Explain management contracting with an example. What are its advantages and disadvantages?
What will be an ideal response?
Management contracting is a type of joint venture. In short, the domestic firm provides the management know-how to a foreign company that supplies the capital. So the domestic firm exports management services rather than products. Hilton uses this arrangement in managing hotels around the world. For example, the hotel chain operates DoubleTree by Hilton hotels in countries ranging from the United Kingdom and Italy to Peru and Costa Rica, to China, Russia, and Tanzania. The properties are locally owned, but Hilton manages the hotel with its world-renowned hospitality expertise. Management contracting is a low-risk method of getting into a foreign market, and it yields income from the beginning. The arrangement is even more attractive if the contracting firm has an option to buy some share in the managed company later on. The arrangement is not sensible, however, if the company can put its scarce management talent to better uses or if it can make greater profits by undertaking the whole venture. Management contracting also prevents the company from setting up its own operations for a period of time.
You might also like to view...
When a customer's account is identified as uncollectible using the allowance for doubtful accounts method, which of the following is the correct entry to record the write-off?
a. debit Uncollectible Accounts Expense, credit Accounts Receivable (customer name) b. debit Accounts Receivable (customer name), credit Allowance for Doubtful Accounts c. debit Allowance for Doubtful Accounts, credit Accounts Receivable (customer name) d. debit Accounts Receivable (customer name), credit Uncollectible Accounts Expense
_________ is one of the four key behaviors that performing teams exhibit. A. Groupthink B. Individualism C. Contribution
Fill in the blank(s) with correct word
A ________ refers to a document filed by a secured creditor with the appropriate government office that constructively notifies the world of his or her security interest in personal property.
A. security disclosure B. financing statement C. possession statement D. custodial statement
If an agent's act causes loss to the third person, that third person may generally hold the agent liable for the loss
Indicate whether the statement is true or false