The drawbacks of contract manufacturing aredecreased control over the manufacturing processand loss of potential profits on manufacturing.The benefits are the chance to start faster,withlessrisk,and thelater opportunity either to forma partnership with or to buy out the localmanufacturer
◼ The drawbacks of contract manufacturing are decreased control over the manufacturing process and loss of potential profits on manufacturing. The benefits are the chance to start faster, with less risk, and the later opportunity either to form a partnership with or to buy out the local manufacturer
ManagementContracting Under management contracting,the domesticfirm supplies management know-how to a foreigncompany that supplies the capital.The domesticfirm exports management servicesratherthanproducts. Hilton uses this arrangement inmanaging hotels around the world.Management contracting is a low-risk method ofgetting into a foreign market, and it yields incomefrom thebeginning.The arrangement is evenmore attractiveif the contractingfirmhas anoption to buy some share in the managedcompanylateron
◼ Management Contracting ◼ Under management contracting, the domestic firm supplies management know-how to a foreign company that supplies the capital. The domestic firm exports management services rather than products. Hilton uses this arrangement in managing hotels around the world. ◼ Management contracting is a low-risk method of getting into a foreign market, and it yields income from the beginning. The arrangement is even more attractive if the contracting firm has an option to buy some share in the managed company later on