Flevy Management Insights Q&A

What strategies should companies employ to ensure their Build vs. Buy decisions align with long-term growth objectives?

     Joseph Robinson    |    Build vs. Buy


This article provides a detailed response to: What strategies should companies employ to ensure their Build vs. Buy decisions align with long-term growth objectives? For a comprehensive understanding of Build vs. Buy, we also include relevant case studies for further reading and links to Build vs. Buy best practice resources.

TLDR Organizations should align Build vs. Buy decisions with Strategic Planning, leveraging Core Competencies, conducting Financial Analysis and Risk Management, and ensuring Innovation and Market Responsiveness to drive long-term growth.

Reading time: 5 minutes

Before we begin, let's review some important management concepts, as they related to this question.

What does Strategic Alignment mean?
What does Risk Management mean?
What does Innovation mean?
What does Market Responsiveness mean?


When organizations face the pivotal decision of whether to build a new capability in-house or to buy it through acquisition or outsourcing, the stakes are high. This Build vs. Buy decision is not just a matter of immediate cost or convenience but is deeply intertwined with an organization's long-term growth objectives. Strategic Planning, Risk Management, and Innovation are at the core of these decisions. A well-considered approach, grounded in a clear understanding of the organization's strategic goals, market position, and internal capabilities, is essential. Here, we explore strategies that organizations should employ to ensure their Build vs. Buy decisions align with their long-term growth objectives.

Strategic Alignment and Core Competencies

First and foremost, organizations must ensure that any Build vs. Buy decision aligns with their overall Strategic Planning and leverages their Core Competencies. This involves a deep analysis of how the decision fits into the organization's long-term strategy and whether it strengthens the organization's competitive advantage. For instance, a technology company might consider building a new software solution in-house if it aligns with its core competency in software development and offers a competitive edge in the market. Conversely, buying might be the preferred option if the solution lies outside the organization's core competencies or if time-to-market is critical.

Organizations should conduct a thorough market and internal capabilities analysis to guide this decision. This includes evaluating the current and future market demands, competitor capabilities, and the organization's readiness in terms of skills, technology, and resources. Consulting firms like McKinsey and BCG emphasize the importance of aligning Build vs. Buy decisions with the organization's strategic imperatives, such as Digital Transformation, Operational Excellence, or entering new markets.

Real-world examples include Google's acquisition of Android, which was a strategic buy decision that allowed Google to rapidly enter and dominate the mobile operating system market. This decision was aligned with Google's long-term growth objective of expanding its ecosystem and leveraging mobile platforms for its services.

Are you familiar with Flevy? We are you shortcut to immediate value.
Flevy provides business best practices—the same as those produced by top-tier consulting firms and used by Fortune 100 companies. Our best practice business frameworks, financial models, and templates are of the same caliber as those produced by top-tier management consulting firms, like McKinsey, BCG, Bain, Deloitte, and Accenture. Most were developed by seasoned executives and consultants with 20+ years of experience.

Trusted by over 10,000+ Client Organizations
Since 2012, we have provided best practices to over 10,000 businesses and organizations of all sizes, from startups and small businesses to the Fortune 100, in over 130 countries.
AT&T GE Cisco Intel IBM Coke Dell Toyota HP Nike Samsung Microsoft Astrazeneca JP Morgan KPMG Walgreens Walmart 3M Kaiser Oracle SAP Google E&Y Volvo Bosch Merck Fedex Shell Amgen Eli Lilly Roche AIG Abbott Amazon PwC T-Mobile Broadcom Bayer Pearson Titleist ConEd Pfizer NTT Data Schwab

Financial Analysis and Risk Management

Financial considerations and Risk Management are critical components of the Build vs. Buy decision-making process. Organizations must conduct a comprehensive financial analysis that includes not only the upfront costs but also the long-term operational costs, potential revenue generation, and return on investment (ROI). This analysis should factor in the cost of capital, the impact on cash flow, and the risk profile associated with each option. Buying may offer a quicker market entry and revenue generation, but it also involves higher upfront costs and integration risks. Building, while potentially offering a more tailored solution and greater control, may require a significant time and resource investment before any ROI is realized.

Risk Management strategies must be employed to assess and mitigate the risks associated with both options. This includes operational risks, market risks, and compliance risks. Organizations should consider the flexibility and scalability of the solution, ensuring that it can adapt to future market changes and growth opportunities. Accenture's research highlights the importance of a robust risk assessment framework that evaluates the strategic, financial, and operational risks of Build vs. Buy decisions.

An example of effective Risk Management in Build vs. Buy decisions is IBM's acquisition of Red Hat. This strategic buy allowed IBM to bolster its cloud offerings and compete more effectively in the cloud market, a key growth area for the company. The decision was underpinned by a detailed financial analysis and risk assessment, ensuring that the acquisition aligned with IBM's long-term growth objectives and risk tolerance.

Innovation and Market Responsiveness

In today's fast-paced market, Innovation and Market Responsiveness are crucial factors in the Build vs. Buy decision. Organizations must evaluate whether building a new capability in-house will provide the agility and innovation necessary to respond to market changes and customer needs. This often involves considering the organization's ability to foster a culture of innovation and whether internal development processes are agile enough to deliver solutions in a timely manner.

On the other hand, buying or acquiring a solution can often provide immediate access to innovative technologies and capabilities, enabling the organization to quickly respond to market opportunities or threats. However, organizations must carefully manage the integration of acquired solutions to preserve their innovative qualities and ensure they can be effectively incorporated into the organization's offerings.

A notable example of leveraging acquisition for innovation is Amazon's purchase of Whole Foods. This move allowed Amazon to rapidly enter the grocery market and integrate its e-commerce expertise with Whole Foods' brick-and-mortar presence, demonstrating a strategic blend of buying to innovate and responding swiftly to market opportunities.

In conclusion, the Build vs. Buy decision is a complex, multifaceted one that requires careful consideration of strategic alignment, financial implications, risk management, and the ability to innovate and respond to the market. By employing a structured decision-making process that evaluates these factors, organizations can ensure that their Build vs. Buy decisions are aligned with their long-term growth objectives, thereby securing a competitive edge in the market and driving sustainable growth.

Best Practices in Build vs. Buy

Here are best practices relevant to Build vs. Buy from the Flevy Marketplace. View all our Build vs. Buy materials here.

Did you know?
The average daily rate of a McKinsey consultant is $6,625 (not including expenses). The average price of a Flevy document is $65.

Explore all of our best practices in: Build vs. Buy

Build vs. Buy Case Studies

For a practical understanding of Build vs. Buy, take a look at these case studies.

Defense Procurement Strategy for Aerospace Components

Scenario: The organization is a major player in the aerospace defense sector, grappling with the decision to make or buy critical components.

Read Full Case Study

Telecom Infrastructure Outsourcing Strategy

Scenario: The organization is a regional telecom operator facing increased pressure to modernize its infrastructure while managing costs.

Read Full Case Study

Build vs. Buy Decision Framework for Semiconductor Manufacturer

Scenario: A semiconductor firm in the highly competitive technology sector is grappling with the strategic decision of building in-house capabilities versus buying or licensing from external sources.

Read Full Case Study

Luxury Brand E-commerce Platform Decision

Scenario: A luxury fashion house is grappling with the decision to develop an in-house e-commerce platform or to leverage an existing third-party solution.

Read Full Case Study

Make or Buy Decision Analysis for a Global Electronics Manufacturer

Scenario: A global electronics manufacturer is grappling with escalating operational costs and supply chain complexities.

Read Full Case Study

Make or Buy Decision Analysis for Luxury Goods Manufacturer

Scenario: The organization in question is a high-end luxury goods manufacturer facing challenges in deciding whether to make components in-house or outsource to third-party vendors.

Read Full Case Study


Explore all Flevy Management Case Studies

Related Questions

Here are our additional questions you may be interested in.

How should companies approach the make-or-buy decision in highly regulated industries differently?
In highly regulated industries, companies must adopt a comprehensive approach to the make-or-buy decision, considering Regulatory Compliance, Risk Management, Strategic Alignment, and long-term implications for sustainable success. [Read full explanation]
What is a make or buy analysis?
A make or buy analysis is a strategic framework for deciding whether to produce a product in-house or purchase it from an external supplier, considering cost, quality, and risk. [Read full explanation]
What are the key indicators that suggest a company should pivot from a "Buy" to a "Build" strategy, or vice versa, in response to market changes?
Discover when to pivot from a Buy to a Build strategy (or vice versa) by evaluating Cost, Time to Market, Core Competencies, and Strategic Fit for competitive advantage. [Read full explanation]
What role does corporate social responsibility (CSR) play in the Build vs. Buy decision-making process?
Integrating Corporate Social Responsibility (CSR) into Strategic Planning and Operational Excellence influences the Build vs. Buy decision, enhancing brand reputation, sustainability, and market competitiveness. [Read full explanation]
What impact do global supply chain disruptions have on the make-or-buy decision-making process?
Global supply chain disruptions significantly impact the make-or-buy decision-making process, emphasizing Risk Management, Strategic Alignment, Operational Excellence, and the need for agility, resilience, and innovation in sourcing strategies. [Read full explanation]
In what ways can the make-or-buy decision impact a company's sustainability goals and practices?
The make-or-buy decision significantly impacts an organization's sustainability by influencing environmental stewardship, social responsibility, and economic viability through direct control or supply chain influence. [Read full explanation]

 
Joseph Robinson, New York

Operational Excellence, Management Consulting

This Q&A article was reviewed by Joseph Robinson. Joseph is the VP of Strategy at Flevy with expertise in Corporate Strategy and Operational Excellence. Prior to Flevy, Joseph worked at the Boston Consulting Group. He also has an MBA from MIT Sloan.

To cite this article, please use:

Source: "What strategies should companies employ to ensure their Build vs. Buy decisions align with long-term growth objectives?," Flevy Management Insights, Joseph Robinson, 2025




Flevy is the world's largest knowledge base of best practices.


Leverage the Experience of Experts.

Find documents of the same caliber as those used by top-tier consulting firms, like McKinsey, BCG, Bain, Deloitte, Accenture.

Download Immediately and Use.

Our PowerPoint presentations, Excel workbooks, and Word documents are completely customizable, including rebrandable.

Save Time, Effort, and Money.

Save yourself and your employees countless hours. Use that time to work on more value-added and fulfilling activities.




Read Customer Testimonials

 
"I have used FlevyPro for several business applications. It is a great complement to working with expensive consultants. The quality and effectiveness of the tools are of the highest standards."

– Moritz Bernhoerster, Global Sourcing Director at Fortune 500
 
"The wide selection of frameworks is very useful to me as an independent consultant. In fact, it rivals what I had at my disposal at Big 4 Consulting firms in terms of efficacy and organization."

– Julia T., Consulting Firm Owner (Former Manager at Deloitte and Capgemini)
 
"I have used Flevy services for a number of years and have never, ever been disappointed. As a matter of fact, David and his team continue, time after time, to impress me with their willingness to assist and in the real sense of the word. I have concluded in fact "

– Roberto Pelliccia, Senior Executive in International Hospitality
 
"As a consulting firm, we had been creating subject matter training materials for our people and found the excellent materials on Flevy, which saved us 100's of hours of re-creating what already exists on the Flevy materials we purchased."

– Michael Evans, Managing Director at Newport LLC
 
"As a young consulting firm, requests for input from clients vary and it's sometimes impossible to provide expert solutions across a broad spectrum of requirements. That was before I discovered Flevy.com.

Through subscription to this invaluable site of a plethora of topics that are key and crucial to consulting, I "

– Nishi Singh, Strategist and MD at NSP Consultants
 
"I like your product. I'm frequently designing PowerPoint presentations for my company and your product has given me so many great ideas on the use of charts, layouts, tools, and frameworks. I really think the templates are a valuable asset to the job."

– Roberto Fuentes Martinez, Senior Executive Director at Technology Transformation Advisory
 
"As a niche strategic consulting firm, Flevy and FlevyPro frameworks and documents are an on-going reference to help us structure our findings and recommendations to our clients as well as improve their clarity, strength, and visual power. For us, it is an invaluable resource to increase our impact and value."

– David Coloma, Consulting Area Manager at Cynertia Consulting
 
"Flevy is our 'go to' resource for management material, at an affordable cost. The Flevy library is comprehensive and the content deep, and typically provides a great foundation for us to further develop and tailor our own service offer."

– Chris McCann, Founder at Resilient.World



Download our FREE Strategy & Transformation Framework Templates

Download our free compilation of 50+ Strategy & Transformation slides and templates. Frameworks include McKinsey 7-S Strategy Model, Balanced Scorecard, Disruptive Innovation, BCG Experience Curve, and many more.