Name: Liberalisation Entails Removing Trade Barriers
Uploaded: 2019-07-19
Duration: 4 min 53 s
Description: Liberalisation is an economic practice that allows countries to trade freely. Watch this video to see why this idea was so appealing to the Indian government.

Question

How do Multi National Corporations (MNCs) interlink production across countries? Explain with examples.

Accepted Answer

Multi National Corporations (MNCs) interlink production across countries through a strategy known as international production or global value chain integration.

Global Sourcing of Inputs: MNCs often source raw materials, components, and parts from different countries to benefit from cost differences and specialized expertise. For instance, Apple sources components like screens, processors, and batteries from various countries, including China, South Korea, and Japan, to assemble their products like iPhones.

Offshoring and Outsourcing: MNCs may offshore or outsource certain stages of their production process to countries where labour costs are lower. For instance, many clothing companies manufacture their products in countries like Bangladesh or Vietnam due to lower labor costs.

Research and Development (R&D) Centers: MNCs establish R&D centers in various countries to tap into local talent and knowledge. For example, pharmaceutical companies like Pfizer and Novartis have R&D centers in different countries to leverage specialized research capabilities and regulatory expertise.

Assembly and Manufacturing: The assembly and manufacturing stages of products are often located in countries where labour costs are lower. For instance, automobile companies like Toyota and Honda manufacture components in multiple countries and then assemble them in final assembly plants. This approach optimizes cost and efficiency.

Distribution and Marketing: MNCs strategically position distribution centers and marketing teams in different countries to ensure their products reach target markets effectively. For example, fast-food chains like McDonald's adapt their menus and marketing strategies to cater to local tastes and preferences in various countries.

How do Multi National Corporations (MNCs) interlink production across countries? Explain with examples.

Important Questions on Globalisation and the Indian Economy

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