Management contracts

A type of foreign market entry strategy, which is used primarily when the foreign company is perceived to be able to manage an existing or new operation more efficiently than the parent company. Management contract are a means by which a company may use part of its management personnel to assist a foreign company for a specified period of time for a fee. Thus the company may earn income with little capital investment. Management contracts are drawn to cover three to five years, and fixed fees based on volume rather than profits are more common.