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There are several variations on this theme. The Four Seasons company sells management contracts to owner of hotels in many parts of the world to manage their hotels for a fee. Contract manufacturing is where a firm hires local manufacturers to produce the product. Many firms will use a local firm to manufacture within Mexico, for example, to produce products appropriate for their needs. A newer phenomenon is the idea of outsourcing your manufac- turing entirely to a firm, often foreign, with plants in various parts of the world to allow you to focus on other parts of your business where your firm can contribute more value. In Nike’s case, this means designing the sports shoes, building and working with their brand equity and marketing the brand. Another interesting example is, KeyTronic EMS a Spokane, Washington based firm which offers customers a complete global manufacturing solution. They have plants in the US, Mexico and China. These facilities provide their customers the opportunity to manufacture in the facility that best serves specific product manufacturing and distribution needs.
JOINT VENTURES
Foreign firms may join with local investors to create a joint venture (JV) firm in which they share ownership and control. A joint venture may be necessary for political and economic reasons. The foreign firm may lack the finances, physical presence, market knowledge or managerial resources to undertake the venture alone, or the foreign government might require joint ownership as a condition to do business in their country. This has been the experience of firms seeking to enter the vast Chinese market. At one time it was a legal requirement to have a local partner, though with China’s admittance to the World Trade Organization, that requirement has been largely eliminated. But even large multinationals like European food giant Unilever often enter into joint ventures in China in order to get the local investors to help with the sometimes horrendous Chinese bureaucracy and to put a local ‘face’ on the venture. Other advantages a Chinese partner may bring include central or local government support, brand reputation, land, licences, distribution and access to suppliers, which reduce start-up costs and improve the foreign investor’s chances of success. JVs have their drawbacks. First,