INTERNATIONAL BUSINESS ASSIGNMENT

“EFFECTIVENESS OF INTERNATIONAL
RESEARCH & DEVELOPMENT”

SUBMITTED TO: SIR NAVEED AHMED

R&D (Research & Development) plays a very important role in the success of a
business. R&D contributes to sustainability of business. Establishing a global
research and development model has become a basic requirement for large
corporations that want to be competitive in today’s marketplace. Many companies
do not understand the importance of R&D.

It is the R&D function that provides a platform for creativity and innovation to
flourish in an organisation. Innovative breakthroughs have happened only because
of painstaking efforts of the R&D function. Perseverant efforts are needed when
one is in pursuit of research. Every failure in a R&D effort increases the pressure
to perform.

R&D helps a business to have a competitive edge over its competitors. It is the
R&D function that develops plans much ahead other functions. The R&D function
needs to have a clear foresight about future problems that need solutions. R&D (in
its development role) can act as a catalyst for speeding up the growth of
organisation by way of introducing breakthrough products in the market.

Multinational companies are shifting their innovation investment to countries in

which their sales and manufacturing are growing fastest, and where they can access
the right talent. Companies based in fast-growing emerging markets are building
their innovation capabilities to preserve their market shares and to compete with
multinationals – both in their home markets and, increasingly, as they expand their
businesses in other countries.
To compete effectively worldwide, companies must first determine the innovation
model that is best aligned to their overall business strategy, build their innovation
capabilities, and then implement their model around a global network. Competing
with multinationals is particularly important for Asian companies, which are based
in the largest and fastest growing region for innovation activity.

R&D is very relevant in today’s competitive scenario when customers are

hankering after new products and new technologies. The firm that can successfully
leverage its R&D efforts by translating the efforts in building new products will
find itself ahead of its competitors. Expenses on R&D can be considered not as
expenditure but as an investment.

INTERNATIONAL MARKETING RESEARCH

International marketing research is the systematic design, collection, recording,
analysis, interpretation, and reporting of information pertinent to a particular
marketing decision facing a company operating internationally. International
marketing managers need to constantly monitor the different forces affecting their
international operations.

The ROI on R&D efforts can take a while to materialize. But once success is
achieved, the financial returns can be quite high.

Pharmaceutical companies, chemical companies, automotive companies, lubricant

companies invest massive amounts of capital expenditure and revenue expenditure
for this reason. These companies strive to be ahead of others in their learning
curve.

The world moves on only through scientific inventions and discoveries which are
result of sustained R&D effort .Only this leads to long term business sustainability.
Sometimes R&D efforts are also necessitated to meet the regulatory norms eg:
green technologies that reduce pollution. Hybrid cars, electric cars, catalytic
converters in cars are examples of successful R&D efforts

The true test of R&D function lies in time to market. Business exists for the sake of
making profits. So, the role of R&D in shortening the time to market becomes
extremely important.

Germany is known for world class engineering and US is known for its research
agenda. India, despite having a talent pool, still lacks in indigenous research. We
have a situation where foreign companies like GE and Shell come and set up R&D
centers here and gain competitive advantage globally.

R&D becomes extremely relevant to make an organization future ready, to equip

the business with the wherewithal required for commercialization of lab efforts
through large scale production. R&D function can reasonably predict future
technology trends. In an environment filled with resource constraints, R&D efforts
in the right direction will enable allocation of scarce resources for the right
purpose.
R&D helps a business earn revenues through licensing of technology, technology
transfer too. The information technology has developed so much in the last few
years that change has become the norm in such sectors. There needs to be greater
coordination between academic research and industry research.

Companies tend to focus more on “development” and less on “research” mainly to

meet short term operational goals. It must be understood clearly that R&D has a
strategic orientation and using the R&D function to meet short term operational
goals is anything but a wise more. Some firms use R&D as a cost center because of
the depreciation allowance given by the Income Tax dept.

ECONOMIC INDICATORS IN INTERNATIONAL BUSINESS

A significant issue when dealing with international companies is that transactions
occur in more than one currency. A company that collects revenues in a foreign
currency will be either long or short in that currency, depending on whether they
receive more revenue than they pay out in expenses (long) or less revenue than
they pay out (short).

Currency Exchange Rates

Changes in currency exchange rates can have a huge impact on both business
profits and on securities prices. These rates are expressed as the ratio of the price
of one currency against the price of the other.

Balance of Trade
This is the largest component of a country's balance of payments. (The balance of
payments is a record of all transactions made by one particular country during a
certain period of time. It compares the amount of economic activity between a
country and all other countries.)

Balance of trade is the difference between exports and imports. Debit items include
imports, foreign aid, domestic spending abroad and domestic investments abroad.
Credit items include exports, foreign spending in the domestic economy and
foreign investments in the domestic economy.
A country has a trade deficit if it imports more than it exports, and a trade
surplus if it exports more than it imports.

Consumer Price Index

The consumer price index ("CPI") measures changes in the prices of consumer
goods and services that are purchased by households. The index is a statistical
estimate created using prices from a sample of representative items collected
periodically. Often times, this measures is used as a gauge of inflation, which can
positively or negatively affect a country's currency.

The financial markets carefully watch CPI figures for signs of inflation. Rising
inflation can lead to higher interest rates and reduced lending, while deflation can
lead to lower interest rates and greater lending, when it comes to central bank
policy.

Central Bank

Central banks create monetary policy and exert significant control over a country's
economy. Consequently, the financial markets tend to listen closely to every word
that central bankers utter publicly for clues about the future. Central bank minutes
are formal releases that contain valuable economic commentary that can signal
future policy action.

Gross Domestic Product

Gross domestic product ("GDP") represents the market value of all final goods and
services produced within a country during a given period. The figure is usually
given in nominal and real formats, with real GDP adjusting for changes in
monetary value. Given its vast breadth, this indicator is among the most watched
by the financial markets.

The expansion of a country's GDP is indicative of a growing economy, while a

contraction in GDP indicates a slowdown in a country's economy. Meanwhile, a
country's projected GDP growth rate can be used to determine an appropriate level
of sovereign debt or determine if companies operating within the country are likely
to experience growth.
Employment factor

The productivity and wealth of a country's citizens is arguably the ultimate

determiner of economic success. Employment indicators, such as labor force,
payroll and unemployment data, estimates how many citizens are employed, as
well as income trends (e.g. whether they are making more of less money than
before).

The financial markets carefully watch these employment indicators, especially in

developed countries that generate most of their income from domestic consumer
spending. A fall in employment is often proceeded by a fall in consumer spending,
which can hurt GDP statistics and overall economic growth prospects.