Contract Manufacturing

Wholly owned production subsidiary

1. It is a type of international business where a firm enters into a contract with one or a few local manufactures in foreign countries to get certain components or goods produced as per its specifications.

2. The goods are produced or assembled by the local manufacturer as per the technology and management guidance provided to them by the foreign company.

3. It is suitable for small and medium sized firms.

4. Government does not oppose it rather prefers it with some rules and regulations.

1. When the companies want to exercise full control over the foreign company by making 100% investment in its equity capital, it becomes wholly owned production subsidiary abroad.

2. Here, it is not required to disclose technology or trade secrets to others.

3. It is not suitable for small and medium sized firms.

4. Government policies can oppose it.