© 2000 John Petroff
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© 2000 John Petroff |
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Before introducing a product, a company must invest considerable sums into its research and development in order to come up with a product that has some chance of commercial success. Note that investment must go not only into basic (i.e. theoretical) research which can take many years, and which does not represent large sums, but mostly into analysis of consumer preferences. This is essential to develop a product consumer will want, and avoid immediate market failure. Market research and product improvement is much faster nowadays with the use of computer design, test simulation and robotics. But, because of the larger number of individuals involved inside and outside the firm, costs are also more substantial. All these outlays must be done from owner's equity or free cash (discussed in Chapter 8 Section J-3). An analyst must find evidence of such extensive and meticulous research and development work supported by adequate outlays in the companies under consideration. More will be said about the important and difficult work of analyzing technology in last section of this chapter.
See review question Q-14B1.1 through Q-14B1.7.
See research assignment R-14B1.1.
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