Q1. [3] medium thorough-understanding
A multinational corporation designs products in the USA, manufactures components in China, assembles them in Mexico, and runs customer support from India. Why does the MNC choose to split its production process across these different countries rather than doing everything in one place?
Generated by claude-sonnet-4-6 · 2026-06-26 13:25 · grounding rag
Model Answer
An MNC splits its production process across countries to reduce costs and increase profits by taking advantage of each country's strengths.
- USA — skilled researchers and designers for product development.
- China — cheap manufacturing location for component production.
- Mexico — closeness to US markets for assembly and quick delivery.
- India — highly skilled engineers and educated English-speaking youth for affordable customer support.
This global spread of production can result in 50–60% cost savings for the MNC, allowing it to earn far greater profits than if it produced everything in one place.
Source: Chapter 4 — Production Across Countries
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Explanation
- The examiner expects you to directly link each country to its specific advantage — don't just say "cheap labour" for all.
- Key term to use: cost of production and greater profits — these are the core reasons stated in the textbook.
- The "50–60% cost savings" statistic is a strong textbook detail that impresses examiners.
- Avoid writing a general essay; keep it point-based for clarity and time efficiency.