How do large MNCs control the production of small local producers — such as those making garments or sports items — without directly owning those production units?
Generated by claude-sonnet-4-6 · 2026-06-26 13:23 · grounding rag
Model Answer
Large MNCs control small local producers without owning them by placing orders for production of garments, footwear, and sports items with these small producers. The finished products are then collected and sold under the MNC's own brand name.
Through this arrangement, MNCs exercise tremendous power to determine:
- The price at which they buy the product
- The quality standards to be maintained
- Delivery schedules
- Labour conditions for the workers
Thus, although the MNC does not own the production unit, it effectively controls every aspect of production through its purchasing power and strict conditions.
Source: Chapter 4 — Globalisation and the Indian Economy, "Interlinking Production Across Countries"
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Explanation
- The examiner wants two things: (1) the mechanism (orders placed, products sold under MNC brand) and (2) the four control levers (price, quality, delivery, labour conditions) — these exact terms appear in the textbook and must be included.
- Do not confuse this with joint production or buying up local companies — those are separate methods described in the same chapter.
- Listing the four control points as bullets saves time and scores full marks clearly.