TIMELY RESOURCE ALLOCATION BETWEEN R&D AND MARKETING: A SYSTEM DYNAMICS VIEW

Trade-off between marketing and research and development (R&D) has always been a dilemma in management science for many years. Allocating the budget to departments and estimating the future profits and customer base as a result of this action has remained a "challenging task." Developing products faster, better, and cheaper than competitors has become critical to success in many markets. This may require huge initial investments in underlying processes resulting in over-investment in marketing and/or R&D in spite of insufficient purchasing power and market saturation for new products.Using a system dynamics (SD) model, this paper aims to understand the dynamics of a complex market where demand fluctuates annually. The problem contains severe difficulties in terms of planning and strategy for marketing and R&D. The budgets to be shared by R&D and marketing vary every period. The market includes feedback and dynamic issues to consider. This brings in the problem of understanding and controlling complexity in the market structure by understanding the cyclical causal relationships.The paper indicates that SD modeling is very useful in investigating and finding sustainable allocation trends in marketing and R&D, so that a firm can keep a sustainable level of customers. While searching for these trends, special attention is paid to the timing of these decisions to synchronize two activities. The paper shows an understanding of the management of a complex problem via policy design and analysis using SD modeling.