Operation Management Assignment : Make or Buy Decision

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Executive Summary This paper explores one of the fundamental processes in most businesses, the make-or-buy decision. This research scrutinizes the theory related to the make-or-by decision, its importance in businesses strategy, criterions to be considered in the process as well as its advantages and disadvantages. Further investigation conducted revealed the reality of make-or-buy decision and it was found that decision makers rarely apply strategic decision making rules based on sound reasons resulting in unpremeditated and irrational conclusions. An international clothing retail business, ZARA, is chosen to demonstrate the application of such decision process in its production. The business outline is briefly described and the…show more content…
Research by (Prahalad and Hamel, 1990, Porter, 1991, Venkatesan, 1992, and Sturgeon, 2002 as cited in Jaydeep, 2005) focused on strategic and organizational issues, such as core competence and organizational flexibility, which address directly the significance of make-or-buy decisions. In addition, Jaydeep (2005) cited Hoyt and Lee (2001) as discussing the evolution of outsourcing, and the resulting strategic implications, from the perspective of a particular industry. Fundamentally, the make-or-buy decision requires ongoing collection of decision-related information and the establishment of a process that serves as a guideline for the business to make such decision. Maddalena (2007) reported that at its most basic level, decision-making involves gathering information and evaluating the merits and potential implications of each available option before arriving at a decision. In routine management activities decision-making takes place quickly and, with experience, becomes second nature and intuitive (Maddalena, 2007). Complex problems, however, often require more time and resources, consultation with others, consideration of various kinds of information, and a more thorough evaluation of options and desired outcomes and also some decisions can have significant long term implications for the organization, various stakeholders
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