In-house or Joint R&D (JRD) with Foxconn? If JRD, to what extent should the JRD be? These questions need to be answered for the development of Nokia Denmark in surviving the increasingly competitive mobile device market. Therefore, thorough analysis of feasibility and compacts of JRD should be done, in terms of pros and cons. Due to limited space, most relevant and significant factors will be discussed.
For the positive aspect, JRD can benefit Nokia in the following aspects:
Effective Cost and Higher Efficiency: By making use of the competitive advantage for the low labor price in China and Taiwan, Nokia can achieve more effective resource allocation: with less investment to obtain higher efficiency, just as mentioned in the HBR case. Foxconn has a series of advantages Nokia can make use of to achieve higher quality and faster speed to market.
Focus on Core Competencies: By outsourcing to Foxconn, Nokia will have more resource to target on core competencies.
For the cons, JRD might jeopardize Nokia in the following aspects:
Overlooked Costs: The reduced cost from labor wage saving is somewhat overemphasized while other tangible or intangible costs are overlooked. For instance, the training for engineers in Foxconn. The process will take time and man power, and the high turnover could make the cost much higher. Other costs include quality inspection, supplier management, custom compliance and so on. Failure to consider these costs can be hazardous, as in Boeing’s case for 787 Dreamliner.
Off-shore Supplier Management: proper amount of internal resource should be allocated for off-shore supplier management. Poor communication and lack of proper governance can lead to outsourcing obstacles, which appeared in Nokia’s path in outsourcing to Foxconn. Though efforts have been made to deal with the communication inefficiency and the outcome is satisfactory, to