PRODUCTION SHARING FACILITIES
International production sharing has become a popular cost-reduction strategy for companies throughout the industrialized world. By taking advantage of worldwide resources–particularly inexpensive labor–firms in Europe, Japan, and the U.S. are able to compensate for high domestic wage rates and improve their overall cost position. At the same time, these firms begin to establish a local presence in the emerging markets, where they perform the low-cost manufacturing. In essence, production sharing can potentially improve firm performance by locating productive activities in different countries to take advantage of inherent factor and market advantages.
Production sharing, also known as co-production, is generally a part of a broader manufacturing strategy–globalized manufacturing rationalization. Perhaps the best known production sharing situation in the United States involves the so-called “maquiladoras” of Mexico. These maquiladora facilities are low-cost manufacturing and assembly...
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