Feed R&D or Farm It Out

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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,
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• There will be a huge cost advantage for RLK from the start and hence this reduces risk that the company will face should the product fail to meet market demands. • As there are time differences, distance and other factors to consider, the lack of interaction between the teams may cause friction between them and thus create a big problem for RLK.
• There is a big cultural difference between Ray’s R&D team and Inova. This may cause both teams to be uncooperative and show a lack of enthusiasm in handling this project.
• Besides, RLK’s brand equity may be at risk by outsourcing as the consumers’ expectation of RLK is that their products are designed and produced in the United States.
3. Hire a few more software engineer talents to strengthen RLK’s long-term in-house capabilities and transfer a few of his R&D leaders to
Gurgaon for training. • Having more software talents in RLK will satisfy Ray’s request and at the same time, strengthening the R&D department’s ability to meet long term obligations
• By going overseas, the engineers can help to facilitate communication between both teams and monitor things over at Inova’s side. • Ray may still be unhappy with the thought of collaborating with Inova even if Lars grants his request of expanding the R&D department in RLK.
• RLK may suffer losses if the partnership with Inova turns sour and the Intellectual property remains with Inova.

D) Explanation of Application of Course
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