What is Turnkey Projects?
Turnkey Projects or operations are common in international business in supply, erection and commissioning of plants. Turnkey operations are a type of collaborative arrangement in which one company contracts with another to build complete, ready-to-operate facilities.
Turnkey operations are generally done in the areas of industrial equipment manufacturing and construction. The customer for a turnkey operation is often a government agency.
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Advantages of Turnkey Projects
- Turnkey projects are a way of earning great economic returns from the know-how required to assemble and run a technologically complex process.
- Turnkey projects make sense in a country where the political and economic environment is such that a longer term investment might expose the firm to unacceptable political and/or economic risk.
Disadvantages of Turnkey Projects
- By definition, the firm that enters into a turnkey deal will have no long-term interest in the foreign country.
- The firm that enters into a turnkey project may create a competitor.
- If the firm’s process technology is a source of competitive advantage, then selling this technology through a turnkey project is also selling competitive advantage to potential and/ or actual competitors.