Make or Buy Choices: Strategic, Profitability and Financial Aspects

Abstract

Make-or-buy choices are often analysed only from an income point of view, i.e. comparing the costs of the production process implemented within the company with the costs of the service acquired outside the company from third-party economies. This attitude can lead to severe problems in the decision-making process. In choosing the best option, point make or buy alternatives must be implemented primarily based on the strategic impact of the chance to be executed or from comparing the strategic implications of the two options. The strategic aspect of make-or-buy choices is an essential element to be considered since the lack of this type of analysis can lead to choices that are perhaps the most profitable. However, these choices have severe consequences at the level of the company's overall strategy, which is why top management must implement make-or-buy decisions, not the heads of operational departments. Alongside the strategic and profitability aspects, it must also implement make-or-buy choices by considering the financial impacts of the two options. The static and dynamic financial aspects analysed through ratios and flows, respectively, represent an essential element of analysis for the decision to fall on the most convenient option for the cartel, where the concept of convenience is understood in a broad sense and, therefore, also financial. The analysis of the strategic, profitability and financial aspects, thus, appears to be fundamental to analysing the make or buy choices from every point of view. The decision can fall on the most advantageous option for the enterprise where the concept of convenience contains elements of a strategic, profitability and financial nature within it.