write three merits and demerits of contract manufacturing
Answers
Answer:
Less investment: It helps international firms in production of goods at massive scale without making any investment in setting up production facilities. Therefore, it is more suitable for small and medium size manufacturers who can’t undertake 100% or even 50% investment. 2. Less risky: It is less risky as there is little investment involved. Moreover, local manufacturers who have been given specific product design and quality standards do not deviate from them. 3. Low cost: If goods are contracted in low labour and material cost country, then it also gives benefit of low cost. For example, in India labour is very cheap and therefore it has become a favorite destination for contract manufacturing.
Answer:
Explanation:
Merits of Contract manufacturing
1 : Less investment: It helps international firms in production of goods at massive scale without making any investment in setting up production facilities. Therefore, it is more suitable for small and medium size manufacturers who can’t undertake 100% or even 50% investment.
2 : Low cost: If goods are contracted in low labour and material cost country, then it also gives benefit of low cost. For example, in India labour is very cheap and therefore it has become a favorite destination for contract manufacturing.
3 : An opportunity for local producers to become international: Local producer also gets an opportunity to get involved in international business.
Demerits of Contract manufacturing
1 : Deviations from Product design and quality Specifications: Local firms might not follow product design and quality standards causing serious product quality problems for international firm.
2 : Loses control over Manufacturing Process: Local manufacturer in the foreign country loses control over manufacturing process.
3 : No authority to sell output: The local firm cannot sell the output according to his will. It has to sell the goods to international firm at pre-determined prices.