GLOBALISATION

Q1) What are MNCs?

i) MNC is a large company that owns or controls production in more than one
nation.
ii) MNCs set up offices and factories for production in regions where they can
get cheap labor and other resources.
iii) This is done so that the cost of production is low, and the MNCs can earn
greater profits.
iv) MNCS sell their finished products globally, and these goods and services
are also produced globally.
v) As a result, production is organized in increasingly complex ways.
Q2) Give an example for the working of an MNC
i) For example, an MNC, producing industrial equipment, could design their
product at research centres in the US
ii) The components are manufactured in China, which is a cheap
manufacturing location.
iii) They are then shipped to Eastern Europe and Mexico, where the products
are assembled.
iv) Eastern Europe and Mexico are useful due to their closeness to the UK and
USA in the market.
v) As they are being sold all over the world, customer service is handled in
call centers in India.
vi) India has skilled engineers who understand the technical aspects of
engineering.
vii) Also, India has educated English-speaking youth who can provide customer
care services.
viii) This all means 50-60% less cost for the MNC.
Q3) What are the factors in which MNCS choose the locations to set up
production?
i) Generally, MNCs set up production where it is close to the markets.
ii) Where there is skilled and unskilled labor available at low costs.
iii) Availability of other factors of production is also ensured.
iv) MNCs might also look for government policies that look after their
interests.
Q4) What is investment? What is foreign investment?
i) The money that is spent to buy assets such as land, buildings, machines, and
other equipment is known as investment.
ii) The investments made by an MNC are known as foreign investments.
iii) These investments are made with the hope that the assets will earn profits.
Q5) What are the various ways in which NMCS set up or control production in
other countries?
i) MNCs set up production jointly with local companies.
ii) MNCs provide additional investments, like buying faster machines for
production or better technology.
iii) MNCs can also buy up local companies and then expand production.
iv) MNCS with huge wealth can easily do so.
o For example, Cargill Foods, a very large American MNC has bought
over small Indian companies such as Parakh Foods.
 Parakh Foods has built a large marketing network in various parts
of India.
o Parakh Foods also has oil refineries, which are now under the control of
Cargill Foods.
o Cargill is now the largest producer of edible oil in India.
v) MNCs place orders for production with small producers.
vi) Garments, footwear, and sports items are examples of industries where
production is carried out by small producers.
vii) The products made by small producers are given to the MNC, they sell
these products in their own name.
viii) MNCs look towards developing nations to set up trade because, in such
places, labour and manufacturing costs are much lower.
Q6) Foreign trade thus results in connecting the markets or integration of
markets in different countries. Explain.
i) Foreign trade provides opportunities for both producers and buyers to reach
beyond the market that is available in their country.
ii) As goods travel from one country to the other, competition among
producers increases.
iii) This is because the buyers have more options available to them.
iv) Prices of similar goods in two markets tend to become equal.
v) Thus, producers in the two countries compete against each other, though
they are thousands of miles apart.
Q7) What is globalisation?
i) Globalisation is the process of rapid integration or interconnection of
countries.
Q8) What is the role of MNCs in the globalization process?
i) Globalisation has boosted international trade and communication. The Silk
Road is one historical example.
ii) MNCS set up production sites in several different countries.
iii) They choose locations where they have access to cheap and skilled labor,
are close to markets, and have favorable political climates.
iv) Thus, MNCs interconnect the economies of various nations by producing
and selling across various nations, accelerating globalization.
Q9) What are the various ways in which countries can be interlinked?
i) Movement of goods, services, and investments between the companies.
ii) Foreign investments being done in one country by a company situated in
another country.
iii) Immigration of people into one country from another for better job or
education opportunities.
iv) They are also linked by tourism.
v) Telecommunication and the internet also help in interlinking different
countries.
Q10) What are the factors that have enabled globalization?
1) Technology
i) Rapid improvement in technology has been a major factor that has
improved globalization.
ii) There have been several improvements in transportation technology,
which has helped in faster delivery of goods across long distances at low
costs.
2) Information and communication technology.
i) Telecommunication facilities (telegraph, mobile phones, fax) are used to
contact one another around the world.
ii) They can also be used to access information easily.
iii) ICT also helps in easier communication is remote areas.
iv) Due to the development of the internet, anyone can obtain and share any
information.
v) The Internet also allows us to send instant email and talk.
 3) Liberalisation of foreign trade and foreign investment policies.
i) Liberalisation means to remove trade barriers or restrictions that have
been set up by the government.
ii) With the liberalisation of trade, businesses can freely import or export
goods.
iii) Foreign companies can not set up factories and offices in different
places.
Q11) What are trade barriers?
i) Trade barriers are certain restrictions that have been kept on trade.
ii) Governments use trade barriers to increase or decrease foreign trade.
iii) It is also done to decide what kind of goods and how much of each should
come into the country.
Q12) What was the reason for putting barriers to foreign trade and foreign
investment by the Indian government? Why did it wish to remove these barriers?
i) Barriers to foreign trade and investment were put up by the Indian
government to protect domestic producers from foreign competition.
ii) Especially when industries had just begun to come up in the 1950s and
1960s.
iii) Only imports of essential items such as machinery, fertilisers, petroleum
were allowed.
iv) Around 1991, the government wished to remove these barriers.
v) They felt the domestic producers were ready to compete with foreign
industries.
vi) Foreign competition would also improve the quality of goods produced by
Indian industries.
vii) The decision was also supported by powerful international organisations.
Q13) How has the liberalization of trade and investment policies helped the
globalization process?
i) Liberalisation has helped the globalization process by making foreign trade
and investment easier.
ii) Several developing countries had placed barriers and restrictions on imports
and investments to protect domestic production.
iii) However, to improve the quality of the domestic goods, the countries have
wished to remove the barriers.
iv) Liberalisation has led to a further spread of globalisation as now businesses
are allowed to make their own decisions on imports and exports.
v) This has led to a deeper integration of national economics.
Q14) What is WTO?
i) World Trade Organisation (WTO) is an organization whose aim is to
liberalize international trade.
ii) It was started by the initiative of the developed countries.
iii) WTO establishes rules regarding international trade and sees that these rules
are obeyed.
iv) About 160 countries of the world are currently members of the WTO.
Q15) Why is WTO criticized?
i) Though WTO is supposed to allow free trade for all, in practice, developed
countries have unfairly retained trade barriers.
ii) WTO rules have forced developing countries to remove trade barriers.
iii) Domestic producers in developed countries get protection from their
government, hence producers from these countries sell their products at low
prices.
iv) This affects the producers of developing countries.
v) Developing countries should also have some protection for domestic
producers against competition from imports.
Q16) What do you think should be done so that trade between countries is fairer?
i) Trade between countries would be fairer if both the countries removed trade
barriers and allowed the free flow of goods and services.
ii) They should let the market forces of demand and supply decide the volume
of goods that will be transacted between countries.