Which global sourcing arrangement is established where labor costs are lower to supply components to the home country?

The focus of this question is on global sourcing arrangements aimed at leveraging lower labor costs to supply components back to the home country. The correct answer highlights the concept of an overseas joint venture, which involves two or more entities collaborating in a foreign country to achieve business objectives.

In the case of an overseas joint venture, one of the parties typically contributes local knowledge, resources, or access to labor, which can be cost-effective due to lower wage rates in that region. This allows the home country firm to benefit from these reduced labor costs while still sharing the risks and rewards with the local partner. This type of arrangement can offer better market access and operational benefits, making it an attractive option for companies looking to enhance their competitiveness by reducing production costs.

The other options differ in structure and implications. A wholly owned subsidiary represents a situation where a company fully owns a production facility in another country but does not necessarily involve partnering with local firms. An overseas independent contractor could involve outsourcing specific tasks without establishing a deeper business involvement, which may not capture the advantages of shared resources and support typical in joint ventures. Lastly, global independent subsidiary is not commonly used in the context of sourcing components; it lacks the partnership dynamic that characterizes a joint venture.

Therefore, the overseas joint venture