Question

Nike will often enter a foreign market through an agreement with a foreign firm. The agreement calls for the foreign firm to manufacture products to Nike's standards and attach the Nike name and trademark. This technique allows Nike to experiment in a new market without incurring the large start-up costs involved with building their own production facilities. This is an example of:

Answer 1

Contract manufacturing.

Step-by-step explanation:

Contract manufacturing is when a company provides to another company the manufacturer with all the specifications, and, if applicable, also with the materials required for the production process.

Contract manufacturing obviates the need for plant investment, transportation costs and custom tariffs and the firm gets the advantage of advertising its product as locally made. Contract manufacturing also enables the firm to avoid labour and other problems that may arise from its lack of familiarity with the local economy and culture.