There is almost no day passing without any news about mergers, acquisitions or cooperations between two or more companies. In most cases, one of the major motivations is the recognition of cost reduction potentials to stabilize profits. Daimler-Benz and Chrysler, since early 1999 known as DaimlerChrysler, merged their R & D and sourcing activities to achieve economies of scale. But for what reason do they have to stabilize profits? Because they live in a world of decreasing margins and stagnating sales. It is evident that despite their high volumes the markets of the industrialized countries are almost satisfied and lack appreciable growth rates. Product life cycles (PLCs) become gradually shorter, reducing the profit periods of products. Moreover, these markets are mostly dominated by a destructive price competition so that often companies are forced to offer at almost dumping prices in order to survive. The big German mineral oil enterprises recently claimed that the introduction of Dea′s payback card to bind their customers via a one-pfennig (!) patronage refund per consumed liter had been, in their opinion, responsible for a follow-up ruinous price "battle". At the same time, they were all fighting together against the private brands. Shortly afterwards, it was the food trade battling, which had been instigated by Wal Mart′s dumping-price policy with basic foodstuff. And this development will continue.
Therefore, companies more and more initiate activities to conquer foreign markets, with many of them evading to less developed countries. This apparent contradiction turns out to be a logical step of enlarging upon business activities because many of these countries are on the threshold of becoming industrialized and consequently, they reveal huge potentials of unsatisfied demands, which, up to that point, remained unattended. Hence, even small and medium-sized enterprises turn "international", seeking advantages in distribution and sourcing as well.
Table of Contents
- 1. Introduction
- 1.1 Internationalization as a Surviving Strategy
- 1.2 Problems with Internationalization
- 2. Conceptualization of Contract Manufacturing
- 2.1 Contract Manufacturing as a Foreign Production Strategy
- 2.2 Types of Contract Manufacturing
- 2.3 Benefits and Advantages against other Strategies
- 2.3.1 Evading Financial, Political and Legal Barriers
- 2.3.2 Gaining Advantages in Sourcing and Customer Orientation
- 2.4 Risks and Disadvantages against other Strategies
- 2.5 Recommendations of Strategy Choice
- 3. Implementation in Industrial Goods Markets
- 3.1 Finding and Selecting the Right Manufacturers
- 3.2 Structuring a Contract
- 3.3 Realizing a Supply Chain Management
- 3.4 Controlling of Contract Manufacturing
Objectives and Key Themes
This work aims to conceptualize and analyze the implementation of contract manufacturing as a foreign market entry strategy, specifically within industrial goods markets. It examines the advantages and disadvantages of this approach compared to other internationalization strategies, considering the challenges and opportunities presented by diverse economic, political, and cultural contexts.
- Internationalization Strategies for Industrial Goods
- Advantages and Disadvantages of Contract Manufacturing
- Challenges of Foreign Market Entry
- Supply Chain Management in Contract Manufacturing
- Risk Mitigation and Strategic Decision-Making
Chapter Summaries
1. Introduction: This introductory chapter sets the stage by discussing the increasing pressure on companies to internationalize as a survival strategy in the face of shrinking profit margins and saturated domestic markets. It highlights the global competition and the shortening product life cycles that force companies to seek new growth opportunities in foreign markets, particularly in developing countries with untapped potential. The chapter also briefly touches on the challenges inherent in internationalization, foreshadowing the complexities explored in later chapters.
2. Conceptualization of Contract Manufacturing: This chapter delves into the core concept of contract manufacturing as a foreign production strategy. It explores various types of contract manufacturing arrangements, outlining the benefits, such as evading financial, political, and legal barriers, and gaining advantages in sourcing and customer orientation. Conversely, it also details the inherent risks and disadvantages associated with this strategy. The chapter culminates in a discussion of recommendations for choosing the optimal strategy, weighing the pros and cons for different business contexts and market situations.
3. Implementation in Industrial Goods Markets: This chapter focuses on the practical aspects of implementing contract manufacturing in industrial goods markets. It provides a framework for finding and selecting suitable manufacturers, structuring effective contracts, establishing efficient supply chain management systems, and implementing robust control mechanisms to ensure the quality and timely delivery of products. This section offers practical advice and considerations for businesses looking to implement this foreign market entry strategy successfully. The emphasis is placed on the operational aspects of managing this complex international business venture.
Keywords
Contract manufacturing, foreign market entry, internationalization strategy, industrial goods, supply chain management, risk management, strategic decision-making, global competition, emerging markets.
Frequently Asked Questions: A Comprehensive Language Preview on Contract Manufacturing as a Foreign Market Entry Strategy
What is the main topic of this document?
This document provides a comprehensive overview of contract manufacturing as a foreign market entry strategy, particularly within industrial goods markets. It analyzes the strategy's conceptualization, implementation, advantages, disadvantages, and associated risks. The document also offers guidance on selecting suitable manufacturers, structuring contracts, managing supply chains, and implementing effective control mechanisms.
What are the key themes explored in this document?
The key themes include internationalization strategies for industrial goods, the advantages and disadvantages of contract manufacturing, challenges of foreign market entry, supply chain management within contract manufacturing, risk mitigation, and strategic decision-making in the context of global competition and emerging markets.
What are the different chapters covered in the document?
The document is structured into three main chapters: Chapter 1 (Introduction) sets the context by discussing the need for internationalization and its challenges. Chapter 2 (Conceptualization of Contract Manufacturing) delves into the definition, types, advantages, and disadvantages of contract manufacturing. Chapter 3 (Implementation in Industrial Goods Markets) focuses on the practical aspects of implementing contract manufacturing, including manufacturer selection, contract structuring, supply chain management, and control mechanisms.
What are the advantages of using contract manufacturing as a foreign market entry strategy?
Contract manufacturing offers several advantages, including evading financial, political, and legal barriers in foreign markets and gaining advantages in sourcing and customer orientation. It allows companies to access new markets without the significant capital investment required for setting up their own production facilities.
What are the disadvantages and risks associated with contract manufacturing?
Despite its benefits, contract manufacturing carries risks. These include potential loss of control over production quality, intellectual property protection concerns, dependence on the contract manufacturer, and challenges in managing complex international supply chains. The document thoroughly explores these risks and offers strategies for mitigation.
How does this document help in selecting a suitable contract manufacturing strategy?
The document provides a framework for evaluating the suitability of contract manufacturing for a given business context. It outlines the benefits and risks, offering recommendations for choosing the optimal strategy based on a careful consideration of the pros and cons for different market situations and company capabilities.
What aspects of implementation are discussed in the document?
The implementation section provides practical guidance on finding and selecting appropriate manufacturers, structuring robust contracts, establishing efficient supply chain management systems, and implementing effective control mechanisms to ensure product quality and timely delivery. It emphasizes the operational aspects crucial for successful implementation.
What are the key words associated with this document?
Key words include: Contract manufacturing, foreign market entry, internationalization strategy, industrial goods, supply chain management, risk management, strategic decision-making, global competition, and emerging markets.
What is the overall objective of this work?
The work aims to provide a comprehensive analysis of contract manufacturing as a foreign market entry strategy, focusing on its conceptualization and practical implementation within industrial goods markets. It seeks to illuminate the advantages and disadvantages, challenges, and opportunities associated with this approach in diverse economic, political, and cultural contexts.
- Quote paper
- Reinhard Nickel (Author), 2000, Contract Manufacturing - Foreign Market Entry via Contract Manufacturing - Conceptualization and Implementation in Industrial Goods Markets, Munich, GRIN Verlag, https://www.grin.com/document/2528
