Research and development

From Free net encyclopedia

The phrase research and development (also R and D or R&D) has a special commercial significance apart from its conventional coupling of research and technological development.

In general, R&D activities are conducted by specialized units or centers belonging to companies, universities and state agencies.

In the context of commerce, "research and development" normally refers to future-oriented, longer-term activities in science or technology, using similar techniques to scientific research without pre-determined outcomes and with broad forecasts of commercial yield.

Statistics on organisations devoted to "R&D" may express the state of an industry, the degree of competition or the lure of scientific progress. Some common measures include: budgets, numbers of patents or on rates of peer-reviewed publications.

Bank ratios are one of the best measures, because they are continuously maintained, public and reflect risk.

In the U.S., a typical ratio of research and development for an industrial company is about 3.5% of revenues. A high technology company such as a computer manufacturer might spend 7%. Although Allergan (a biotech company) tops the spending table 43.4% investment, anything over 15% is remarkable and usually gains a reputation for being a high technology company. Companies in this category include Big Pharma, such as Merck & Co. (14.1%) or Novartis (15.1%), and engineering companies like Ericsson (24.9%).Template:Fn

Such companies are often seen as poor credit risks because their spending ratios are so unusual.

Generally such firms prosper only in markets whose customers have extreme needs, such as medicine, scientific instruments, safety-critical mechanisms (aircraft) or high technology military armaments. The extreme needs justify the high risk of failure and consequently high gross margins from 60% to 90% of revenues. That is, gross profits will be as much as 90% of the sales cost, with manufacturing costing only 10% of the product price, because so many individual projects yield no exploitable product. Most industrial companies get only 40% revenues.

Generally the largest technology companies not only have the largest technical staffs, but also manage them most effectively.

On a technical level, high tech organizations explore ways to repurpose and repackage advanced technologies as a way of amortising the high overhead. They often reuse advanced manufacturing processes, expensive safety certifications, specialized embedded software, computer-aided design software, electronic designs and mechanical subsystems.

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