Major limitations of contract manufacturing are discussed below:
1. Non adherence to quality standards: Local firms may not adhere to quality standards or product design. It may cause serious quality problems for international firm. .
2. No control on production by local producer: Local producer has no control on manufacturing as goods are manufactured strictly as per the terms and specifications by international firm.
3. Zero control over sales: Local producer can’t sell the output to customers directly. He needs to sell to the international firm at a pre-determined price. It reduces profits of local firm.