Operating in domestic markets and expanding into global market offers new opportunities. These opportunities necessitate changes relating to the strategy, operational planning and the organisation itself. Growth can be planned. To operate effectively in a global market it is necessary to identify global drivers and to compete with rivals. Therefore costs should be reduced and the competitive advantage should be extended. One issue relating to the reduction of costs could be a “make or buy (m/b)” decision, in other words, vertical integration or vertical de-integration, so-called outsourcing. Cost savings are achieved through more effective co-operation. Vertical integration includes merging and acquiring and its direction is backward or forwards due to its related activities respectively its supply chain. Outsourcing, or deintegration, contains to concentrate on the specialisation of competences by subcontracting all other activities and it subcontracts activities (Grant, 2002: 393-4). There are three forms of outsourcing: Co-sourcing that keeps the clients responsibility for management and strategic aspects of the activity while an expert provides the outsourced activity (Brown, 1997: 60). Secondly, removing an activity out of the company as an indepented company and demand its products. Thirdly, outsourcing as used in the following: An activity is in the responsibility of another organisation (Brown, 1997: 60).
While talking about a m/b decision it is necessary to define and to present the point of view of the transaction cost approach in contrast to the resource-based approach. Firstly, an introduction in transaction costs approach is given, after a discussion of its point of view relating to the make and buy decision. Afterwards the resource-based approach is added. Because of limits of space, the network approach is not discussed1. Relying on at least two frameworks discuss those factors which influence an organisation′s decision whether to "make or buy" goods or services.
Inhaltsverzeichnis (Table of Contents)
- Introduction
- Transactions costs (TC) Approach
- Resource-Based View
- Conclusion
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This paper examines the factors that influence an organization's decision to "make or buy" goods or services. It aims to provide a comprehensive understanding of the considerations involved in vertical integration or outsourcing decisions. The analysis relies on two major frameworks: the transaction cost approach and the resource-based view.
- Transaction Costs and Market Imperfections
- Bounded Rationality and Opportunism
- Resource-Based View and Competitive Advantage
- Vertical Integration and Outsourcing Strategies
- Flexibility and Adaptability in the Market
Zusammenfassung der Kapitel (Chapter Summaries)
- Introduction: Introduces the concept of "make or buy" decisions in relation to vertical integration and outsourcing, highlighting the importance of cost reduction and competitive advantage in a globalized market.
- Transactions costs (TC) Approach: Explores the transaction cost approach, which assumes that markets operate without central control. This chapter discusses the role of transaction costs in influencing "make or buy" decisions, including factors like bounded rationality, opportunism, and asset specificity.
- Resource-Based View: Presents the resource-based view, which emphasizes the importance of internal resources and capabilities in creating competitive advantage. This chapter examines how resource-based considerations impact the "make or buy" decision.
Schlüsselwörter (Keywords)
The main keywords and focus topics of this paper include: "make or buy" decision, transaction cost approach, resource-based view, vertical integration, outsourcing, bounded rationality, opportunism, asset specificity, competitive advantage, and flexibility.
- Quote paper
- Susanne Jung (Author), 2003, Relying on at least two frameworks discuss those factors which influence an organisation's decision whether to "make or buy" goods or services., Munich, GRIN Verlag, https://www.grin.com/document/53644
