The Importance of Factors Other Than Cost Considerations in Make or Buy Decisions

Abstract

The majority of make or buy decisions are invoked in the name of “cost”, but the two case studies outlined in this paper demonstrate that cost is only one of a multitude of criteria which managers need to evaluate in this strategic decision. Also highlighted are the difficulties in ascertaining the cost elements in the make or buy decision. The sequence of events by which these two make or buy decisions were resolved are analysed, together with the levels and functions in the company organisation structure which determined the direction taken by the make or buy investigation. The case studies also indicate the very active role of purchasing in the make or buy decisions, their being involved in around 90 per cent of the decision stages.

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