Question

Why is the cost of research important? Give an example of a research project where costs would be minimal? Give an example when a research project would be expensive? Specifically what would cost money? How are some ways a researcher can get money to fund his or her research?

Answer 1

In a competitive market place, companies need to spend on Research and Development to stay ahead of their competitors and to be profitable. Research projects helps to brings in efficiency by enhancing the products, services, technologies and in turn helps to reduce cost. It helps companies to bring enhance the existing products or develop new products. New product design and development is nowadays a crucial factor in the survival of a company. Firms must continually revise their design and product ranges in an industry that is fast changing.

Example - Pharmaceuticals companies (eg - Novartis) spend huge amount of money on Research Projects. Similarly Research project is expensive for any technology based companies (eg - Facebook) or a manufacturing company (eg- Apple)

For a simple trading business which is involved in buying good from producer and selling final products to the end user, the research cost is minimal. (eg- Walmart)

In research Project the money is spent on Resources who are working on the project, the technology, testing, the raw material. The opportunity cost of fund (i.e if the money was not spent on the research project then it could have been utilised for some other purpose).

Most companies keep aside a portion of their Net Profit to fund Research projects. Some companies create a sinking fund where they accumulate certain amount of money in installments and this money is used on Research projects. Sometimes companies borrow money to fund their Research Projects.

Venture capital firms sponsor the research project for some researchers. Sometimes Companies provide stipend to research scholars to help them fund their research.