Reference no: EM133039578
NetTech is a small, hi-tech electronics company located in Huntsville, Alabama, and has been developing the basic components for a fiber-optic/wireless communications router that will combine satellite-driven signals and ground-based Internet services. Unfortunately, their internal R&D funding for the next two years is not sufficient to complete the design into an operable, producible system. In addition, their current small production facilities are all over-scheduled, over budget, and at capacity limits on their current products. The new router has the potential to dominate the industry for at least two years and domestic (US) revenue projections are solid for five years. International sales are estimated to be at least 3 times more than domestic sales. What should they do?
NetTech management has identified three options that could mitigate their problems.
-Cooperative Agreement: One option considered by NetTech is approaching a larger company such as Motorola or D-Link to establish some kind of cooperative agreement, an agreement whereby the partner would provide the majority of the final R&D development funding. In fact, a Japanese-based company: "Fiber Specialists", has been involved in discussions with NetTech for the last six months looking for a joint venture opportunity to co-develop new products for both companies. They are willing to invest at least 8 billion yen. However, the details remain sketchy as the negotiations have been temporarily suspended because the legal team at NetTech is concerned about retaining the proprietary rights to this key technology.
-Outsource: Another option offered to NetTech through the University of Alabama-Huntsville, is for NetTech to work with students from the University of New Delhi in India. The University of New Delhi is looking for continuing education opportunities where its engineering students can get realistic application studies. They have volunteered 5-10 undergraduate engineers at no cost to NetTech as an outsourced option to complete the Systems Analysis portion of the final design. But, the work would be conducted in the labs in New Delhi.
-Licensing Agreement: Finally, as a third option, NetTech currently has in place existing cooperative licensing agreements with "LightStrokes Limited " (LS Ltd), a small company based in Scotland for co-production of existing NetTech designs. LS Ltd has expressed an interest in the new technology and is willing to make whatever capital changes are necessary to produce new products at their facility in Glasgow.NetTech management would like to proceed but is unsure which option or blend of options would be in their long-term best interests. Given that several competitors are working on similar designs, NetTech has 3-6 months to move on this product before losing its competitive edge. Mr. James wants to have a plan in place within the next 2-3 weeks. As the Product Line Manager, you are responsible for the future plans for the new router.
Assignment Instructions:
Write your analysis in which you discuss the three options and make a recommendation for NetTech's future plans for the router. Be sure to discuss the benefits, hazards, and/or potential problems of pursuing each of the three options. Choose one of the options as your recommendation and explain the logic behind your decision.