5.8 Research and Development (hl)

Question 1

research and development (R&D)

Answer 1

Refers to the investigative activities a business conducts to improve existing products and procedures or to lead to the development of new products and procedures.
In other words, R&D is a process of inquiry and search for new and creative ideas to either address a problem or create and opportunity.
If businesses fail to invest in R&D the competition will overtake and outcompete them very quickly through numerous areas such as, consumer preference and costs savings.
R&D is not limited to product design but also how a product is made and how could it be developed.

Question 2

benefits of R&D

Answer 2

• Growth opportunities
• Increased productivity
• Competitive advantage
• Customer loyalty
• Creation of jobs
• Improved quality of life for customers

Question 3

limitations of R&D

Answer 3

• Expensive and time consuming
• Requires skilled labour and capital
• High failure rate
• May be difficult to commercialize
• Possible ethical considerations

Question 4

goods and services that address customer’s unmet needs

Answer 4

Consumers have needs that are unmet from the existing goods and services available on the market. Hence, businesses can find out about these unmet needs by usingmarket research.
Basically, firms use the information gathered by market research for its advantage hence the importance of communications between R&D and Marketing departments.

Question 5

It is also important to relate marketing and R&D with the use of intellectual property rights to prevent the competition developing identical products. Patents, Copyrights and Trademarks are key in this process which will help the business to:

Answer 5

• Have first mover’s advantage
• Increase profit margins
• Safeguard continuity of production
• Have time to develop new products
• Financially benefit from its creativity, innovation and R&D

Question 6

innovation

Answer 6

defined as the commercial of a new idea in order to fulfil existing customer needs or to create an unmet customer wants (desires). Equally important, is to improve and existing product or idea.
Innovationalso refers to being able to bring your product to the market (otherwise it is just an invention sitting in your garage).
One of the goals of any business should be making everybody in the organization part of an innovation culture.

Question 7

two different types of innovation

Answer 7

a) product innovation
b) process innovation

Question 8

product innovation

Answer 8

type of innovation where new products are created or improvements to existing products are made (i.e. iPod, Xbox, Microsoft, Sony’s Walkman, Kodak’s first digital cameras, etc.). Ideas for new products can come from the market or from the business itself. Additionally, Ideas for products can also come from slight or significant alterations or what the competitors produce

Question 9

process innovation

Answer 9

type of innovation where some parts of the manufacturing or service delivery are improved. Improvements are made through exhaustive and innovative studies and the outcome can be extremely beneficial (i.e. waiting times in health surgeries, tracking your own package online).

Question 10

two categories of innovation

Answer 10

adaptive innovation
disruptive innovation

Question 11

adaptive innovation

Answer 11

is about making small adjustments and improvements to something that already exists, like a product or a process. Instead of completely changing it, you gradually tweak and enhance it over time. This could mean adding new features to a product or refining how a service is delivered.
These small changes are important because they help a business keep its customers happy and stay competitive. So, if a company doesn’t keep up with making these small improvements to their products or services, they could fall behind and lose customers to companies that do (i.e. iPhone).

Question 12

disruptive innovation

Answer 12

refers to coming up with completely new and groundbreaking ideas or inventions that could completely transform industries. It is risky because there’s no guarantee of success, but if it works out, it can be incredibly rewarding.

Question 13

examples of disruptive innovation

Answer 13

• Email (1969), which totally changed the way in which people and businesses communicate.
• Amazon.com (founded in 1994), which changed the way consumers around the world bought books.
• Toyota’s hybrid Prius car (1997), which sold over 1 million units within the first ten years of being launched.
• Tesla (founded in 2003), which revolutionized the electric cars industry, selling its one millionth car in March 2020.
• Spotify (founded in 2006), which changed the way people buy and listen to music, with its online music streaming business.
• Apple’s iPhone (introduced in 2007), which revolutionized the mobile phone industry and people’s daily lifestyles - or, as Steve Jobs put it,”a dent in the universe”.
• ChatGPT, the revolutionary artificial intelligence interface, reached 1 million registered users within 5 days of its launch in late 2022.

Question 14

Many factors can influence the R&D practices and strategies of an organizations; for example:

Answer 14

• Organizational culture – in an organization that is bureaucratic, has an autocratic approach and it is risk averse; innovation can be very difficult and is unlikely to happen. Conversely, democratic and collaborative organizational cultures are more risk takers and can appreciate R&D as a valuable resource.
• Past experience – the firms uses “what has worked in the past” as an strategy for R&D.
• Finance – since R&D is proved to be costly, the budget of the firm might or might not cover its costs.
  Technology – this is a key factor for R&D since the use of Computer-assisted design (CAD) and the use of the Internet help immensely with the development of new ideas.
  The pace of change – some industries are more responsive to changes than others. Some business may be more technological than others and that will affect their strategies and development of R&D.
  The level of competition – the more competition there is in a market the more innovative for a firm to create a competitive edge through innovation.
  HR – besides the financial costs, the availability of “skilled” workers to spend time in the project will have an effect in the firms HR.
  Legal constraints – legal constrains in different countries need to be followed whether the product is in development or implementation stages. Sometimes, legal requirements might stop the implementation in some countries or sectors (i.e. labour laws, testing laws, etc).
  Ethical constraints - even when some innovations some legally possible, some stakeholders may have strong ethical concerns for example animal testing. Conversely, if a company such as LUSH or The Body Shop does not use animal testing; they use that slogan in their marketing campaigns.