Strategies for Reaching Global Markets: Contract Manufacturing and Joint Ventures
With many companies today striving to become more globally competitive and meet consumer demands for lower prices, many of the methods of reaching global markets and joint ventures with foreign companies are becoming increasingly attractive. One of the options available to product manufacturers is contract manufacturing with foreign producers. Like licenses, contract manufacturing involves a foreign company producing goods for another company. However, when the license implies that the manufacturer uses the trademark or the brand name of the licensed company and the sale of consulting services by the licensor, the contract manufacturing implies a company that already produces a branded product. private and another company that attaches its brand or trademark.
In contract manufacturing, the manufacturer has no trademark rights. Contract manufacturing is often a form of offshore outsourcing in which a company produces a product for a specific brand. Examples of this can be seen in a number of large American corporations. Singapore contract manufacturers often produce mobile phones and other electronic devices for various US brands, and China is a leading contract manufacturer of US computers and laptops such as Dell.
The benefits of contract manufacturing for start-ups or smaller companies can be great, as contract manufacturing often allows these companies to experiment with different product variations in different markets without having high production costs associated with a local manufacturing facility. Furthermore, for established companies, the production of successful products can be easily expanded to meet new demands without incurring additional costs and overhead.
Aside from contract manufacturing, the formation of international joint ventures and strategic alliances are also great ways to expand in the global marketplace. However, these types of joint ventures have traditionally been used more by larger corporations. A joint venture is a type of arrangement in which two companies come together for a particular project. Examples of this are often seen in the auto industry, where American auto companies form a joint venture with Asian automakers to produce vehicles for all markets. The two companies, which are often from two different countries, share technology and risks associated with the project, along with marketing and management skills.
The advantage of these types of ventures is that many companies that would not otherwise be able to enter some markets can work together with local companies that have access to those markets. A strategic alliance is almost the same, joining two or more companies with a common goal. However, in a strategic alliance, companies generally do not share costs, management, or profits. While these types of agreements can be beneficial for reaching other markets, the disadvantages are very similar to those of a license agreement, in which one company can take the technology and expertise of the other companies, abandon the agreement and use ideas to promote your own business or your profits. .