Business Essay HelpWatch
1.To what extent do you think that finance is likely to be the major barrier to greater innovation with public limited companies in the UK. (25 markers)
Innovation is done through research and development which is medium to long term commitments. For a public limited company (PLC), they do not have much of a problem investing in research and development due to their large capital. But this hugely depends on the industries the business operates in. Pharmaceutical companies for example spend up to about 43% of their capital on research and development. This can be evident from GlaxoSmithKline (GSK)pharmaceutical company. For GSK, research and development is important to ensure that they can selectively target diseases and safe for consumption. It could be said that anything above 40% is highly technological. However, due to the uncertainty associated with forecasting the output of an innovation project and the unavailability of information about the time needed to bring an innovation project onto the market, innovation investment is considered to be especially sensitive to financial limitations.
If businesses do not put investments into research and development, they may instead put investments into buying another company or strategic merger. Firms could look into doing this as companies such as (I am not sure, suggest me companies)
On the other hand, PLCs follow investor or shareholders’ vision. This leads to managers becoming short termist. This is not necessarily bad as UK discounters chains operate with this strategy. Businesses such as Aldi or Lidl would not invest much into research and development as to supermarket chains such Tesco’s.
In conclusion, research and development is vital for the growth of a business. (I can't really think of what else to include. thank you in advance)