Research and development Flashcards
What is innovation
When a new idea or invention is launched onto the market normally with a view to competitive gain
What are the types of innovation
Product and process
What is research and development
The scientific research and technological developments of new products and processes
What is product innovation
Adapting a product that already exists
What is the purpose of innovation
Firms cannot afford to stand still in competitive markets, they must innovate to secure new markets and prevent the loss of future market share
What are the risks involved with innovation
Firms make substantial losses if innovation falls, other companies react with their own innovation
What are the benefits of innovation
Creates a USP, less competition due to patents, more efficient and cost effective production processes and likely to result in premium products with higher prices
What are the costs of innovation
Can be very costly and a drain on resources, there is an opportunity cost for all innovations, many innovations never see the light of day
How do fixed costs make R&D expensive
Have to produce significant output to recoup costs, increased scale of production, barriers to entry and increases market power of the firm
What is differentiation
Being able to offer a product or service that stands out from the competition
What is the purpose of product differentiation
Has to appear better than competition, USP and patents
What is the purpose of differentiation for promotion
Create desire, exclusivity and brand loyalty
Define product differentiation
Changing a product that already exists or developing an invention into a brand new product
Define process innovation
Changing a process of production that already exists or putting into practise a brand new production process
