Supply and Demand Analysis

BUSI 5803A Managerial Economics

Winter 2011

Group Assignment 1

Course Professor: William Clements

Ruiying Zhao (Student ID: 100814099)

Yang Bi (Student ID: 100818136)

Yujing Zhang(Student ID: 100815062)

Date: Feb.01, 2011

BUSI Consulting Inc.

1255 Colonel By Drive

Ottawa, Ontario, Canada, K1S 5B6

February 1st, 2011

Dear RIM Board of Directors,

As per your request, BUSI Consulting Group has conducted a thorough analysis on the proposal to out-source and off-shore Research & Development (R&D), manufacturing, and logistics of the Blackberry line to a new Joint-Venture (JV) - Tata Consultancy Services (TCS) from India teamed with Huawei from China.

Currently, RIM is under pressure from other smart phones, i.e. Apple’s iPhone, which leads to a declining margin. To maintain the competitiveness in high-tech industry and meet the booming demand for Smart Phones, it is essential for RIM to reduce its total costs. Our major concerns on the costs are Cost of Sales and R&D Expenditure, which increased from 53.9% of Revenue in 2009 to 56.0% in 2010, and from 6.2% to 6.5% of Revenue in the same period respectively. So far, both the two companies, Tata and HuaWei, has claimed that they are able to take on its respective functions, R&D by Tata and production by Huawei, at a lower cost with equal or higher quality and productivity.

To further investigate, we have analyzed the proposal in the context of Demand & Supply for Smart Phones and in the context of Producer Theory as a framework for considering costs. At the very end, after comparing the advantages and disadvantages of out-sourcing and off-shoring, we recommend RIM to outsource R&D to TCS but to keep its Blackberry production in-house.

Sincerely,

Busi Bizz

Busi Bizz, CEO

BUSI Consulting Inc.

Proposal on RIM’s Outsourcing and Offshoring

1) Influence on Demand and Supply for Blackberries

Whether RIM should accept the proposal of the joint-venture (JV) or not depends on whether this...