Make

'Make' refers to a companies decision to manufacture or develop (parts of) a product internally. Reasons favoring 'Make' decisions are:

• Strong linkage between activities
  • If it is crucial for a company to tightly integrate different activities of its Value chain then the activities should be performed internally if it is the only way to achieve such integration.
  • Creating these linkages help firms to provide superior customer benefit
• Confidentiality of information
  • Sharing information may undermine the firm's competitive advantage.
• High Transaction costs
  • Transaction costs arise because buyers and sellers have diverging interests: the seller wants the highest price, a buyer wants to keep the costs down.To avoid Opportunistic behavior a company needs to select the right partner. Factors that determine Opportunistic behavior are:
    • Asset specificity, refer to investments that need to be made in order to setup a transaction between two or more parties. An example is the creation of an electronic data interchange (EDI) system before electron transactions can be made. After choosing a system there is a vendor lock-in.
    • Information asymmetry, Often a buyer lacks vital information about a seller because it does not know the track record of the seller and vice versa.