Assembly operations

An assembly operation is a variation of the subsidiary. A foreign production plan might be set up simply to assemble components manufactured in the domestic market or elsewhere. The exporting company may try to retain key component manufacture in the domestic plant, allowing development, production skill and investment to be concentrated, while maintaining the benefit from economies of scale. Some parts of the products may be produced in various countries (multisourcing) in order to gain each country´s comparative advantage. Capital-intensive parts may be produced in advanced countries, and labour-intensive assemblies may be produced in less developed countries (LDCs), where labour is abundant and labour costs are low. When a product becomes mature and faces intense price competition, it may be necessary to shift all of the labour-intense operations to LDCs. This is the principle behind the international product life cycle (IPLC). See outsourcing; offshoring; subsidiary.

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