Production Sharing Contracts

While tax and royalty fiscal systems are common, another prevalent form of fiscal system is the Production Sharing Contract, in which the investor (e.g. oil company) enters into an agreement with the host government to explore and potentially appraise and develop an area. The investor is a contractor to the host government, who retains the title of any produced hydrocarbons. 

I. Giannoccaro, and P. Pontrandolfo, Supply Chain Coordination by Revenue Sharing Contracts, International Journal of Production Economics, 89, 131-139 (2004). 

Change in pricing. This may impact sales contracts and revenue sharing contracts among the enterprise partners due to a potential change in product sales volume or its market share. 

Explain why, for the same inventory level, a revenue-sharing contract results in a lower sales effort from the retailer than if the retailer has paid for the product and is responsible for all remaining inventory. 

Since the 1970s, when production was relocated to countries with lower wages, the rate of clothing import increased. This process started with contract finishing, but soon afterwards new companies were founded in these countries and joint ventures followed this trend. Figures on the current domestic production share in Europe are not available, but estimates range around 10%. 

The sales strategy needs to decide what product to be sold in which sales market representing the sales location in the value chain network. New markets needs to be evaluated for their attractiveness and the own competitive position with respect to existing products or the capabilities in the development of new products for the respective demand. Sales business rules include decisions on the strategic share of contracted business volumes vs. flexible spot business volumes. These business rules often depend on sales channels and frame contracts with customers. The sales strategy can be matched with classical marketing mix decisions on products, prices, promotion and communication, as well as sales channel decisions. 

American traders who have been visiting China since the Chinese opened the door to the US continue to meet their share of frustrations. The Chinese are only now allowing foreigners to deal with end-users of the products, but trade continues to be conducted "Chinese style"—that is, the Chinese reluctantly enter into long-term contracts—but there is still an absence of a conventional legal system in which to conduct trade. 

This sale and back-lease model is applied by many other pharmaceutical companies. It enables the company to dispose of assets without being forced to lay off employees. The net effect for the industry as a whole is that statistically, the share of outsourcing is increasing. However, the problem of underutilized capacity persists. For a hne-chemical company, the acquisition of an API plant from a pharma company is problematic. Once the supply contract, offered by the pharma company as an incentive for the acquisition, expires, the problem arises as to what the capacity should be used for. This is all the more the case as the plants usually are designed to manufacture just one product and therefore are not truly multipurpose. Last but not least, the plants have been run as cost centers and the implementation of a lean production... 

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