Modda

Off shoring and Outsourcing

Advantages:

Desirable producer function: The decision of accepting the joint venture includes outsourcing RIM’s R&D and manufacturing departments to offshore locations like India and China. RIM has its R&D currently located across Canada and some parts of the U.S. Apart from these locations, RIM established its R&D facility in Germany. The current proposal talks about the R&D department to Tata Consultancy Services which is an Indian I.T giant. It is a well-known fact that cost of labour in India is very low when compared to other nations especially in case of high skilled labour. According to Reuters news, the average pay scale that was offered to employees working in the U.S was 84000$ per annum. The wage would be way more lesser than that for an employee of the same designation in India paid by Tata Consultancy Services. This would be the main reason why TCS can afford to offer such a J.V to RIM promising a lower cost of R&D. Apart from this R&D facility, the J.V also proposes outsourcing of manufacturing the devices to an offshore location that is China. Currently RIM has its head manufacturing facility in Waterloo and its offshore locations like Mexico and Hungary. But the reputation of China worldwide regarding manufacturing facilities and cheap labour is unbeatable. China has been a manufacturer’s paradise for past few years. Almost every major company outsources its manufacturing to China to reduce their cost of capital. Now RIM has a very good chance of taking advantage of this J.V to reduce their cost of capital. So by choosing to adopt this Joint Venture RIM can achieve the competitive advantage of achieving its quantity of production with a profitable mix of labour and cost of capital. This is a competitive advantage because, in the market of mobile manufacturers, it is very important to lower your cost of sales and keep up the gross profit margins. This would help the company price its product...