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Feed R&D Case

Group: Red Dragon

Group Member: Lishuang Wu, Robin Salim, Weili Tan, Jin Choi and May Chen

Date:5/4/2009

Background

RLK Media started 1985 with focus on high-performance consumer electronics. The company is reputed for it brand equity, innovation, high quality and high priced products. The products appealed to affluent audiophiles. But the industry changed after home theater is introduced, RLK can not compete with Japanese competitor’s high quality, competitive priced consumer electronics. RLK is facing slow sales and deteriorated margin, primarily due to decreased demand for high-end consumer electronics and increased R&D costs. Another challenge that RLK is facing is new consumer electronics products are all embedded-software based products, where RLK has no expertise in this new arena. RLK is betting on its new innovation product – a video headset with directional; however the R&D costs for embedded-software developers posts great risks to the company in its current financial situation. CEO Lars has to decide whether outsource the R&D or expand its R&D capacity in-house.

Strategic Sourcing Framework

R&D is definitely the core competence of RLK, embedded-software technology is critical to bring the product successfully to market and meet customer’s needs. The company believes in innovation, product quality, superior features will add value to customer. So this strategic move has high strategic value to RLK.

RLK has no expertise in embedded software engineers. While Inova Lab has 100 software engineers, 20 of them are PhDs, the lab is global reputed for innovation and deliverables. So compare with Inova, RLK is low in the relative competence. Hence, we put RLK in the “partnership” position in the framework. In this perspective, out sourcing to Inova raises RLK’s value and lowers the costs, so it makes sense for RLK to outsource R&D.

Value creation and risk analysis

Developing the product in house will...