Q.7:- Differentiate between contract manufacturing and setting up wholly owned production subsidiary abroad.
Answer:-
| 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. |