Research and development

• What does R&D stand for?

  Research and Development
• What is the intention of R&D investment?

  To improve goods, services, or production methods
• How does a firm gain competitive advantage?

  By having better products than competitors
• What are the ways a firm can gain competitive advantage?

  Price, quality, cost, or niche market
• What is a cost competitive advantage?

  Lowering average costs to maximize consumer value
• What might contribute to a firm's cost competitive advantage?

  Skilled workforce, cheap materials, effective technology
• Why is it hard to maintain a cost competitive advantage?

  Firms need to offer additional consumer benefits
• What can be additional benefits to consumers besides low price?

  Strong brand reputation and exceptional service
• How can R&D increase market power?

  By creating unique selling points for products
• What is an example of rapid technology change affecting a market?

  Smartphone industry developments
• What are the effects of technological change on production?

  Improvements in efficiency and productivity
• What has happened to mobile phone production costs?

  They have become cheaper to produce
• What is the impact of technological change on product quality?

  Quality has improved significantly
• What market changes can technological change cause?

  Development of new products and markets
• What is an example of market destruction due to technology?

  VHS tapes replaced by DVDs and downloads
• What role do SMEs play in the market?

  They create jobs and stimulate innovation
• What is Schumpeter's idea of 'creative destruction'?

  New entrepreneurs challenge existing firms
• What happens to less productive firms in 'creative destruction'?

  They are forced to leave the market
• What does product innovation involve?

  Small changes in performance and features
• What does process innovation improve?

  The efficiency of production methods
• How does R&D contribute to economic growth?

  Increases GDP, incomes, and lowers unemployment
• What limits the benefits of R&D?

  Not enough is done due to market failure
• Why is R&D expensive for firms?

  It requires significant financial investment
• How can the state support R&D?

  By providing funding and subsidies
• What is a government subsidy in R&D?

  Financial aid to lower production costs
• What is a potential disadvantage of state funding for R&D?

  Opportunity cost and potential higher taxes
• How can reliance on subsidies affect firms?

  It may lead to inefficiency in operations
• What is government failure in R&D funding?

  Subsidizing inefficient industries
• What are the stages of the product life cycle?

  1. Development
  2. Growth
  3. Introduction
  4. Decline
• What happens during the development and growth stages?

  Sales and revenues are increasing
• What must a firm do during the introduction stage?

  Research and develop the product before launch
• What occurs during the decline stage of a product?

  Sales of the product flatten out
• What must firms decide during the decline stage?

  To use extension strategies or remove the product
• What are extension strategies in the product life cycle?

  • Techniques to lengthen a product's life
  • Improve sales before decline
  • Examples: advertising, rebranding, price changes
• What is an example of a brand with strong loyalty?

  Microsoft
• How does Microsoft maintain strong brand loyalty?

  By continuously improving its products