Designing and Managing Cross-Functional Make or Buy Decision Processes

Doctoral thesis, 2009

Cross-functional make or buy decision processes are strategic decision processes. The outcome of a make or buy decision affects competitive advantage, strategic development and leads to changes in internal and external relations. When trying to make a strategic decision concerning make or buy there are several functions that will have to be included, since the decision requires input regarding both existing and future possibilities. Furthermore, the outcome of the decision will affect the organisation not only in the long-term but also in its day-to-day operations. These are all important reasons for designing and managing the cross-functional make or buy decision process. Current research indicates that there is no one best way in which all organizations can reach make or buy decisions but that these processes need to be cross-functional. There is a need to understand the functional involvement with its differences and consequences in make or buy decision processes. The purpose of this dissertation is to develop knowledge of design and management of cross-functional make or buy decision processes. The main contribution of the literature used in this dissertation is to establish existing research in the field of cross-functional make or buy decision processes. Several decision process models are outlined and their pros-and-cons are analysed. The research gaps found are the basis for three research questions that together lead to the development of knowledge regarding design and management of cross-functional make or buy decision processes. Empirical data were collected from an in-depth, longitudinal case study and two shorter case studies. The cross-functional make or buy decision process is an iterative process including at least five phases, from initiating an investigation to follow-up on the outcome. The process needs different depth of functional integration in the phases in order to be able to move forward efficiently. Therefore, the cross-functional integration is shifting in the five phases, making the process change in resources. The design of the cross-functional make or buy decision process is shaped by at least eight characteristics. These characteristics are organizational position, time for development, complexity of products, designation of process owner, make or buy strategy, production systems, customer relations and supplier relations. They shape the design by determining which functions should be involved, the extent of their involvement, which phases are needed, the number of options for make or buy, formality of the process, importance of the process, information flows and process time, thus due to the process being cross-functional there are consequences. The cross-functional make or buy decision process has disadvantages with regards to several information flows, several functional strategies, power distribution and resource-consumption. However, the advantage is that a focused make or buy strategy can be obtained, resources allocated correctly, and an up-to-date view of the internal and external environment.