A local Indian edible oil company had a well-established brand, a wide marketing network and four oil refiner…

Question

A local Indian edible oil company had a well-established brand, a wide marketing network and four oil refineries. After being bought over by a large American MNC, it lost control of all these. Explain why an MNC would prefer buying an existing local company over setting up a completely new one.

Accepted Answer

## Model Answer An MNC prefers buying an existing local company because: 1. **Ready infrastructure:** The local company already has factories/refineries, saving the time and cost of setting up new ones. 2. **Established brand and market:** The MNC instantly gains a well-known brand name and a wide marketing network, avoiding the effort of building customer trust from scratch. 3. **Immediate production capacity:** Operations can begin at full scale immediately, maximising profits faster. For example, Cargill Foods bought Parakh Foods and gained its four oil refineries and established marketing network, becoming India's largest edible oil producer instantly. *Source: Chapter 4 — Interlinking Production Across Countries* --- ## Explanation The examiner expects three clear reasons, ideally with the textbook example of **Cargill Foods buying Parakh Foods**. The key points are: ready assets (refineries/factories), established brand/marketing network, and immediate large-scale production. Me…

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