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SAI INTERNATIONAL SCHOOL
SESSION 2020-21
CLASS-X

ECONOMICS- Ch-4- GLOBALISATION AND THE INDIAN ECONOMY
LESSON NOTES
SUB-TOPIC- 2
Interlinking production across countries

The money that is spent to buy assets such as land, building, machines and other
equipment is called investment. An investment made by MNCs is called foreign
investment. MNCs are exerting a strong influence on production at these distant
locations. As a result, production in these widely dispersed locations is getting
interlinked.

There are a variety of ways as mentioned below, in which MNCs are spreading their
production and interacting with local producers in various countries across the
globe.

1. By setting up partnerships with local companies
2. By using the local companies for supplies
3. By closely competing with the local companies or buying them up

MNCs set up production jointly with local companies which benefits local
companies in the following ways:

1. First, MNCs can provide money for additional investments, like buying new
machines for faster production.
2. Second, MNCs might bring with them the latest technology for production.

MNCs set up production units at such a place where -
(a) Markets are closer.
(b) Skilled and unskilled labour is available at low cost.
(c) Other factors of production are assured.
(d) Government policies are favourable.
The various ways in which Multinational Corporations set up or control
production in other countries are :
(i) MNCs set up production unit in those countries where there is skilled and
unskilled labour available at low cost and which has large market to sell
their product.