4.1. Production Across Countries

Most regions of the world are getting increasingly interconnected. While this interconnectedness across countries has many dimensions — cultural, political, social and economic — this chapter looks at globalisation in a more limited sense. It defines globalisation as the integration between countries through foreign trade and foreign investments by multinational corporations (MNCs).

Globalisation refers to how countries are becoming more linked with each other economically, primarily through multinational corporations (MNCs). MNCs are companies that operate in multiple countries, and they play a significant role in facilitating global trade and investment. This interconnectedness means that goods, services, and even jobs can cross borders more easily than ever before. Essentially, MNCs bring different economies together by sharing resources and technologies, which helps in the production of goods globally.

Think of MNCs like a bridge connecting different islands (countries). Just as a bridge allows people and resources to flow smoothly between islands, MNCs enable the flow of products, services, and technologies across nations. For example, a company based in the USA might design a product, source raw materials from Africa, manufacture parts in China, assemble them in India, and then sell the final product in Europe.

A large MNC, producing industrial equipment, designs its products in research centres in the United States, and then has the components manufactured in China. These are then shipped to Mexico and Eastern Europe where the products are assembled and the finished products are sold all over the world. Meanwhile, the company’s customer care is carried out through call centres located in India.

MNCs often distribute various stages of their production process across different countries to minimize costs and maximize efficiency. For instance, they may design the product in their home country, manufacture parts where labor is cheaper, assemble them closer to major markets, and handle customer service in regions with a skilled English-speaking workforce. This strategy allows MNCs to take advantage of global economic differences to create products at lower costs.

Imagine a pizza restaurant where the dough is made in Italy, the cheese comes from Wisconsin, the toppings are sourced from California farms, and it’s all assembled in your hometown. This restaurant benefits from the best ingredients from different parts of the world, much like MNCs benefit from utilizing the best resources globally.

The advantage of spreading out production across the borders to the multinationals can be truly immense. MNCs can provide money for additional investments, like buying new machines for faster production. Second, MNCs might bring with them the latest technology for production.

By spreading production internationally, MNCs not only reduce costs but also contribute to local economies. They invest capital, which can lead to the improvement of facilities and create numerous jobs. Additionally, MNCs often introduce advanced technologies that enhance productivity and efficiency in the local production process, benefiting both the MNC and local businesses.

Consider a local bakery that partners with an international chain. The chain brings in modern baking machines and techniques that help the bakery produce better products faster. As a result, the local bakery can serve more customers and improve its profitability while providing locals with higher-quality baked goods.

But the most common route for MNC investments is to buy up local companies and then to expand production. MNCs with huge wealth can quite easily do so.

MNCs frequently acquire local businesses to gain access to existing markets, resources, and customer bases. This can provide them with a foothold in a new market without the initial costs of building a new facility. While this can lead to growth for the local companies through investment and technology transfer, it also raises concerns about foreign control over local industries and potential negative effects on local entrepreneurship.

Think of it like a big tech company acquiring a small startup. While the bigger company can help the startup grow quickly by providing funding and technology, the original founders may lose control over their vision and business decisions.

Thus, we see that there are a variety of ways in which the MNCs are spreading their production and interacting with local producers in various countries across the globe.

MNCs engage with local markets in diverse ways, such as forming partnerships, utilizing local suppliers for cheaper goods, or directly competing with local firms. These interactions create a network of production that is interlinked across international borders, ultimately influencing local economies and job markets.

Imagine a collaborative art project where artists from different countries each contribute a piece. The final artwork is a reflection of various cultures and styles, much like how MNCs' varied production processes across nations create a diverse range of products available to consumers worldwide.

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