| With many companies scrambling today to become | | | | successful products can easily be expanded to meet |
| more competitive on a global level and meet consumer | | | | new demands without incurring additional costs and |
| demands for lower prices, many of the methods for | | | | overhead. |
| reaching global markets and joint ventures with foreign | | | | Aside from contract manufacturing, forming |
| firms are looking more and more attractive. One of the | | | | international joint ventures and strategic alliances are |
| options available to product manufacturers is contract | | | | also great ways to expand into the global market. |
| manufacturing with foreign producers. Much like | | | | However, these type of joint ventures have |
| licensing, contract manufacturing involves a foreign | | | | traditionally been used more by larger corporations. A |
| company that produces goods for another company. | | | | joint venture is a type of arrangement where two |
| However, where licensing involves the manufacturer | | | | companies join together for a particular project. |
| using the company's trademark or brand name under | | | | Examples of this are often seen in the motor industry |
| license and the sale of consulting services on the part | | | | where American car companies enter into a joint |
| of the licensor, contract manufacturing involves a | | | | venture with Asian car manufacturers in order to |
| company that already produces a private-label product | | | | produce vehicles for all markets. The two companies, |
| and another company attaching their brand name or | | | | which are often from two separate countries, share |
| trademark. | | | | technology and risks associated with the project, along |
| In contract manufacturing, the manufacturer has no | | | | with marketing and management skills. |
| rights to the trademark. Contract manufacturing is | | | | The advantage of these kinds of ventures is that |
| often a form of offshore outsourcing where a | | | | many companies who would not otherwise be able to |
| company produces a product for a specific brand. | | | | enter some markets are able to work together with |
| Examples of this can be seen in a number of large US | | | | local companies that have access to those markets. A |
| corporations. Singapore contract manufacturers often | | | | strategic alliance is much of the same thing, tying |
| produce cell phones and other electronics for a | | | | together two or more companies with a common goal. |
| number of US brands, and China is a leading contract | | | | However, in a strategic alliance, companies typically do |
| manufacturer for US computers and laptops like Dell. | | | | not share costs, management, or profits. While these |
| The benefits of contract manufacturing for startup | | | | kinds of arrangements can be beneficial at reaching |
| companies or smaller businesses can be great, as | | | | other markets, the disadvantages are much like in a |
| contract manufacturing often allows these companies | | | | licensing agreement, where one company can take the |
| to experiment with different product variations in | | | | other companies technology and expertise, leave the |
| different markets without having hefty production | | | | arrangement, and use the ideas to promote their own |
| costs associated with a local manufacturing facility. In | | | | company or profits. |
| addition, for established companies, production of | | | | |