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Consider the factors that might determine whether an increase in Research and Development would improve the financial performance of UK manufacturing firms.

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Introduction

Consider the factors that might determine whether an increase in Research and Development would improve the financial performance of UK manufacturing firms UK manufacturing firms have many factors which influence their financial performance. Research and Development could be a key factor in determining a firms success, however it does not assure financial improvement in all businesses due to the extensive variety of business types. Research and Development can be defined as the scientific investigation necessary to discover new products and the process of bringing these products onto the market. A manufacturing firm, which generally refers to a business that makes or processes raw or semi processed materials into either a finished product or further processed materials, by using large-scale mass production by means of automation and production lines. Manufacturing firms tend to rely on economies of scale to lower costs and allow bulk-buying benefits, from this firms produce large volumes of products using specialised machinery, which can then be sold at low prices to finance the business. Research and Development can take many forms, for example, large international pharmaceutical companies spend huge amounts of money on Research and Development, this is because pharmaceutical companies rely heavily on new products which can be patented, and then used as a competitive advantage that allows premium pricing and increased profits. ...read more.

Middle

Also Research and Development could develop new methods to produce existing products, to lower average costs. However this depends on the skill of the scientists and researchers, because despite how much money is pumped into the Research and Development department, without ideas, invention and innovation the business will have no rewards. Furthermore, even if Research and Development does its job, this will be worthless if the manufacturing firm has too specialised equipment, which is unable to be flexible enough to change to creating this new product or process. With a manufacturing firm, and almost all companies there is a balance needed between, quality, price, and costs. If for example Research and Development produced a higher quality product, then this may cost more to produce, but may gain the benefits of been able to charge higher prices. However, say for example this manufacturing firm was producing scissors, and the R & D department produced a titanium sharpest ever pair of quality scissors. The quality would undoubtedly be higher, but their may not be a market or demand for a higher quality product, when steel scissors and low prices do the job practically just as well, and are ultimately cheaper. ...read more.

Conclusion

As is clear by now the businesses which are most likely to succeed in the future are those which develop more new products than their closest rivals, bring their new products to the market in less time than their rivals, compete in more product- and geographic-markets than their rivals, and provide very strong after-sales service to customers. The deciding factor in whether or not R & D may improve the financial performance of a UK manufacturing company could be many things, which depends on the type of product they are producing, its geographical location, the state of the economy, the firms flexibility to produce new products, the skills and funding put into the R & D process, the Corporate Culture, whether it encourages innovation and creativity, or whether it promotes more traditional tayloristic principles. Finally, the short term and long term objectives of the firm also affect its financial performance, whether its plans are to develop new products with short life cycles to continually adapt to the changes in consumer needs, or whether to economize and focus on long term survival. ...read more.

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