As a conclusion, each branch works for its best interest, thereby losing overall company profitability.
Influence costs entail lobbying for resources which may lead to biased information and destructive competition within the firm; internal divisions may lobby each other, raising the cost of production. Using independent firms keeps these issues distinct.
On the other hand, there are advantages for firms that choose the 'make' strategy over outsourcing. Using the 'make' strategy means that all information with regard to the production of the product is handled in-house with direct responsibility and control over security and privacy of information. This would prove a benefit to firms in sustaining their competitive advantage because information leakage could prove fatal for firms who are unable to respond to their rivals duplicating and improving their technology. .
Contracting and transactions cost are also reasons why companies choose the 'make' strategy. Transaction cost refers to the cost of organizing and transacting exchanges between partners. It evaluates how trading partners safeguard themselves from the risks associated with exchange relationships. The key characteristics of transaction cost economics are relationship- specific asset and the fundamental transformation concepts of holdup, rent and quasi rent. Relationship-specific investment is a set of assets or investments made specifically for the improvement of efficiency of the given transaction which cannot be redeployed to another transaction without incurring cost or affecting the productivity of the asset. Assets can be relationship-specific for many reasons such as site, physical, human and dedicated assets. Site specificity is the process wherein parties are in a 'cheek-by-jowl' relationship to minimize inventory and transportation costs and assets are highly immobile in a particular place.