Why do Apple company partnership with Sony to create the world’s leading camera sensors for iPhone? Can’t they make it !

Have you wondered why apple company makes it’s own processors but yet they buy their camera sensors and lenses from Sony! Apple is an Mega corporates who can build it's own sensors and lenses yet they purchase their products from sony. Lets see why they do it and the strategic behind it.

Build/Borrow/Buy is a competitive strategic concept that allows you to decide to build/outsource/purchase from the market. It is an extremely important decision because organizations cannot build “everything” inhouse and not all important services should be outsourced. So how do apple take a rationale well thought-out decision ?

The decision making can be based at an initial level through a 2 cross 2 matrix

Its an example of BGC’s 2 cross 2 matrix and used for various projects and case models

X Axis: Knowledge and Capability Fitment

Y Axis: Organization Need Fitment

1. When do you Build
   One should build the resource in-house when they realize that they are sitting on the top right quadrant of the 2 by 2 i.e. high knowledge and high organization fitment.
2. When do you Borrow (Non Equity Based Alliances)
   or Buy (Equity Based Partnerships)

One should consider external help when either of the parameters are low or both of them are low. Below chart shows examples of both alliances as well as equity based partnerships.

2.A When do we go for Alliances

Alliances should be preferred when-

I. Nature of the resource is low on tradabilility

II. Success outcomes of the project can be relatively low.

III. Scope of the project is extremely Narrow (example- call centres)

Hence, if your alliance partner tomorrow pulls back the chord, you should be able to find 100 such partners because the project initially was low on organization fitment or success outcome. In apples case, it can be Audio chips and Battery distrubuters.

2.B When do we go for Partnerships

Partnerships should be preferred when-

I. Nature of the resource is low on tradabilility

II. Success outcomes of the project can be high

III. Scope of the project is extremely wide

IV. Control needed is High

After going through the blog. Next time whenever you read about an acquisition or alliance in newspaper, you may apply the above framework to
a) understand strategies of organization
b) evaluate their decision making.

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