Feed R&D or Farm It Out Essay

Words: 1667
Pages: 7

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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b) Create value through financial economies via efficient internal capital allocations so as to achieve cost savings by collaborating with Inova rather than investing a huge sum of money in their own R&D department.

c) Strategic or Tactical action – If RLK decides to collaborate with Inova, it is a strategic action as it involves a significant commitment of organizational resources and is difficult to implement and reverse. The company will run the risk of losing its intellectual property which may lead to losses suffered in the long run.

E) Alternative Matrix Alternative

Criteria Weight a) Invest more in RLK’s R&D and regain leadership in product innovation b) Collaborate with Inova to work on the iVid prototype so as to exploit cost advantages by outsourcing. c) 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
Impact on the R&D department in RLK H Positive (+1) Negative (-1) Probably Positive (+1)
Long term viability and lowering the risk of any possible action H Unknown (0) Neutral (0) Positive (+1)
Impact on financials L Negative (-1) Positive (+1) Unknown (0)
Ability to ward off competitors such as Pycosonics and gain a higher market share M Unknown (0) Probably Positive (+1) Probably