5.8 - Research and Development (HL - Unit 2) Flashcards
Research and Development
The scientific research and technical development of new products and processes
May involve:
- Creating new products
- Updating products
- New methods of doing things
- Creation of new industries
Why R & D is important
Advantages over competitors
- More desirable products
Meet customers’ unmet needs
- E.g. Through market research
Customer loyalty
- Brand image and publicity
Higher prices (less price sensitivity)
- E.g. allows premium price
Creates property rights
- Intangible assets, e.g. patents
- Could potentially sell these
Lower cost of production
- E.g. more efficient ways of production
Incremental Innovation (Extension Strategies)
When the innovations are relatively small, and the updated product is a small improvement from the previous version
E.g. new iPhone
Disruptive Innovation
When the innovation is much larger and can create a new product or market
E.g. the original iPhone
E.g. Netflix, digital cameras, Uber, 3D printing
Intellectial Property Rights (IPR)
Legal rights assigned to the owners of works related to human creativity
Patents
IPR relating to inventions
Stops anyone else making use of the invention
Trademark
IPR relating to brand, image, logos, name
Stop anyone using these (™)
Copyright
IPR relating to artists, writers, and musicians
Stops anyone using their work
Factors that influence R&D
Nature of the industry
- E.g. smart phone, cars
Organizational culture
- E.g. short versus long-termism
- It may take years to see the benefits of R & D
Access to finance
