Q.7:- Differentiate between contract manufacturing and setting up wholly owned production subsidiary abroad.
|Contract manufacturing||Wholly owned production subsidiary|
|A firm enters into a contract with one or a few local manufacturers in foreign countries to get certain components or goods produced as per its specifications.||The parent company acquires full control over the foreign company by making 100 per cent investment in its equity capital.|
|The firm has limited control over the local manufacturer.||The parent company has full control over its operations in another country through the subsidiary.|
|There is no or little investment in the foreign countries||The parent company buys up the entire equity of the firm abroad and makes this firm its subsidiary.|