Question

Even though it is not actively involved in global marketing, Hennessey Enterprises, a U.S.-based business, agreed to sell two thousand of its stress-reducing balls to a distribution company in Norway. This would be an example of contract manufacturing. True or false?

Answer 1

Answer:

This would be an example of contract manufacturing.

True

Explanation:

Contract manufacturing can be defined as an international agreement between two companies in different countries to manufacture a product for the other company. It involves the arrangement by one company to receive manufactured products from another company. Contract manufacturing can also be known as international outsourcing or international subcontracting. In the contract, the company that needs the products usually stipulates the specifications of the product. In some cases, depending on the contract requirements, the company can provide the raw materials to be utilized in manufacturing.

This type of contract also specifies the expected quality of the products, quantity of products and the date of delivery of the products. The contract also provides for the testing of the products to ascertain that the quality meets the standards of the contract. Furthermore, the contract also provides for compensation in case of breach of contract.

Contract manufacturing is usually considered when the cost of production in a foreign country is much lower than in the country that is outsourcing the production.