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276 PART 3 • STRATEGY IMPLEMENTATION

R&D employees and managers perform tasks that include transferring complex
technology, adjusting processes to local raw materials, adapting processes to local mar-
kets, and altering products to particular tastes and specifications. Strategies such as
product development, market penetration, and related diversification require that new
products be successfully developed and that old products be significantly improved.
But the level of management support for R&D is often constrained by resource
availability.
Technological improvements that affect consumer and industrial products and
services shorten product life cycles. Companies in virtually every industry are relying on
the development of new products and services to fuel profitability and growth. 15 Surveys
suggest that the most successful organizations use an R&D strategy that ties external
opportunities to internal strengths and is linked with objectives. Well-formulated R&D
policies match market opportunities with internal capabilities. R&D policies can enhance
strategy implementation efforts to:

1. Emphasize product or process improvements.
2. Stress basic or applied research.
3. Be leaders or followers in R&D.
4. Develop robotics or manual-type processes.
5. Spend a high, average, or low amount of money on R&D.
6. Perform R&D within the firm or to contract R&D to outside firms.
7. Use university researchers or private-sector researchers.

Pfizer Inc. has only a few new drugs in its pipeline to show for its $7.5 billion R&D
budget, so the firm is laying off 5,000 to 8,000 of its researchers and scientists in labs
around the world. Cash-strapped consumers are filling fewer prescriptions and are turn-
ing more and more to generic drugs. Pfizer is bracing for the 2011 expiration of its
patent on cholesterol fighter Lipitor, the world’s top-selling drug that alone accounts for
a quarter of Pfizer’s roughly $48 billion in annual revenue. Pfizer’s $7.5 billion R&D
budget is the largest of any drug maker. The firm recently scrapped two drugs nearly
ready to go to market—insulin spray Exubera and a Lipitor successor drug—after spend-
ing billions to develop them. Research areas that Pfizer is exiting include anemia, bone
health, gastrointestinal disorders, obesity, liver disease, osteoarthritis, and peripheral
artery disease.
There must be effective interactions between R&D departments and other functional
departments in implementing different types of generic business strategies. Conflicts
between marketing, finance/accounting, R&D, and information systems departments
can be minimized with clear policies and objectives. Table 8-15 gives some examples of
R&D activities that could be required for successful implementation of various strate-
gies. Many U.S. utility, energy, and automotive companies are employing their research
and development departments to determine how the firm can effectively reduce its gas
emissions.

TABLE 8-15 Research and Development Involvement in Selected
Strategy-Implementation Situations
Strategy Being
Type of Organization Implemented R&D Activity
Pharmaceutical company Product development Test the effects of a new drug on different subgroups.
Boat manufacturer Related diversification Test the performance of various keel designs under
various conditions.
Plastic container manufacturer Market penetration Develop a biodegradable container.
Electronics company Market development Develop a telecommunications system in a foreign
country.