Two Questions 3 Essay Example | Topics and Well Written Essays - 500 words

Two Questions 3 - Essay Example Because of his inability to exert proper cost control, Lopez was relieved of his responsibilities in 2008, and Gabriella Garcia became head of Consumer Products Research. Garcia vowed to improve the performance of CPR and scaled back CPR’s development activities to obtain favorable financial performance reports. In terms of profit, Garcia did a better job than Lopez as a result of scaling back the project development. When profits are low and management is looking to cut costs, spending significant amounts of money on research and development is not the appropriate tactic. R&D is expensive and, as the timeline of two years from project initiation to implementation under Lopez demonstrates, there is no return on investment reflected in the financial statements until well after the products are brought to market. During times of low profit margins, development has to be scaled along with cost initiatives to keep management and investors satisfied. Even though Lopez developed good ideas, his efforts at cost control failed because there was no actual cost cutting and no immediate impact on revenues. While it could be argued that, given enough time, Lopez’s management would have yielded greater profits at lower costs. Management’s focus on profitability, however, precluded the comp any’s ability to focus on R&D to the extent that Lopez intended. Garcia, however, reduced—but did not eliminate—development while simultaneously focusing on cutting the costs related to current market offerings. This had an immediate impact on the company’s profitability and management was no-doubt pleased with the results. The issue here was time. It does take time to develop innovative products and bring them to market. This effort, however, cannot be the sole focus unless the company is currently in a strong financial position and can absorb the R&D costs until the new products are in place. Simply stated, the company could not afford