............................refers to a type of international business where a firm enters into a contract with one or a few local manufacturers in foreign countries to get certain components or goods produced as per its specifications.

Contract Manufacturing

The correct answer is option 3- Contract Manufacturing.

Contract manufacturing refers to a type of international business where a firm enters into a contract with one or a few local manufacturers in foreign countries to get certain components or goods produced as per its specifications. Contract manufacturing, also known as outsourcing, can take three major forms:

• Production of certain components such as automobile components or shoe uppers to be used later for producing final products such as cars and shoes.
• Assembly of components into final products such as assembly of hard disk, mother board, floppy disk drive and modem chip into computers.
• Complete manufacture of the products such as garments.

The goods are produced or assembled by the local manufacturers as per the technology and management guidance provided to them by the foreign company. The goods so manufactured or assembled by the local producers are delivered to the international firm for use in its final products or out rightly sold as finished products by the international firm under its brand names in various countries including the home, host and other countries. All the major international companies such as Nike, Reebok, Levis and Wrangler today get their products or components produced in the developing countries under contract manufacturing.