Q. 114.5( 2 Votes )

How India can contribute to the spreading of production by an MNC?

Answer :

Multi-National Corporations are large companies established in a particular country and has offices, markets and produces and sells its products in many countries. They try to integrate and control the production across countries where close markets, low labour and high profits are earned. Thus they can develop an easy market in developing countries like India which exhibit all these characteristics. They control the market to maintain their economic and social power and their marketing network. MNCs generally link the production across countries by three methods. It can be explained as-


• Produce jointly with local companies- MNCs may set up their production jointly with some local companies of the home country. This benefits the local companies in two ways. MNCs provide them with the monetary help they need by additional investment. They also provide them with the latest upgraded technology and equipment for production.


• Purchase local companies- This is the most common method through which MNCs expand their production. Because of the huge amount of wealth and assets they own, they can purchase the finest local companies. MNCs can purchase well-performing local companies and expand their production taking advantage of the local company’s reputation and name.


E.g. - An American MNC Cargill Foods had purchased an Indian company Parakh Foods that had a large marketing network and high reputation. Thus, Cargill Foods can expand its production.


• Place orders for products locally- MNCs may use this method to control the local production. MNCs may place orders for their commodities with the local producers of developing countries. This will reduce the cost of production and also reduce the risk of local competition. MNCs sell these products under their own brand name. MNCs have the authority to determine the price, quality, labour conditions and delivery of these products. It is commonly found in the garments, footwear and sports industries.


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