Production across Countries and Interlinking
Production across Countries
Multinational Corporations (MNCs)
An MNC is a company that owns or controls production in more than one
nation.
MNCs set up offices and factories for production in regions where they
can get cheap labour and other resources.
MNCs can earn greater profits due to cost-savings.
Interlinking Production across Countries
Factors considered by MNCs for setting up offices and factories for
production in other countries:
o Skilled and unskilled labour at low costs
o Cheap manufacturing locations
o Closeness to markets
o Availability of other factors of production
o Favourable government policies
Foreign investment is the money spent by MNCs to buy assets such as
land, building, machines and other equipment.
The benefit of joint production to a local company:
o MNCs provide money for additional investments, like buying new
machines for faster production.
o MNCs bring with them the latest technology for production.
MNCs are spreading their production and interacting with local
producers in various countries across the globe.
Foreign Trade and Integration of Markets
Foreign Trade and Market Integration
Foreign trade is the exchange of goods and services across international
borders.
Foreign trade creates an opportunity for producers to reach beyond the
domestic markets.
Producers can sell their produce in the domestic market and the international
market.
The buyers get a wide choice of goods in the market due to foreign trade.
Foreign trade helps in connecting the markets or the integration of
markets in different countries.
Chinese Toys in India
Chinese manufacturers start exporting plastic toys to India as toys are sold
at a high price in India.
Indian buyers can choose between Indian and the Chinese toys.
Chinese toys become more popular in the Indian market because of
the cheaper prices and new designs.
Effect of Chinese toys in Indian Markets
Globalisation
Globalisation and Factors Enabling It
What Is Globalisation?
Globalisation is this process of rapid integration or
interconnection between countries.
MNCs are playing a major role in the globalisation process.
There is movement of goods, services, investments, technology and
people between countries.
Factors that Have Enabled Globalisation
Technology
The globalisation process has been stimulated by rapid improvement in
technology.
Improvements in
o transportation technology have made faster delivery of goods across
long distances possible at lower costs.
o information and communication technology have played a major
role in spreading out production of services across countries.
o the technology in the areas of telecommunications,
computers and the Internet have made instant communication and
instant access to information across the globe possible. This has been
facilitated by satellite communication devices.
Liberalisation of foreign trade and foreign investment policy
Trade barriers are government-placed restrictions on trade between
nations.
The types of trade barriers are subsidies, quota and import tariff.
Trade barriers can be used by governments to regulate foreign trade.
After independence, the Indian government put barriers to foreign trade
and foreign investment to protect the producers within the country from
foreign competition.
In 1991, the government decided to remove barriers on foreign trade and
foreign investment to improve the performance of producers within the
country.
Liberalisation is removing barriers or restrictions set by the government.
World Trade Organisation
The aim of the World Trade Organisation (WTO) is to liberalise
international trade.
The WTO establishes rules regarding international trade and sees that these
rules are obeyed.
At present 164 countries of the world are members of the WTO.
Impact of Globalisation in India
Globalisation’s Impact
Positive Impact of Globalisation
The impact of globalisation has not been uniform among producers and
workers.
Local companies supplying raw materials, etc., to industries such as cell
phones, automobiles, electronics, soft drinks, fast food or banking
services have prospered.
Several of the top Indian companies gained from successful
collaborations with foreign companies.
Globalisation has enabled some large Indian companies to emerge as
multinationals by spreading their operations worldwide. For example:
o Tata Motors (automobiles)
o Infosys (IT)
o Ranbaxy (medicines)
o Asian Paints (paints)
o Sundaram Fasteners (nuts and bolts)
Globalisation has created new opportunities for IT companies.
Negative Impact of Globalisation
Globalisation has posed major challenges for a large number of small
producers and workers.
Industries such as batteries, capacitors, plastics, toys, tyres, dairy products
and vegetable oil have been hit hard by competition.
Many workers have become jobless as many small-scale production units
have shut down.
Steps to Attract Foreign Investment
Industrial zones, called Special Economic Zones (SEZs), are being set up
by the government in India to attract foreign companies to invest in India.
SEZs have world-class facilities such as
o electricity,
o water,
o road,
o transport,
o storage,
o recreational and
o educational facilities.
Companies in the SEZs do not have to pay taxes for an initial period of five
years.
The government has also allowed flexibility in the labour laws to attract
foreign investment.
The Struggle for a Fair Globalisation
It is important to make globalisation ‘fairer’.
Fair globalisation would create opportunities for all and also ensure that
the benefits of globalisation are shared better.
