INTERLINKING
PRODUCTION ACROSS
COUNTRIES
▪ Why MNCs Choose Certain Locations for Production
▪ They prefer places close to large markets so that products can reach customers
quickly.
▪ They choose countries where skilled and unskilled workers are available at low
wages.
▪ They select locations where land, raw materials, and other resources are easily
available.
▪ They look for areas with good transport, communication, and other facilities.
▪ They choose countries with government policies that support and encourage
foreign companies.
▪ Investment by MNCs
▪ When money is spent to buy assets like land, buildings, machines, and equipment,
it is called investment.
▪ When this investment is made by MNCs, it is called foreign investment.
▪ The main aim of this investment is to earn profits from these assets.
▪ Ways MNCs Set Up Production
▪ Joint Production with Local Companies – MNCs work together with local
companies by providing money for extra investment, such as buying new
machines. They also bring the latest technology to improve production.
▪ Buying Local Companies (Most Common Way) – MNCs purchase local
companies and increase their production. For example, Cargill Foods from the USA
bought Parakh Foods in India. Parakh Foods had a strong marketing network and
four oil refineries. Now, Cargill is the largest edible oil producer in India, making 5
million pouches every day.
▪ Placing Orders with Small Producers – MNCs from developed countries give
orders to small producers in different parts of the world. This is common in the
production of garments, footwear, and sports goods. The MNCs decide the price,
quality, delivery time, and even the working conditions for the workers.
▪ Power and Influence of MNCs
▪ Some MNCs have more money than the total yearly budget of some developing
countries.
▪ They form partnerships with local companies to share resources and technology.
▪ They use local suppliers to get raw materials and other goods.
▪ They buy local companies and take control of their production.
▪ They control the quality of products and decide the prices at which these products
are sold.
PYQ
1-Mark / Very Short Answer Questions
▪ What is foreign investment? (CBSE 2014)
▪ Give one example of an MNC operating in India. (CBSE 2016)
▪ Why do MNCs set up production in other countries? (CBSE 2013)
▪ 3-Mark Questions
▪ Explain any three reasons why MNCs set up production in different countries. (CBSE 2012)
▪ Explain any three ways in which MNCs control production in other countries. (CBSE 2014)
▪ Explain any three benefits of joint production between a local company and an MNC. (CBSE 2017)
▪ 5-Mark / Long Answer Questions
▪ How are MNCs spreading their production across countries? Explain with an example. (CBSE 2012, CBSE 2015)
▪ Explain with examples the various ways by which MNCs set up production in other countries. (CBSE 2016)
▪ How do MNCs exercise control on production? Explain with examples. (CBSE 2014)
