Question:
Discuss meaning, merits and demerits of contract manufacturing.
Answer:
Contract manufacturing refers to type of international business where a firm enters into contract with some local manufactures in foreign countries to get certain components of goods produced as per their specifications. It is also called outsourcing. It can take three forms: Getting produced certain parts of final products which will be used for the production of final products later; assembly of components into final products; and complete manufacture of the products like garments.
Merits of Contract manufacturing
- 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.
- 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.
- 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.
- Better capacity utilization: Local producers benefit get from contract manufacturing because it allows them to make better use of their idle production capacity.
- An opportunity for local producers to become international: Local producer also gets an opportunity to get involved in international business.
Disadvantages of Contract Manufacturing
- 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.
- Loses control over Manufacturing Process: Local manufacturer in the foreign country loses control over manufacturing process.
- 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.
International Business I
Q 1.
What is the share of India's exports in world exports?
Q 2.
Which mode of international business should be chosen by a small business man and why?
Q 3.
Explain different forms of Joint Ventures.
Q 4.
What are the major items that are exported from India?
Q 5.
Reebok orders for footballs to local manufacturers of Ludhiana and then sells it all over the world. It is an example of what?
Q 6.
Discuss the scope of international business.
Q 7.
Discuss as to why nations trade.
Q 8.
State the important changes being observed in composition of India's external trade since 2007-08.
Q 9.
What are the benefits of international trade to firms?
Q 10.
List the major countries with whom India trades.
Q 11.
Discuss the merits and demerits of entering into joint ventures.
Q 12.
Discuss meaning, merits and demerits of contract manufacturing.
Q 13.
India is_largest economy in the world.
Q 14.
Discuss any three advantages of international business.
Q 15.
When a middleman is involved in handling export procedure, then it is called by what name?
Q 16.
Licensee or franchisee pays a fee to licensor or franchisor. What is it called?
Q 17.
"International trade benefits both the parties involve."Do you agree? Justify your answer:
Q 18.
Which service has got dominating share in foreign trade in services?
Q 19.
Discuss the major trends in India's foreign trade. Also list the major products that India trades with other countries.
Q 20.
What is the basic reason behind international trade?
Q 21.
How is home trade different from external trade?
Q 22.
Write a short note on India's foreign investments.
Q 23.
List major items of India's import.
Q 24.
Why is it said that licensing is an easier way to expand globally?
Q 25.
"Foreign trade is not free from difficulties."Comment.
Q 26.
What is the major reason under lying trade between nations?
Q 27.
Give one point of difference between licensing and franchising.
Q 28.
Name the country whose share is largest in India's exports and imports.
Q 29.
Out of international trade and international business which one is wider in scope?
Q 30.
Discuss meaning, merits and demerits of contract manufacturing.
Q 31.
Enumerate limitations of contract manufacturing.
Q 32.
India embarks on the path of globalisation. Comment
Q 33.
Discuss the benefits of international business.
Q 34.
What benefits do firms derive by entering into international business?
Q 35.
"International business is more than international trade". Comment.
Q 36.
In what ways is exporting a better way of entering into international markets than setting up wholly owned subsidiaries abroad.
Q 37.
"Wholly owned subsidiary is a more investing, more risky and less return giving venture."Do you agree? Substantiate your answer.
Q 38.
Discuss briefly the factors that govern the choice of mode of entry into international business.
Q 39.
Explain different forms of contract manufacturing.
Q 40.
Define international business.
Q 41.
Differentiate between international trade and international business.
Q 42.
What is invisible trade? Discuss salient aspects of India's trade in services.
Q 43.
Differentiate between contract manufacturing and setting up wholly owned production subsidiary abroad.
Q 44.
Distinguish between licensing and franchising.
Q 45.
What is international business? How is it different from domestic business?
Q 46.
Licensing and franchising are suitable in different situations. Explain how?
