Investing in research allows companies to produce higher quality products. High quality products are sold faster in retail allowing higher profit.
You may have noticed "stars" next to the products on the market. These determine the quality level of the resource. By default, you can manufacture quality 0 (Q0), by investing into research, you can get manufacture capability up to level 4 (Q4).
To invest in research you need to get so called research units. Depending on the industry you want to get higher quality level in, you need to get the right research units. Go to the RESEARCH screen to see what research units are needed for which products. You can obtain research units either by getting a laboratory building, or buing them from other players.
Once you obtained research units, you can try to get your research patented by using them in the RESEARCH screen. This varies, but you can expect approximately 6 to 8 research points getting your company a single patent. You can imagine rolling a dice for each research points, getting a patent each time you get a six.
You will need 12 patents to get quality level 1 (Q1), another 50 for quality level 2 (Q2), 500 more for quality level 3 (Q3) and finally 2000 more for quality level 4 (Q4).
Do I just need to invest in Q1 smart phones research and I can produce Q1 smart phones? Well, yes, that's exactly right, once your company is granted the 12 patents needed, all the smart phones you produce from then onwards will be Q1. There's no need to decide what quality you want to produce, the highest quality possible is always produced.
Does the same works for Q2? Not entirely .. You do need to invest research points to achieve Q2, but you also need all your input resources to be at least Q1. The rules is simple: The manufactured product cannot be higher quality than the lowest quality input resource plus one.
It's actually very simple. Let's say you want to sell petrol Q3 and you already invested in the research. You will need crude oil that's at least Q2 and power that's also Q2 minimum. To produce Q2 crude oil, you will need at least Q1 power.
Some players wonder what's higher quality water for? It can't be sold in retail, so why bother leveling the quality up. Well, it's simple, you need high quality water, to produce high quality apples, orages, etc.
We covered the mechanics, so let's answer the most obvious questions. Should I invest in research, and when should I do so.
In principle, you can use your funds to either get more plants and shops, or to increase the quality of the products you are selling. While you are very small, it's almost always better to do the former, get more buildings, or level up the buildings. However, having more employees increases your labor cost and you will start getting diminishing results. Investing in research on the other hand will allow you to earn more per each unit you sell, while keeping your employee headcount the same.
Let's see an actual example, getting Q1 apples capability needs approximately 12 times 7, 7 is approximate, plant research units. Assuming unit cost of $230, this is $19,320. $230 being on the expensive side, assuming you get the plant research units on the market or from other players. Getting your own Plant research center can bring the cost down to $90 a unit. With $90 a unit, the total cost of Q1 is $7,560.
Keeping the same selling rate, time being constant, with normal demand, you can ask $0.1383 more for each apple. To get your $19,320 back, you need to sell a bit less than 140,000 apples. To get your $6,480 back, you need to sell approximately 55,000 apples.
A very rough calculation, depending heavily on market conditions and your retail strategy, assuming you sell 350 apples an hour in each of your two level 5 grocery stores. You will get $19,320 back in a week or $7,560 back in less than 3 days.
Cost of getting a good CTO can vary greatly. A young student fresh of the university will have skill 0 - 3. Training him/her, or keeping the executive around for long time can cost anywehere around $50k to $100k. The cheapest way probably is to poach one from another company.
Assuming the worst case of patent conversion 1/8, e.g. 12.5%. A CTO skill 15 increases this by 15%, changing the conversion to 12.5% * 1.15 = 14.375%. If you were to bring your batteries from Q2 to Q3 (500 patents, $300 for energy research). The move from Q2 to Q3 costs around $1.2M, the science 15 skill CTO would save you ~ $155,000.
It makes sense to invest in research once your company get larger (reaches about $1,300,000 in company value or 3,000 employees). The larger your company is, the more sense high quality products make. Having a strong CTO on retainer is worth it only if you are getting Q3 research or higher.
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