CHAPTER-4 (Question Answer)

Globalisation
Q.1 What is Globalisation?
Ans. Globalisation is a process of integration of economies of two or more countries.
Q.2 Define MNCs. Write its features.
Ans. MNCs refers to Multi National Corporations. A MNC is a large company that owns or
controls production and marketing operations in two or more countries. Its features are:

 It does not produce all the goods on their own and at one single place. They operate in
different countries at a same time.
 They come up with a common aim of profit maximisation and cost minimisation.
 They bring huge investments with them.
 They have advanced production strategies and technology.
Q.3 What do you mean by foreign investment?
Ans. Money spent by MNCs on purchasing assets (such as land, building, machinery etc.) is
what we call foreign investment.
Q.4. What are the different ways in which MNCs spread and interlinked their
production?
Ans. There are mainly three ways by which MNCs are spreading and interlinking production.
These are:
i) JOINT VENTURES/ PARTNERSHIP- MNCs propose local companies to work in
collaboration with them. When it accepts the proposal, MNCs start production jointly with
local companies of different countries.
ii) PURCHASE OF LOCAL COMPANIES- MNCs look for buying any loss going companies who
might not be interested in continuing with the same level. This gives them an opportunity to start
working directly in a fully furnished set up.
iii) PLACING ORDER WITH SMALL PRODUCERS- MNCs look

Q.5 What are the factors that have led to globalisation?

Ans. The factors affecting globalisation are-

1. TECHNOLOGY- Technological development in a country is the most important

factor affecting globalisation. Greater the advanced technology in a country, more will
be the need of interconnecting with other countries. It includes Production Technology,
Information and communication Technology and Transportation Technology.
2. LIBERALISATION OF FOREIGN TRADE AND INVESTMENTS- The second
factor affecting globalisation is liberalisation of foreign trade and investment policy.
Setting up foreign trade and investment policy, free from trade barriers will allow
 countries to globalise themselves. They are allowed to take decisions more freely and
can trade according to their wish.

Q.6 What do you mean by trade barrier? Give examples.

Ans. Trade barriers refer to those restrictions which are imposed on trading of foreign goods.
For ex- Taxes and Quotas
Q.7 When was the WTO established? What is the role of WTO in globalisation?
Ans. WTO was established on 1st January 1995. WTO plays a vital role in promoting
globalisation. The main functions of WTO are:
i) Liberalising the foreign trade.
ii) Framing rules and regulations regarding international trade
iii) Seeking to resolve trade disputes
Q.8 Explain the positive impacts of globalisation.
Ans. The positive impacts of globalisation are as follows:

1. Expansion of market- Due to Globalisation, producers can trade beyond the market of
their country. This results in expansion of market and increased profits for the
producers. The market has transformed.
2. Increase in Standard of Living- International competition requires standard quality
goods at low prices to compete in the market. This has increased standard of living of
domestic people also.
3. Foreign Investment- Globalisation not only trade in goods & services but also in
investments. It invites foreign companies and MNC to come and invest in the host
country. This leads to increase in foreign exchange reserves.
4. Technological development- Globalisation brings with it modern and advanced
technology. This leads to technological development in a country.
5. Helps in emergence of MNC- Globalisation enables some large-scale companies to
produce and trade globally. This helps in emerging them as MNCs.
6. Variety of Products- Globalisation bought new and advanced products from global
market. Not only this, now market is flooded with variety of products and consumers
may have better choices available for a single product.

Q.9 Explain the negative impacts of globalisation.

Ans. The negative impacts of globalisation are as follows:
1. Loss to small producers- Increased competition due to globalisation has proved to be
unfavourable for small producers. Cheap imported goods replaced their domestically
produced goods. It is too early for them to compete with these goods. Therefore, they
perish.
2. Uncertain Employment- Due to increased work and minimum labour costs, employers
prefer to employ workers ‘flexibly’. They pay them on the basis of work done, not on
regular basis. This kind of uncertain employment brings a lot of sufferings to the
workers.
3. Discard of Labour laws- To attract foreign investments, government has also allowed
leniency in labour laws for some period of time. Employers do not obey labour laws and
exploit their employees.