_ involves outsourcing production to third-party firms.
a. Horizontal integration
b. Long tailing
c. Peer production
d. Contract manufacturing
e. Viral production
The correct answer and explanation is :
The correct answer is d. Contract manufacturing.
Contract manufacturing refers to the practice of outsourcing the production of goods to third-party firms, rather than manufacturing the products in-house. In this arrangement, a company contracts another company, typically located in a different region or country, to produce its products. This is commonly used in industries such as electronics, apparel, and pharmaceuticals, where companies want to focus on design, marketing, and branding, while leaving the manufacturing process to specialized firms that can produce the goods at a lower cost or with greater efficiency.
Contract manufacturing offers several advantages to companies. One of the key benefits is cost savings. Companies can avoid the expenses associated with building and maintaining manufacturing plants, purchasing machinery, and hiring employees. Instead, they can rely on third-party firms with established facilities and expertise. This is particularly important for businesses looking to scale their production rapidly without making significant capital investments.
Another advantage is flexibility. Companies can easily adjust their production levels based on demand without worrying about excess capacity or underutilization of their own resources. Contract manufacturers often have the ability to quickly ramp up or scale down production, making it easier to meet market fluctuations.
Contract manufacturing also allows businesses to focus on their core competencies. By outsourcing production, companies can devote more attention to research and development, marketing, and customer service. Additionally, companies can take advantage of the expertise and specialization that contract manufacturers bring to the table, ensuring that products are made with high quality and efficiency.
In summary, contract manufacturing involves outsourcing the production process to third-party firms, helping companies reduce costs, increase flexibility, and focus on core business activities. This has become a widely used strategy in the globalized economy.