(2) Implementing global R&D
July 2013
Fostering integrated R&D sites or specialized R&D sites

Companies with global operations can be divided into three types. The first of these is the export-based company. These companies centralize power in headquarters, often located in the company's “home“ country. R&D is also principally carried out in that country, and the company's operation sites in overseas markets are responsible only for executing headquarters' strategy. The next type is the multi-national corporation that maintains a research capability at headquarters but also has development, production and sales facilities in its overseas markets. In such companies, each region has a certain degree of independence. The third type consists of network-based companies where the operations in each area form a nucleus encompassing specific technology, products and business divisions, and these areas coordinate with each other in order to maximize their advantages. Different product divisions of the same company may fall into each of the three different categories. When thinking about how to run R&D sites, companies need to understand these characteristics before seeking to achieve an optimum style. One effective approach is to establish research facilities responsible for specific technologies and products in certain advanced markets. However, the sites responsible for product and project development need to be in a position to readily respond to the needs of each area. Thoroughly implementing this strategy, though, results in the spread of small development sites all around the world which reduces efficiency. It is desirable for companies to develop such sites into all-purpose sites with a company-wide scale that can handle specific technologies and products suitable for markets around the world over, or that are able to cover a multiple number of technologies and products required for each area. Not only does doing so provide economies of scale, such sites can also form a core global R&D function, and promote communication and coordination between different areas. The Swiss food giant Nestlé has built a global R&D organization based around the R&D sites in its “home“ country. The company has set up development sites specializing in technologies and products for which the company has an advantage in each respective area, while also establishing, within production sites in each area, applied development departments that cover the technologies and products each area requires. The company's structure is now well-balanced for producing new technologies and products as the various sites achieve mutual co-operation. It is no exaggeration to say that the way a company decides to organize its R&D facilities affects where a company will be in 10 or 20 years time. Establishing an R&D organization that properly reflects global perspectives is the key to future growth.