Question

What should we do ourselves. internally, verse what should we outsource? The make and buy decision.

A. Cost Driver Analysis

B. Strategic Positioning

C. Life Cycle Costing

D. Value Chain Management

Answer 1

A make or buy decision is an act of strategic choice between producing an item internally (in-house) or buying it externally (from an outside supplier).

Considerations that favor make / buy decisions are:

Make	Buy
Cost Considerations (less expensive)	Lack of expertise
Better quality control	Small volume requirements
Need to exert direct control over productivity and or quality	Brand preference
Unreliable suppliers	Item not essential to the firm’s strategy

Based on the above brief explanation, please find the suggested answer below:

Make	Buy
Cost Driver Analysis	Strategic Position
Life cycle costing	Value chain management

Note for Answer

Cost driver Analysis refers to analysing the various possible cost drivers for a particular type of cost or an activity etc.... and explaining their cause and effect relationship between the activity and cost driver. Example: Direct labour hours worked, number of customer contacts, number of engineering change order issued.

As it is analysing from the internal record and internal expertise will be sufficient. Hence Make decison.

Strategic positioning is concerned with the way in which a business as a whole distinguishes itself in a valuable way from its competitors and delivers value to specific customer segments Example: Brand Strategy, product positioning

As it requires analysing the external market in comparision with internal data, it is advisable for Buy Decision

Life-cycle costing is a costing tool used to determine the one-time and recurring costs associated with a major purchase over the lifetime of the good or product.

As this activity is associated more with internal, it is advisable for Make Decision.

Value Chain Management is the process of monitoring and managing all the components that comprises in manufacturing, including procurement, production, quality control and distribution.

As it requires recording all the internal / external data, it is advisable for Buy Decision