The Impact of the New Economy on Developing Countries - Essay Example

ASSIGNMENT Review the strategic issues presented in the case This case throws light over Neptune Gourmet Seafood’s newly proposed brand strategy by one of the top executives named Rita Sanchez. The sales manager proposed that Neptune, which is North America’s third largest ($820 million) company in USA’s $20 billion seafood industry, should clear off its rising inventories by introducing a new low-priced brand (that will be half the price) “Neptune Silver” in the market to entice maximum customers. Indeed, the major reason behind that new strategy was that Neptune Seafood’s inventories had risen to an alarming level of 60 days because of Research and Development that took place in past one year. Indeed, the premium quality seafood seller had inducted new trawlers in the fleet and replaced old outdated boats with the newly manufactured. In addition, the company also modified its processing system thereby improving the shelf life of its seafood products. The abovementioned initiatives enabled the American seller to ensure better catch and enhance internal productive capacity and efficiency. Demand increased considerably for premium quality Neptune Gold products, yet the inventories stockpiled as supply side had easily offset existing demand patterns. The top management had been expecting that situation would aggravate further because it was not practically possible to bring supply and demand forces in equilibrium by reducing supply or fish catch. In short, Neptune had been facing a grave strategic issue of rising stocks for which no immediate solution was available in the short run. Rita Sanchez’s recommendation about introducing a new low priced brand, for which quality would be similar to that of existing Neptune Gold line products, indeed have both positive and negative consequences that will be discussed in detail in the following paragraphs (Kesner and Walters, pp. 2-3, 2005). After analyzing the internal and external business environment of Neptune Gourmet, I would endorse the new strategy regarding the introduction of a new brand, namely, “Neptune Silver” of premium quality products. It would not really matter if this strategy could lead to short-term migration of customers of premium quality brand toward low-priced yet similar quality seafood products. Indeed, the reason being the fact Neptune could implement it as a short run strategy and reduce its inventory levels in next two months. Obviously, this strategy would not only attract existing customers but also entice new customers who have not yet tried Neptune’s optimal quality seafood. Once, the inventory level becomes normal or near-to-normal, the company could reduce supply of Neptune Silver product line and bring back existing customers to Neptune Gold. However, the top management expected that the seafood seller might trigger price wars with competitors because the rivals would opt to ensure their survival and maintain market share. However, according to my knowledge and understanding, it will not sabotage company’s financial position because Neptune is ready to absorb losses by halving its prices and offer premium quality seafood under second brand name. Indeed, the main objective is to cover some costs of stockpiled fish products by selling at throw away prices (Kesner & Walters, pp. 3-4, 2005). In other case, if Neptune does not take any action, it would to suffer 100% inventory losses after expiry of shelf life. Hence, it would be better to gain something rather end up with nothing in company’s income statement and balance sheet. In addition, the strategy will not damage Neptune Gold’s brand equity because the seafood seller will market second brand line products only for few months to minimize inventory at hand. On the other hand, the company will continue offering premium quality Neptune Gold (NG) products throughout the year to a large pool of existing loyal customers. Indeed, Neptune will be better off if it offers its traditional NG products by using aggressive advertising techniques to balance brand equity and persuade customers. For instance, the Neptune Gourmet Seafood’s profit margin has already reduced by almost 10% in last one-year because of stiff competition after entrance of new companies and escalation in costs of doing business. However, it has attracted business because of constantly growing demand of fish meat. In such a scenario, it would be feasible for the seafood seller to launch a new low priced brand, because it will not only minimize inventory losses but also reduce additional burden on the company’s financial resources such as net profits and retained earnings (Kesner & Walters, pp. 4-8, 2005). Discuss the key issues management needs to consider in deciding whether to support an in-house R&D function or outsource all Research & Development The top management and strategic planners should take into consideration various factors if they have an inclination to conduct and promote in-house Research & Development Process. Indeed, the first major factor is availability of technological resources, skills, and capabilities at production sites. Explaining the above, it is worthwhile to point out that companies that have willingness toward a sustainable business should ensure Research and subsequent Product (including goods and services) Development. In fact, no company could prosper and observe growth if does not innovate, differentiate and position its products in the mind of customers. Business entities only observe survival, expansion and long run sustainability when they opt to produce and market new products followed by innovation of existing products. Considering the above, I would like to highlight that if business has enough financial strength for induction of modern information technology resources, latest equipments and machinery then it could conduct in-house experiments and initiate research process. In addition, I would endorse that availability of well trained, educated, skilled and professional personnel is essential besides aforementioned material resources. In shout, a firm could not commence R&D process without experts and specialists; the examples of these skilled and educated field professionals include scientists, engineers, software developers, and technical staff (Studt, pp. 26 – 27, 2007). Moreover, the business firms should conduct in-house Research and Development if product life-cycle is short and markets are flooded with new goods and services on regular basis. For example, corporations and entities that manufacture and market Electronic appliances (such as fridges, microwaves and air conditioners), Computer equipments and peripheral devices (such as desktop PCs, laptops, handhelds or Personal Digital Assistants, monitors, LCDs, printers, plotters, scanners, fax machines, routers, mouse, CD/DVD Rom, etc.) and Cellular phones only compete on the basis of innovated and updated and new products that have additional features in comparison to existing brands. In such cases, it may not be feasible to outsource Research & Development function to domestic or foreign specialist companies, suppliers and agencies because of chances of delay, quality assurance factor, designing issues, service management or any other underlying factors (Studt, p. 26, 2007). On the other hand, a business should outsource entire R&D function only to foreign or domestic specialist agencies and service providers if they could provide assurance they really have employed professional, well educated, trained and specialized personnel who could meet or exceed expectations of parent company. Indeed, there is dire need to critically evaluate and analyze the quality and quantity of staff before outsourcing any job, research project, or assignment. It should not be forgotten that a company should only outsource Research and Development function if lacks all or majority of above-mentioned resources. In addition, top management should also review if that specialist agency has inducted latest equipments, technology and machinery at its laboratories and have sufficient quantity of well trained workers who are aware of advancements and progress in the markets of developed countries. Usually, firms outsource jobs and R&D function by firms in developing nations to suppliers in emerging economies like China, India, Ireland etc (Studt, p. 27, 2007). Second, the firms should outsource R&D function only in entirety when specialist agencies are capable enough to provide top quality services and products in the assigned period at lowest costs. In most cases, a business firm has resources as well as ability to establish organized Research + Developments departments, yet the costs are too high to be absorbed in total per unit costs. In such cases, firms seek service providers and appropriate foreign suppliers with similar attributes in the foreign developing nations that could meet quality standards, innovation, and differentiation standards. As a result, Outsourcing R&D function is an ample move toward costs saving. Indeed, most of the foreign firms (United States and United Kingdom especially) outsource these research tasks to attain cost-efficiency and to restore competitiveness in global markets in which they face stiff competition and rivalry with relatively cheaper products of international suppliers. It is worthwhile to point out that labor costs in USA and United Kingdom are well above world’s average that compels companies to outsource their R&D function either partially or completely to specialist Indian and Chinese service providers. For example, India enjoys leading position (at present) in software developing (on Oracle Applications and other programming languages) and export; therefore, most businesses are more than interested to outsource their R&D to such companies that could supply a package of IT software services plus maintenance as well as development of prototypes for new products (Studt, p. 29, 2007). Third, a company should outsource Research and Development function completely when it expresses dissatisfaction with its product design or packaging and perceives certain weaknesses in product quality, which requires immediate rectification. In addition, firms may also outsource this function to specialist agencies and suppliers if it requires certain jobs in lowest possible time so that it could participate in any competitive event, exhibition, symposium, seminar, etc. For instance, R&D is also outsourced completely when a firm loses its key research workers and employees and thus does not have any remedy or solution for initiate in-house R&D in shortest possible time to facilitate business operations. Nevertheless, outsourcing becomes essential when top management of a business fails to innovate existing process as well as it does not have awareness and mandatory knowledge of new production methods and procedures. Obviously, in such a way, it outsources this function to enhance company’s productivity, internal efficiency and effectiveness that later leads to strengthen relationships with partners and customers as well as enhance reputation and goodwill in the market (Balachandra, p.3, 2005). Discuss the implications of outsourcing R&D for middle managers As far as the implications of outsourcing Research and Development function for middle managers are concerned, it is worthwhile to mention that contracting or subcontracting specialized jobs and functions with offshore companies result in transfer of jobs to foreign nations. The reason behind it is that scientists, engineers, software developers and IT specialists, hardware and machine designing experts, and technical staff which is responsible for product designing, prototyping and maintenance are all considered to be middle managers. Indeed, they aforementioned personnel are not a part of top management because they are not assigned managerial responsibilities of strategic planning and controlling. Rather, these employees are responsible for organizing tasks into departments, for smoothly conducting routine business operations and for motivating their subordinates to work mutually for organizational welfare, prosperity, and well being. Hence, when a firm outsource entire R&D function, the agreements with middle-managers are disbanded and firms do not need them anymore thereby resulting in retrenchment and downsizing. Indeed, this is solely done to reduce aggregate costs of doing business and to attain cost efficiency. However, this adversely affects these middle managers as they lose their jobs because they are no longer needed in their respective companies. Another negative impact of R&D outsourcing on middle managers is that firms are reluctant to invest for product and process innovation or development in their organizational departments that reduces new growth and promotion opportunities for currently employed Research and Development personnel. This, in turn, demotivates these executives and may lead to employer/employees conflicts, lack of normative commitment, trust, information sharing as well as an absolute absence of socio-emotional and instrumental cohesion (harmony and we-feeling). Middle Managers, as a result, lose interest in their jobs that adversely impacts their performance On the positive note, outsourcing of some Research & Development functions and tasks provides additional time to existing employees who could now focus on more specialized jobs. In this way, outsourcing serves as an important source of reducing unnecessary workload on middle managers and allows them to concentrate freely on more important research assignments and process. In conclusion, outsourcing may have both positive and negative implications for Middle management. However, escalating trend of outsourcing entire R&D function by firms in developed nations is disastrous in a way that it reduces new employment opportunities and adversely affects job creation for middle managers in the market. References/Bibliography: Kesner, Idalene and Rockney Walters “Class—or Mass?” Harvard Business Review, April 2005 Studt, Tim “R&D Outsourcing Becomes More Strategic” R & D magazine: Vol. 49, No. 6, June, 2007, p.26-29 Available at http://www.rdmag.com/Featured-Articles/2007/06/R-D-Outsourcing-Becomes-More-Strategic/ R. Balachandra “Outsourcing R&D” Institute of Global Innovation Management, Working Paper No.: 05-004, 2005 Available at http://w.cba.neu.edu/igim/thoughtLeadership/working_papers/igim_wp05-04.pdf Lau, Lawrence “The Impact of the New Economy on Developing Countries” Stanford University, June 2000, Available at http://www.stanford.edu/~ljlau/Presentations/Presentations/NBS.PDF Narula, Rajneesh “In-house R&D, outsourcing or alliances- Some strategic and economic considerations” University of Oslo January 27, 1999 Available at http://arno.unimaas.nl/show.cgi?fid=321 Read More