5.8 Research & Development (HL) Flashcards
Research and Development (R&D)
-Is the process of creating new products and processes, in order to meet market needs.
R&D is likely to include the following:
Investment (financial funding)
Test marketing
Prototypes
Market research
Internal forces driving R&D
-Source of improved competitiveness
-Source of extra revenue
-First mover advantage
-Market orientation (‘keeping with the times’).
External forces driving R&D
-Changes in consumer habits and tastes
-Changes in government legislation
-Innovative products launched by rival firms
Advantages of R&D
The corporate image may improve, if the business is perceived to be innovative and at the forefront of research and development
A first mover advantage might be acquired
The R&D process can lead to the creation of premium products, enabling higher prices can be charged for (and hence improved profit margins)
Disadvantages of R&D
The cost of conducting R&D can be extremely high
It is a very time-consuming process, yet there is no guarantee of any financial return
The failure rate of new products and ideas can be significant
The money spent on R&D might have been better spent elsewhere to improve the organization.
Prototype
-To test whether a product addresses the unmet needs of customers.
Advantages of Prototypes
Risk reduction - Prototyping allows businesses to identify potential risks and issues early in the product development process.
User feedback - With prototypes, firms can gather valuable feedback from consumers. This ensures that the final product is more likely to address the needs of customers, leading to higher sales.
Visual representation - Prototypes provide a visual representation of the final product, making it easier for the firm and its customers to understand.
Disadvantages of Prototypes
Costs of prototyping - Developing and refining or reworking different prototypes can be expensive, especially for complex products –> Bad for small businesses.
Time-consuming - While prototypes can save time in the long run, the process of creating and refining them can be very time-consuming. This might be a disadvantage in projects with strict time constraints.
Overemphasis on aesthetics - At times, managers and customers might focus too much on the visual or physical aspects of a prototype, neglecting functionality and operational considerations
Intellectual Property
-Refers to the intangible assets of a business through its creativity and capital expenditure.
Intellectual Property Protection
-Refers to the legal protection of the intangible assets of an individual or organization.
-Once the intangible assets of a business are registered with the authorities, the owner of the non-physical assets has exclusive rights to their use.
Three main categories of IPR
-Copyrights
-Trademarks
-Patents
Reasons for protecting the intellectual property of a business are:
To maximize the firm’s return on investment.
To maintain a unique selling point by being the exclusive supplier of a product.
To reduce the threat of competition.
Copyrights
-Give the registered owner the legal rights to creative pieces of work.
-Gives the copyright holder of the intellectual property the exclusive rights to the commercial use of the product.
-Copyrights cover the work of artists, authors, musicians, conductors, playwrights (scriptwriters) and directors
Patents
-Are used to protect the inventions of a business. They provide the official rights to the registered business to exploit an invention (including the features and processes) for commercial purposes
-They give a registered patent holder the exclusive right to use the innovation for a limited period.
Trademarks
-Are a form of intellectual property protection that gives the owner exclusive commercial use of the registered brands, logos, and/or slogans (catchphrases
