“Markets have transformed over the years.”
MULTINATIONAL CORPORATION (MNC)
A multinational corporation 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.
It reduces the cost of production for MNCs and to earn greater profits.
MNC's ARE CONTROLLING THE PRODUCTION IN AN ORGANISED AND COMPLEX WAYS--
1. A large MNC designs its products in research centres in the United States.
2. The components are manufactured in China.
3. These components are shipped to Mexico and Eastern Europe where the products are assembled and the finished products are sold all over the market.
4. The company's customer care is carried out through the Call centres located in India
The role of MNCs in globalisation process
MNCs plays a major role in the globalisation process
More and more goods and services investments and technology are moving between countries
Most regions of the world are in close contact with each other.
INTERLINKING PRODUCTION ACROSS THE COUNTRIES
MNCs set up production where they are close to the markets
skilled and unskilled labour available at low cost
Where the availability of other factors of production is assured.
Government policies that look after their interest
Developed infrastructure
Investment
The money that is spent to buy assets such as land, building, machines and other equipment is called investment
Foreign investment
Investment made by MNCs is called foreign investment.
MNCs ARE SPREADING THEIR PRODUCTION IN DIFFERENT WAYS:-
By doing foreign direct investment (FDI)
By setting up partnerships with the local companies.
For example Ford motor company invest 1700
crore rupees to set up a large plant near Chennai.
This was done in collaboration with
Mahindra and Mahindra.
By placing the orders with local companies. For example garments,
footwear, sport items etc.
By buying local companies. For example Cargill buying Parakh foods in India
MNCs set up production jointly with some of the local companies of this countries because:-
MNCs can provide money for additional investments.
MNCs bring the latest technology for production.
FOREIGN TRADE AND INTEGRATION OF MARKETS
Foreign trade
Producers can sell their product not only in the markets located within the country but can also compete in markets in other countries of the world.
So foreign trade also increases the choice of goods that are domestically produced.
- With the opening of trade, goods travel from one market to another.
- Choice of goods in the market rises.
- Producers in different countries closely compete against each other even though they are separated by thousands of miles.
THUS FOREIGN TRADE RESULTS IN CONNECTING THE MARKETS FOR INTEGRATION OF MARKETS IN DIFFERENT COUNTRIES.
GLOBALISATION
It is the process of rapid integration or interconnection between countries.
✓ More and more goods and services, investments and technology are moving between countries.
✓ Movement of people is also there in between the countries.
FACTORS THAT HAVE ENABLED GLOBALISATION:--
Improvement in transportation
Development in information and communication technology
Telecommunication
Computer
Internet
TRADE BARRIER
These are the restrictions on trade.
Tax on imports is an example of a trade barrier.
Government can use trade barriers to increase or decrease (to regulate) foreign trade and to decide what kinds of goods and how much of each should come into the country.
After independence , the Indian government had put barriers to foreign trade and foreign investment.
It was done to protect domestic producers from foreign competition.
As the industries were just coming up in 1950 and 1960 the competition from imports at that stage would not have allowed these industries to come up.
India allowed in ports of only e essential items such as machinery, fertilisers, petroleum etc.
Around 1991 some changes in foreign policy were made in India.
Government decided that the time had come for Indian producers to compete with the producers around the globe.
It was felt that competition improved the performance of producers within the country.
This will also improve dear quality.
Thus, trade barriers on foreign trade and investment were removed.
Liberalisation
Removing barriers or restrictions set by the government is known as liberalisation.
✓ It allows businesses to make decisions freely about what they wish to import or export.
✓ The government imposed less restrictions on trade and became more liberal.
WORLD TRADE ORGANISATION
World Trade organisation is an organisation which aims to liberalise international trade. It undertakes the following :--
It aims to liberalise international trade.
It establishes rules regarding international trade and fees that these rules are obeyed.
Nearly 164 countries Were the member of the WTO.
Though the WTO is supposed to allow free trade for all. It is seen that the developed countries have unfairly retained trade barriers. On the other hand WTO rules have forced the developing countries to remove trade barriers.
IMPACT OF GLOBALISATION IN INDIA
✓ MNC's have increased their investments in India.
✓ Many jobs have been created and local companies supplying raw materials and services to these industries have prospered.
✓ Several top Indian companies have benefited from the increased competition by investing in new technology and production methods to raise their production standards and quality.
✓ It has enabled some large Indian companies to emerge as themselves.e.g. Tata motors, Infosys, Ranbaxy, Asian paints etc.
✓ Call centres have been popularly introduced by some Indian companies and have begun to produce magazines for several foreign based companies.
✓ Many services like data entry ,accounting ,and administrative tasks are now being done economically in India and as exported to the developed countries.
Globalisation and greater competition among producers, both local and foreign producers, have been of advantage to consumers -
They have greater choice
They enjoy improved quality and lower prices for several products.
STEPS TO ATTRACT FOREIGN INVESTMENT
In recent years the central and state governments in India are taking special steps to attract foreign companies to invest in India.
These are special industrial zones called special economic zones (SEZ) being set up.
They have world class facilities of electricity, water ,roads ,transport, storage etc.
companies who set up production units in the SEZ"s ,don't have to pay taxes for an initial period of 5 years.
Government has also allowed flexibility in the labour laws to attract foreign investment.
DISADVANTAGES OF GLOBALISATION
The impact of rising competition globalisation has posed major challenges for small producers of items like batteries, capacitors
Etc.
✓ Many of these items have been shut down due to the intense competition from imported goods.
✓ Most employers prefer to employ workers' flexibility which leads to insecurity of jobs for the workers.
✓ Most workers are employed in the unorganised sector.
THE STRUGGLE FOR A FAIR GLOBALISATION
Globalisation creates opportunities for all and also shows that the benefits of globalisation are shared .
This can be ensured in the following manner-
The government must protect the interests of all the people in the country.
The government can ensure that the labour laws are properly implemented and the workers get their rights.
It can support small producers.
The government can negotiate at the WTO for fairer rules.
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