Nokia: From In-house to Joint R&D

This case describes the organizational and strategic challenges of outsourcing research and development (R&D) activities from Denmark to China. Nokia Denmark was founded in 1996 as a subsidiary of the Nokia Corporation and contained the largest Nokia R&D unit, concentrating on the development of mobile phones, outside Finland. In 2007, Nokia Denmark received instructions from corporate headquarters to drastically increase the number of mobile phones developed. Motivated by the need to alleviate pressure on its in-house capacity, Nokia Denmark outsourced certain product development projects to the Taiwanese company Foxconn in a joint R&D (JRD) setup. Foxconn, one of the world’s largest electronic component manufacturers, which was also developing products for many of Nokia’s competitors, was given the responsibility of developing and testing selected standardized and less complex mobile phones. However, by 2010 Foxconn had become a central figure in Nokia Denmark’s product development process with responsibility for increasingly complex projects. <br><br>Given the growing importance of Foxconn for Nokia Denmark, the rising pressure from the corporate headquarters, and the competitive market environment, Nokia Demark thus faced the question of how to proceed with the JRD. Three alternatives were outlined for the future of Nokia Denmark’s JRD with Foxconn: the management could decide on scaling up, phasing out, or continuing the status quo.

Although this case can be used for a broad range of subjects, outsourcing remains the central topic as it focuses on a Danish subsidiary entering into product development cooperation with a Taiwanese company. This raises questions about value chain configurations and strategy topics, such as how much of a company’s R&D activities should and can be outsourced, and which organizational structure should this outsourcing follow. Moreover, topics relating to international management are relevant to the case through discussions on the challenges of a Danish company collaborating with a culturally different Taiwanese company or the risk of outsourcing key competences to a company that engages in similar collaborations with competitors. The most relevant teaching objectives are:<ul><li>Offshore outsourcing versus retaining activities in-house.</li><li>Organizational design and learning.</li><li>Multinational subsidiary strategy.</li><li>Industry analysis and competitive strategy.</li></ul>

• Outsourcing
• Organizational Design
• Joint Research and Development
• Corporate Strategy
• Denmark
• China