RLK Media Case

           RLK Media is involved in producing high end electronic goods. It is considering outsourcing to a firm in India. A TCE analysis reveals that the company will not face challenges of assets specificity. This is so because most of the equipment that is required for manufacturing is available in India. Further, most of the work to be done is of an intellectual nature. The exchange of ideas and the development of software can be easily conducted through teleconferencing and regular visits to the outsourcing company. The process of developing the new product is known to both parties. What is left to be done is to fine tune the details to make the iVid smaller and commercially available. Thus as concerns the complexity, the two groups will be working along the lines of parallel synchronicity. Communication problems are not much of an issue as English is spoken on both sides. On the cultural side, the Indians tend to be more organized than the American counterparts. This may create some friction but overall it should not be so serious as to derail the project. Both R & D teams are used to working round the clock thus time differences will not create challenges. Inova Laboratories is prepared to put money in the venture as well as provide ideas that will ensure that the project is a success. They are also prepared to be equal partners in the joint venture. All these intents will be put down in an enforceable contract. This goes to show the potential level of trust that can exist between the parties.

               The major advantage RLK Media has over its competitors is the ‘Made in USA’ label. This has endeared it to many of its loyal customers. The R & D team that has been working at RLK has over the years been able to develop innovative products that have been instant hits. Their laid back manner of working has worked well for them. The head of research refers to his team as a well oiled machine. This enables them to get work done faster. They trust one another. Consequently, there is no suspicion which in most cases creates negative friction and slows down work.

                 The problem of focusing on innovativeness is that the company is losing out on business to other companies which are producing ‘run of the mill products’. These products are being mass produced and at a cheaper cost. The company has yet to outsource production preferring to rely on brand image and priding itself on being patriotic. The problem with this is that customers are not that fussy about the source of the product as long as it satisfies their needs. The company’s policy has served it well in that there has been no leaking of plans to the competition. Outsourcing especially with a company that has dealt with its competitor could make it vulnerable security wise.

                If RLK Media were to outsource to Inova laboratories and come up with the iVid model before anybody else, it could make a killing. This innovation would take the market by storm. By collaborating with the Indian company they would save costs on technical staff and on production costs. This means they would be able to make higher margins of profit than if they did all the work in the USA. Further because Inova will be a partner it will be in its best interests to expedite the development of the product. Being an Indian company it will be better placed to market the product in Asia which has a large market. Thus cost of marketing will be minimal for RLK.

The matter of outsourcing is also very tricky. The major resource of RKL is proprietary assets and this can be easily pirated. The collaboration with Nova may lead to leaking of plans to rival companies. The negative stance taken by the head of research towards outsourcing may push him to leave the company to start his own startup. There is the real threat that he may go with some of the staff. This will not only paralyze operations at RKL but also create a formidable competitor with inside information. The loss of jobs that will be occasioned by outsourcing may earn the company some bad press. Those customers who were loyal to the company for its ‘Made in USA’ brand may well stop supporting it. This will further complicate the financial health of the company.