Make or buy decisions involve companies deciding whether to produce a product themselves or outsource it to another company. This decision is based on factors such as competitive advantage, trade secret protection, and order size.
A make or buy decision is a concept that is related to the types of business decisions that various companies have to make in relation to the matter of producing something. This concept is closely related to that of competitive advantage, which suggests that it is a form of strategic advantage for companies to focus on the items they are best suited to produce. For example, a Florida company in the United States would be comparatively positioned to produce orange juice due to its close proximity to mass-produced oranges and the fact that it has developed competent methods for extracting and manufacturing the product over the years. . Assuming a company located in an area that does not have the same advantages develops a unique recipe for making orange juice and decides to produce orange juice, it could outsource the production of the juice to a company in Florida, while focusing on the packaging and marketing of the finished product.
In that case, the company would apply the make-or-buy decision to its manufacturing or outsourcing dilemma. More directly, the make-or-buy concept relates to items such as products that may have been developed by the company in question. For example, a company that specializes in manufacturing airplane parts might develop a new type of part that requires a type of specialized manufacturing process that may be beyond the developing company’s reach. In this case, the company may be evaluating its options as part of a buy or buy decision. The company may decide to outsource since it would be cheaper to have the part manufactured in another company that specializes in mass-producing the part more efficiently.
To determine whether the decision to make or buy would apply during cases involving the production of new products, the company would have to decide whether the product in question is one that carries trade secret protection, in which case the company would have to produce it from alone, regardless of any cost. Another factor that could influence the decision to outsource or produce yourself would be the size of the order. If the order size is too small, it may be too difficult or exorbitant for the company to find another company that can produce the product. A company might also decide to engage in the manufacturing of the product if it doesn’t have much faith in another company’s output of the product, even though it will be cheaper to outsource the manufacturing.
Protect your devices with Threat Protection by NordVPN
