Dictionary of Marketing Terms: make-or-buy decision
make-or-buy decision
business decision that compares the costs and benefits of manufacturing a product or product component against purchasing it. If the purchase price is higher than what it would cost the manufacturer to make it, or if the manufacturer has excess capacity that could be used for that product, or the manufacturer's suppliers are unreliable, then the manufacturer may choose to make the product. This assumes the manufacturer has the skills and equipment necessary, access to raw materials, and the ability to meet its own product standards. A company who chooses to make rather than buy is at risk of losing alternative sources, design flexibility, and access to technological innovations.
