Feed R&D or Farm It Out

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Issue| Feed R&D| Farm it Out|
Financial| 1. This is a great idea in that it helps cut costs while maintaining active and competitive in the industry.| 1. 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. 2. 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. 3. 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. 4. Inova doesn’t require a large investment upfront, but will share the profit risk.| Brand| 1. 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.| 1. | Synergy| 1. 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. 2. 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. Outsourcing can risk the effectiveness and morale of the existing R&D team. 4. Removing the software engineers from the R&D lab to a remote place with a different culture could be an overwhelming challenge for productivity. 5. Could Drain In-House R&D Team and make them less motivated 6. Must build trust early on to be successful| 1. RLK must consider the lost of project control, intellectual...
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