Q1. [3] medium thorough-understanding
MNCs are described as playing a 'major role' in the globalisation process. Explain, with reasoning, how the activities of MNCs drive greater integration of production and markets across countries.
Generated by claude-sonnet-4-6 · 2026-06-26 13:27 · grounding rag
Model Answer
MNCs drive globalisation by integrating production and markets in three main ways:
- Foreign Investment: MNCs set up factories where labour and resources are cheap, spreading production across countries (e.g., Ford Motors set up a plant in India).
- Control over Trade: A large part of foreign trade is controlled by MNCs. They produce in one country and sell globally, linking markets worldwide.
- Interlinking Production: MNCs divide the production process across countries — for example, one MNC designs in the USA, manufactures components in China, assembles in Mexico, and runs customer care from India — reducing costs by 50–60%.
Thus, through foreign investment and trade, MNCs create greater integration of production and markets across countries.
Source: Chapter 4 — Globalisation and the Indian Economy; Sections: Production Across Countries, Interlinking Production Across Countries, What is Globalisation?
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Explanation
- This is a 3-mark reasoning question, so examiners expect one clear definition/concept + at least two well-explained points with examples.
- Key terms to use: foreign investment, foreign trade, interlinking of production, integration of markets.
- The Ford Motors and the industrial equipment MNC examples from the textbook are ideal to cite — they show concrete evidence of integration.
- Avoid vague statements like "MNCs help countries grow." Be specific about how they integrate production and markets.