Final answer:
A nonequity relationship between two firms where one handles some aspect of the other's manufacturing process is referred to as outsourcing or contract manufacturing. This approach allows firms to leverage their strengths while another company handles production, which can be cost-effective and efficient.
Step-by-step explanation:
A nonequity relationship between two firms in which one firm handles the manufacturing or some aspect of the manufacturing process for the other is often referred to as outsourcing or contract manufacturing. In this arrangement, a company may outsource parts of its production process to another firm, which could involve anything from components manufacture to final assembly. This kind of partnership allows firms to leverage their core competencies and can result in cost savings, increased efficiency, and flexibility. It is particularly prevalent in industries with complex supply chains and can be seen as a strategic move to streamline operations without merging or acquiring another company.
For example, a well-known case is when technology companies outsource the production of certain hardware components to specialized manufacturers. These manufacturers operate under contractual agreements, producing goods as per the specifications provided by the hiring company. This approach enables technology companies to focus on their strengths such as research and development, design, and marketing while the outsourced manufacturer handles the production.