Question

What are the various ways in which MNCs set up, control or produce in other countries?

Answer 1

Multinational Corporations (MNCs) set up and control production across countries through the following four distinct methods:

1. Joint Ventures (Partnerships): MNCs form relationships with local enterprises to begin joint production. This provides fresh funding to the local industry for new machinery and innovative technologies (for example, Ford Motors and Mahindra).
2. Buying Out Local Companies: The most common path for MNCs is to acquire established domestic enterprises and then expand production, leveraging the local company’s existing market network (for example, US-based Cargill Foods purchasing India's Parakh Foods).
3. Placing Orders with Small Producers: MNCs place significant orders with dispersed small-scale producers in industries such as apparel, footwear, and sportswear. The goods are subsequently collected by multinational corporations, quality-controlled, and sold abroad under their own brand names.
4. Setting up Independent Production Units: MNCs directly purchase land and establish brand new, completely owned manufacturing plants and offices (Foreign Direct Investment) in places with cheap labour, low-cost raw materials, and supporting government regulations.