Outsourcing to small producers
Also called: Subcontracting · Topic: Globalisation and MNCs · NCERT: Class 10, Ch 4 "Globalisation and the Indian Economy"
Meaning
Outsourcing to small producers is one way MNCs control production without owning factories. Large MNCs, mainly in garments, footwear and sports goods, place orders with many small producers around the world. The MNC then sells the goods under its own brand name. It decides the price, quality, delivery date and labour conditions. So the MNC controls production that small, independent firms carry out.
Example
A global sportswear brand orders jeans or shoes from small workshops in developing countries and sells them in the USA under its own label at a high price. Most of that price goes to the brand and the shop that sells them. Very little reaches the workers who made the goods.
Don't confuse with
- Outsourcing of services (Class 11): a company hires regular services, such as call centres or accounting, from outside firms, mostly in other countries. That involves services rather than manufactured goods.
Related concepts
- Multinational corporation
- Joint production
- Technology transfer
- Acquisition of local companies
- Glocalisation