Large MNCs in developed countries sometimes do not manufacture certain goods themselves; instead they place orders with small producers in developing countries and sell the finished products under their own brand names. In such an arrangement, who holds more power — the MNC or the small producer? Justify your answer.
Generated by claude-sonnet-4-6 · 2026-06-26 13:26 · grounding rag
Model Answer
The MNC holds more power in this arrangement.
Justification: Large MNCs have tremendous power to determine the price, quality, delivery, and labour conditions for the distant small producers. The small producers are entirely dependent on MNC orders and must comply with whatever terms the MNC sets. The MNC then sells the finished products under its own brand name, earning higher profits, while the small producer gets minimal returns. Since MNCs possess enormous wealth and global reach, they easily dictate terms, leaving small producers with little bargaining power.
Source: Chapter 4 — Interlinking Production Across Countries
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Explanation
- The key phrase from the textbook is: "These large MNCs have tremendous power to determine price, quality, delivery, and labour conditions for these distant producers." — quote or paraphrase this directly for full marks.
- Examiners expect: (1) clear identification of MNC as more powerful, (2) at least 2–3 specific reasons/factors (price, quality, delivery, labour conditions; brand ownership; wealth), and (3) contrast with the helpless position of the small producer.
- Avoid vague statements like "MNCs are big companies" — be specific about why they hold power.