How do firms decide whether or not to outsource? In a short essay, describe the factors that contribute to the decision to internalize or externalize business activities

What will be an ideal response?

Managers must decide between internalization and externalization—whether each value-adding activity should be conducted in-house or by an external, independent supplier. Firms usually internalize those value-chain activities that they consider part of their core competencies, or which require the use of proprietary knowledge and trade secrets that they want to control. By contrast, firms will usually source from external suppliers when they can obtain noncore products or services at lower cost or from suppliers specialized in providing them.