When making the make-or-buy decision, international firms must make trade-offs between costs and ...

 International firms must make trade-offs between costs and control, risk, investment, and flexibility. Control: Making a component has the advantages of increasing the firm's control over product quality, delivery schedules, design changes, and costs. A firm that buys from external suppliers may become overly dependent on those suppliers. It can also be expensive to enforce contracts with suppliers. Risk: Buying a component rather than making it has the advantage of reducing the firm's financial and operating risks. Investment: Buying from others lowers the firm's level of investment. By not having to build a new factory or learn a technology, a firm can free up capital for other productive uses. Flexibility: A firm that buys rather than makes retains the flexibility to change suppliers as circumstances dictate.