Multinational Companies and Integration of Markets

Today we are availed of the recent Phone developed in the US with in few days of launch.

  • We are able to buy the latest technology enabled smart TV developed far across the world.
  • We have a variety of choice while choosing any product before buying ,from having our favorite brand of Jeans to the latest AI based camera or to the processed food .
  • In a matter of years, our markets have been transformed!

PRODUCTION ACROSS COUNTRIES

  • Until the middle of the twentieth century, production was largely organised within countries.
  • What crossed the boundaries of these countries were raw materials, food stuff and finished products.
  • Colonies such as India exported raw materials and food stuff and imported finished goods.
  • Trade was the main channel connecting distant countries.
  • The situation got changed drastically once the MNC’s came into picture.

MNC’S—Multi national corporations

Multi national corporations

  • It is a company that owns or controls production in more than one nation.
  • MNC is not only selling its finished products globally, but more important, the goods an services are produced globally.
  • As a result, production is organised in increasingly complex ways.
  • The production process is divided into small parts and spread out across the globe.
  • In the above example, China provides the advantage of being a cheap manufacturing location MNC’s set up offices & factories for production in the regions where they can get cheap labour and other resources.
  • This is done so that the cost of production is low and the MNC’s can earn greater profits.
  • Many MNC’s have wealth exceeding the entire budgets of the developing countries , with such enormous wealth they have immense power & influence

FACTORS/ CONDITIONS TO SET UP A MNC

  • MNC’s set up production where it is close to the markets.
  • where there is skilled labour available at low costs.
  • where the availability of other factors of production is assured.
  • They look for the government policies that look after their interests.
  • India has highly skilled engineers who can understand the technical aspects of production.
  • It also has educated English speaking youth who can provide customer care services.
  • And all this probably can mean 50-60 per cent cost-savings for the MNC!
  • The advantage of spreading out production across the borders to the multinationals can be truly immense

INVESTMENT:

  • The money that is spend to buy assets such as land, building, machines and other equipment is called investment.
  • The investment made by MNC’s is called foreign investment.

VAROIUS WAYS IN WHICH MNC’s ARE SPREADING THEIR PRODUCTION:

There are variety of ways in which MNC’s are spreading their production and interacting with local producers in various countries across the globe.

  • They do this by various means:
  • By setting up partnerships with local company.
  • By closely competing with local companies or buying them –the most common route for MNC investments is to buy up local companies and to expand production.
  • With their huge wealth they can easily do so..
  • By using local companies for supply – Large MNC’s in developed countries place orders for production with small producers.
  • Eg., garments, footwear, sports item etc.
  • The products are supplied to MNC’s which then sell these under their brand names to the customers.
  • As a result, production in these widely dispersed locations is getting interlinked.
  • MNC’s are exerting strong influence on production at these distant locations.
  • MNC’S are playing major role in the Globalisation process.
  • MNC’s have been looking for locations around the world , which would be cheap for their production As a result of greater foreign investment and greater foreign trade ,has been greater integration of production and markets across countries.

More and more goods and services,Most regions of the world are in closer contact with each other than a decade back

  • Foreign investment in the countries has been rising.
  • Foreign trade between the countries has been rising many of the top MNCs have wealth exceeding the entire budgets of the developing country governments.
  • With such enormous wealth, imagine the power and influence of these MNCs!
  • There’s another way in which MNCs control production.
  • Large MNCs in developed countries place orders for production with small producers
  • Garments, footwear, sports items are examples of industries where production is carried out by a large number of small producers around the world.

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