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In which circumstance may a firm decide to produce all parts internally?
AWhen the parts are standard screws and bolts
BWhen the parts are needed in very large numbers
CWhen secret design features protect an advantage
DWhen suppliers offer the lowest possible price
Answer & Solution
Correct answer: C. When secret design features protect an advantage
1. The make-or-buy decision normally turns on cost and quantity.
2. On cost grounds alone, buying often wins for standard and high-volume items.
3. There is one consideration that can override cost, and that is secrecy.
4. If a product has special design features that must be kept secret to protect a competitive advantage, sharing them with a supplier would put the advantage at risk.
5. In that case the firm may decide to produce all the parts internally even though buying would be cheaper.
6. Options A, B, and D all describe conditions that push toward buying rather than making, so none of them can be the exception.
_Source: OpenStax Introduction to Business (CC BY 4.0), Ch 10 "Achieving World-Class Operations Management", section Make or Buy?_
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