In the Japanese economy, it seems that there are many large industrial firms. However, the actual work of those firms is carried out by small and medium subcontractors. Therefore, if the contractors have any problems within the market, they can pass that to their subsidiaries. Subcontracting has always been important source of competitiveness and efficiency. gThe importance of subcontractors is especially great in industries where diverse parts, processing and a high level of technology are required, such as in the general machinery, electrical machinery, motor vehicle and precision machinery industriesh.(Okimoto & Rohlen, P84)
Subcontracting (in Japanese is Shitauke) can not be specified exactly, as it is not clearly defined. However, this word is often used in Japan. Subcontracting can be defined and existed when a company (which is called as a contractor) makes an order with another company (which is called as a subcontractor) for the production of components, parts, assemblies or sub assemblies to be sold by the contractor. These orders might include the processing, transformation or finishing of parts or materials by the subcontractor if the contractor requests for it. Subcontractors might be asked to supply parts of products that are not available at their firm, in this case, it must be either manufactured by the assembly industry, imported from other countries or purchased from other companies. These actions differ on an order basis, according to the buyer.
There are also several types of subcontracting.
• One of them is called efull capacity subcontractingf; this comes to be being when a firm is not capable of doing something, so that a percentage of total output is regularly subcontracted.
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