Answered Essay: Name and example for Make,Buy, and Cooperate in the context of internationalization. What are the

Name and example for Make,Buy, and Cooperate in the context of internationalization. What are the different rationales behind these three entry mode choice in international market?

Expert Answer

Make :- Whenever any firm decides to expand its business from on country to other, it has several options of doing this. There are mainly two options for the manufacturing organisations which these firms are required to considered i.e., make or buy the products.

When a firm decides to establish its own manufacturing plant in the host country and take care of entire activities of manufacturing a product, it is regarded as MAKE. For example, in order to utilize the benefit of lower labor cost and cost of production, Apple Inc. established the manufacturing unit in China.

There are number of consideration for a company to make in-house which are enlisted as below:-

  • Cost of production
  • The firm can have the desire to expand the manufacturing focus
  • The firm do not want to lose over the quality and production of the products.
  • It can be associated with the concerns related to intellectual property.
  • Firm want to ensure the higher standards of quality which cannot be left on others.
  • The firm is not sure about the supplier’s reliability.
  • There is no competitive supplier in the host country.
  • Different political and environmental issues.

Buy:- This is the other strategy used by the international firms in which they do not perform the manufacturing operations on their own but they hire some external suppliers or contractors to perform the manufacturing of the product for them. However, the firm will monitor and take care of entire production process. Example:- In 2000, Nike gave the contract of manufacturing of its floaters to an Indian firm named Relaxo Footwear Ltd for five years.

The following considerations are taken in these decisions:-

  • The firm is not able to produce the product at a lower cost but it can buy the products at lower price.
  • The required expertise for the production is not available with the firm.
  • The supplier can have the expertise in the desired area of production.
  • It helps in creating strategic partnership.
  • The firm may not have the sufficient in-house production capacity.

Cooperate:- In this, different types of collaborative agreements are formed between the firm and other contractors or firms to produce the products which can be exported. The desired scale of economies are not obtained by the smaller firms in manufacturing due to smaller size of the local market or inadequacy of proper management of activities or they do not have sufficient marketing resources. With the help of corporate strategy, the firms will be able to attain higher economies of scale and form a broader concept of product. Example:- Ponds, Park Davis, Unilever have this strategy worldwide.

The various points related to this are illustrated as below:-

  • The firm is not required to invest heavily in the host country
  • It does not require the firm to establish any production facilities.
  • However, the firm may lose control over quality and manufacturing process.
  • There can be the risk of potential competitors.
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