Feed R&D--or Farm It Out?
A) Actionable Key Issues and Consequences
1) Invest more in Research and Development department in RLK
a. If Lars decides to invest around $6 million more in research and development, it is highly risky as the company’s survival depends largely on the success of the launch of Ray’s new product into the market.
b. Since customers associate RLK with high-end audio-video design, pumping money into R&D would increase their brand equity as well as to live up to consumers’ expectations of their highly innovative products.
c. However, RLK’s competitors are downsizing and outsourcing R&D and exploiting on the cost advantages. If RLK decides to invest more money into R&D and should the new product stall on launch, they face the danger of becoming bankrupt.
2) Collaborate with Inova to work on the new product - IVid
a. Lars could procure the software skills he needed from Inova for one-fifth what they'd cost in the States. The huge cost savings will be advantageous to the RLK in the short run even though there were transaction costs and royalties to consider as well.
b. A potential obstacle to outsourcing may be Ray, who has long resisted outside involvement in R&D operations. He may be unhappy with external ideas competing with his own and thus refuse to cooperate with Inova.
c. RLK’s organizational cultures are radically different from Inova. The huge culture disparity may cause difficulties in cooperation. Besides, the time zone differences and distance apart will contribute even more problems at hand.
3) Invest in ma ...