Formulation of Functional Strategy: R& D, Information Technology

Prof. Prashant MehtaNational Law University, Jodhpur

Formulation of Functional Strategy

Introduction

Marketing Strategy Formulation

Financial Strategy Formulation

Production Strategy Formulation

Logistics Strategy Formulation

Research and Development Strategy Formulation

Information Technology Strategy Formulation

Human Resource Strategy Formulation

R & D Strategy

• R&D people perform task that includes transferring complex technology,

adjusting processes to local raw materials, adapting processes to local

markets, and altering products to particular tastes and specifications.

• New product development and improvement in old products requires

significant resource availability which is always a constraint.

• Technological improvements that affect consumer and industrial products

and services shorten product life cycle.

• R&D strategy ties external opportunity to internal strengths and is linked

with objectives.

• R&D policies can enhance strategy implementation efforts of the

organization.

R & D Strategy

• R&D Strategy Emphasize

• Product and Process Improvements

• Stress Basic or Applied Research

• Be a Leader or Follower in R&D

• Develop Robotics or Manual-type Processes

• Spend High, Average, or Low Amount of Money on R&D

• Perform R&D within the firm or Contract it Outside the firm

• Use University Researchers or Private Sector Researchers

• There must be an effective integration between R&D departments and

other functional departments in implementing different types of generic

business strategies.

R & D Strategy (External vs Internal)

• If the rate of technological progress is slow, the rate of market growth is moderate, and there is

significant barriers to possible new entrants, then in house R&D is preferred. The reason is that

R&D, if successful, will result in a temporary product or process monopoly that the company can

exploit.

• If the rate of technological progress is rapid, the rate of market growth is slow, then the major

effort in R&D may be very risky because it may lead to development of obsolete technology or

one for which there is no market.

• If the technology is changing slowly but the market is growing quickly, there generally is not

enough time for in-house development. The prescribed approach is to obtain R&D expertise on

an exclusive or non exclusive basis from an outside firm.

• If both technological progress and market growth are fast, R&D expertise should be obtained

through acquisition of well established firm in the industry?

R & D Strategy: Implementation

• The first strategy is to be first firm to market new technological products. (Exiting and

Dangerous Strategy).

• The second strategy is to be innovative imitator of successful products, thus minimizing

the risk and cost of startup. This strategy involves pioneer firms to develop first version

of the new product and to demonstrate that the market exists. Then laggard firms

develop similar products. Need excellent R&D personnel and excellent marketing

department.

• The third R&D strategy is to be low cost producer by mass producing products similar to

but less expensive than products recently introduced. Price consideration is important in

buying decision. Mass marketing replaces personnel selling. This strategy requires more

investment in plant and equipment.

Research & Development Strategies

• LEVEL OF INNOVATION

• Pioneer (Leader) v. Copy Cat (Follower)

• Technological leadership fits well with differentiation

• A “follower” strategy makes sense with cost-leader strategies

• Are we better at finding applications and customer adaptations than actually inventing

something really new?

• Different types of R & D (basic, product, process)

• Where is the firm’s historic expertise / advantage?

• How competent are the R & D Personnel?

• ACQUISITION OF TECHNOLOGY

• Internally developed v. acquired from outside

• Technology “Scouts”

• Strategic Technology Alliances

• Acquire minority stake in promising high-tech ventures

Information Systems Strategies

WORKER PRODUCTIVITY & CONNECTIVITY

• Employees can be networked together across the globe

• Instant translation software for global firms

• “Follow the Sun Management”…pass projects on to the next team

SALES & INVENTORY MANAGEMENT

• Internet sales and development of customer databases

• Instant sales reports allow immediate inventory reorders

SHIPPING & TRACKING GOODS

• FEDEX PowerShip software…stores addresses, prints labels, etc.

• Tracking the progress of package shipment…FEDEX & UPS