►

INVex
Production Across Countries

► Interlinking Production Across Countries

► Foreign Trode & Integration Of Markets

► What Is Globalisation?

► Factors That Hove Enabled Globalisation

► World Trode Organisation

► Impact Of Globalisation In Indio

► The Struggle For A Fair Globalisation

► Conclusion

As consumers 1n today's world, some of us h ove

o wide choice of goods and services before us.

Gone ore the days when Ambassador and Fiat

were the only cars on Indian roods.

Today, Indians ore buying cars produced by

neorty all the top companies 1n the world.

A s1m1lar explosion of brands

can be seen for many o ther
goods: from shirts to
televisions to processed fruit
JUICes.

Such wide-ran
goods in our
relat ively r ecen

PRODUCTION ACROSS
COUNTRIES
 Situation before emergence of MNCs

Till mid-twentieth century, production wos largely

orgonised within countries.

Colonies such as Indio e>:ported row moteriols & food

stuff and imported finished goods.

The moin chonnet connecting distant countries- Trade.

This was before MNCs.

So whot ore th~

WHAT ARE MNCs?

M ultinotionol Corporation or MNC is o compony thot

o wns or controls production in more th on one notion.

Set up offices & factories for production in regions

where they con get cheap labour & other re sources.

Aim- Low co:.t of p r oduction & greoter profit:..

Spreading of Producti on by an MNC

1. Product 2. Components
designings in USA monufoctured in
Chino.

4. Products
assembled-
3. Skilled Mexico & Eastern
Eng1neers- Europe, & final
lnd10. product reedy to
be sold all over the
world.
 Closeness to Morket

Cheap skilled &

unskilled lobour

Fovouroble
government policies

Hoving assured themselves of these cond1 t1 o n s,

MN Cs set up factories and offices for production.

INTERLINKING PRODUCTION
ACROSS COUNTRIES

Sometimes, MNCs
set up production
jointly with some of
the local companies
of a country.
 Benefit to local companies of
joint production

MNCs provide money for

odditionol Investments, like
buying n ew m och in es fo r
fost er p r odu ction.

MNCs m igh t b r in g with t h em

the lotest technology for
production.

2. Most Common Route for MNC

Investment is to buy up local
companies & expand production.

Weolthy MNCs con do this

easily.

EXAMPLE
-+ Porokh Foods- small company
bought over by o large American
Com pony- Cargill Fcods.

-+ Porokh food built large marketing

network in Indio & owned 4 oil
refineries, whose control hos now
shifted to Cargill

-+ Cargill is now the largest

manufacturer of edible oil in Indio
making five million pouches doily.

3 Another way 1n which MNCs control

producti on

Lorge MNCs place their

orders for p rodu c t io n s
wi th small p r odu cers &
sell !hem under th eir
brand name.

Th ese MNCs h ove

tremendou s power t o
determ in e price, qualit y,
delivery, & labou r con ditions
fo r th ese dista nt producer s.
 Partnership with
local company

Ways through
which MNCs Take over small
expand their companies
production

Giving contracts
to local producers

CONCLUSION

1. MNCs are exerting a strong

influence on production at these
distant locations.

2. Result- production in these widely

dispersed locations is getting
interlinked.

EXAMPLE
.. F u1,1 ~.1"1"' ·, . on Amer,can company, ,s one of
the world's largest automobile manufacturers
with production spread over 26 countries of the
world

.. 1Y'l'5 11 came to India & spent Rs 1700 crore to

set up a large plant 1n (henno1

.. Done 1n colloborot,on with- Mahindra and

Mahindra ( maier lnd,an manufacturer of Jeeps
and trucks)

-+ By 2017. Ford Motors was selling 88.000 cars-

Indio 8. another 1,81.000 cars were e•por t ed

-t The company wants t o develop Ford Indio as a

component supplying base for ,ts other plants
oc ross the globe

Exon11nl' Clll)' thrl'c- c.ond1t1011<, wh,ch -.hould be token core or

by mult111ot1011ul con1po111('<, to <,('f up their production unit<,

CBS£ 2017

ANSWER
HNCs decision to set up production units of certain
commodities in other countries is determined by the
following conditions:

1. Pro•imity to t he markets as it helps them to sell

products cosily.

2. Availability of skilled & unskilled labourers at cheap

role which helps them in cutting costs and aids in
product ion work.

3. Presence of favourable government policic,s looking

after their interest or which could support their
operations.

4. Presence o f standard safety measures for assured

production as it helps them to grow and st ay
assured.
 FOREIGN TRADE &
INTEGRATION OF MARKETS

It is the exchange of capital, goods,

and services across international
borders or territories.

BASIC FUNCTIONS OF FOREIGN TRADE

Provides vast market

to Producers.

For buyers, import of

goads produced in
another country is one
way of expanding the
rm II

-
choice of goods. '

• ,',1 t h th,• or••n1nq of trod,·. goods

travel from one market to another

• C h oict• of qood'.::. in the markets r ises

• Pr ices of s1milor goods in the two

markets tend to become equal

• l ncrc•osed compc-t 1t1on between

producers of two different countries.
 EXAMPLE
-+ (h,nf's,• monuloc1urprs r~pons toys to lnd,o
wht•r(> toys or•• sold ot a h,gh procf'

-+ TM('y start f' • port,ng pln<,t,c to,s to lnd,o

-+ Bu,....,,., ,n lnd,o no"' t1ovt• moll' opt,on-. to choost•

ham

-+ (h,nPSt• 1oys ti1•, n9 t t11•01: ,lj,, lot, ..,! ,n dt•s,gn

b('com,• mo•f' po1;1.Jln• ,n lnd,on morlo.pt

.. \'1,th,n (} -,'POI 70 -80'-' ol toys rpplnc ,•cl w,lh (h1nl'St'

toys

Foreign trade thus results in

connecting the markets or
integration of markets in
different countries.

•,•,,.,

~.HJ(,, f ,. " ,

pror,•'.,';

~.1or ,, :•'• mor ,. qood•, .•·. •,,•r 1,111 , ..,. 1nv1•'.,tmt-nts

~'. tPchnoluqy or,• mov1nq lJPt w,•,•n
count111•'.;

_ ,' ,,. , ,·t 1 1 ,,, 1, ~·, 1 , · controllf•d by

,.HJCs

9rf•Oh•1 ,ntt•qrut,un of production 3.

morkf•tc, or roe,•; ( uuntr .. ·<_,
 There is onother woy in
which countries con be
connected. This is t h rough
movem ent of people.

However, due to various

restrictions there hos not been
much increase in the
movement of people between
countries.

FACTORS THAT HAVE ENABLED

GLOBALISATION

TWO MAJOR FACTORS

Technology

Liberalisation of Foreign
Trade & Foreign
Investment Policy

Technology

Rapid lm pr~ment in technology h os been one major

fact or that hos stimulated the Q(obohsot1on process

Example- the post SO yeors h ove seen several

1mpr0'Vements 1n tronsportot1on tec hnology

This hos mode much foster delivery of goods across

tong distances possible ot lower costs

Remarkable developments in 1nformot1on &

commun1cot1on technology hOYe mode
communica t ion accessible even in remote oreos o f
world.
 Information and communication
technology (or IT in short) hos
played a major role in spreading
out production of services across
countries.

Using IT in Globolisation
➔ Magazine for London readers, designed &
published in Delhi.

➔ Text of magazine sent through internet to

Delhi office.

➔ Dc:iigncn get order on how to dc:iign the

magazine from the office in London using
telecommunication facilities.

➔ Designing done from computer. After

printing, magazine sent to London by air.

➔ Payment for the whole process is done

through e-bonking.

LIBERALISATION OF FOREIGN TRADE &

FOREIGN INVESTMENT POLICY

Trode borrier• government-induced restrictions

on internotionol trade, eg. tax on imports.

It is coiled o barrier because some restriction

hos been set up.

Governments con use trade barriers to regulate

fore ign trade & to dec ide what kinds of goods &
how much of each, should come into the country.

1. After Independence,
2. Considered
Indian government hod
necessary- to protect
to put barriers on
the producers within
foreign trade & foreign
the country from
mvestment
foreign competlt1on

4 Thus, Indio allowed

3. Industries were just imports of only
coming up in tho 1950s essential items such
& 1960s & competition as machinery,
from imports at that petroleum, fert lhzers,
stage would not hove etc.
allowed these
industries to come up.
 Far reaching changes in Trade Policy~
India around 1991

Government decided the time hod come for Indian

producers to compete wilh producers oround t h e
globe. · - ·· · · ··· · · · · ·-

Competi-tiOn wouici";mprove lhe performonce of

producers within the country.

Producers within the country would hove to

improve the quolity of the products.

Decision supported by powerful internotionol

organisations

Thus, trode borriers were removed too lorge

extend .

Trade, businesses ore allowed to make decisions

freely obout whot they wish to import or export.

When the government Imposes less restrictions

thon before, It Is said to be more liberal.

How hos improvement in technology stimulated the

globolisotion process? Exploin.
•CBSE 2013, 12

ANSWER

I
There has bcon many improvement
in the recent yea~ that have onabl
dchvcry of goods across th• world.

liji1MtJlikijjW•SfiP''1'" 11

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1

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. . . . ' .. • . .t.? . ,x. .:. ). JUL

WORLD TRADE
ORGANISATION
 Q We hove seen thot the liberolisotion
of foreign trade ond investment in
Indio was supported by some very
powerful International
orgonisotions.

Q These orgonisotions soy that all

borriers to foreign trade and
investment ore harmful

Q There should be no barriers.

Trade between countries s hould be fr ee

Q Ail countries in the world should

liberalise their policies.

WTO- 1s on orgomsotton whose 01m 1s to liberalise

mtemot1onol trode

Who started WTO?

Developed countries 1n 1 Ja nuary 1995

WTO estobUshes- rules rega rdi ng mternot1onol trade,

& sees that t hese rules ore obeyed

Total number of member countnes- 164

Indio Joined WTO- 1 January 1995

rgonisotion
committed t
ree trode om
member cou
However,

.• ,
21:&Jr~
the other ho
e forc ed th
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IMPACT OF GLOBALISATION
IN INDIA

It has been 20 years

since the globalisation in
India has progressed.
What has been its effect
on the lives of people?

Consumers

' , ,' •• ', •'' • ,ri n I I 1 lu , r

I , •• 1 , , I' I , t ,, ! , ◄• 1r1• 1 I' u I r
,, lJr11, r

Th,. Ii,., I , ', I ' 'I '. ! ... ,th

'"1 1 r ., I i J ,It;•, I 1,1,,r I , , ,

'" , ' ,'' , I• ► I, •' / , Ii 11• t 1!1d ,, I Jf l ~ nq

tt11! .,., , 1 ! ► ►,► ,I,,
I. Increased their
investment fn Indio 2 Invested In Industries
over the post 20 such os outomob1les,
years. Meoningly, electron1cs, etc. or
investing in Indio is services such os
benefic lot for them. bonklng In urbon orca:;

3. In these
Industries ond
services new Jobs
hove been erected
in these Industries.
4 . Locol componles
supplying row
materials hove also
prospered.

Steps to Attract Foreign Investment

Indian govt in order to ottroct foreign investments

hos set up indust.-iol zones coiled Special Economic
Zones (SEZsJ

SEZs ore to hove world class fociUties: electricity,

water, rood:5, transport, storoge, recreotionol &
educational focilities.

Componies which ore set up in SEZ oreo will do not

hove to poy t0Xes of initial period of 5 years.

Govt. hos allowed flexibility in Labour lows such os

·short duration" hiring of workers due to work
pressure instead of regular basis to reduce cost of
componies.

Severol lndion companies hove been oble to

benefit from the increased competition.

They hove Invested in newer technologies &

raised their production stondords. Some
hove gained from successful colloborotions
with foreign companies

Examp le: Toto motors, Infosys, Ronboxy, As1on

Points, Sundorom Fasteners (nuts & bolt) ore
spreading worldwide
 1. Globolisotion hos erected new
opportunities for service companies
porticulorly IT industries.

2. E.g., coll centres, Indian company

producing magazine for London
based company.

3. Services like doto entry, accounting,

administrative tasks, engineering ore
done ch eo p ly in Indio & exp o rted t o
t h e d eveloped countr ies.

Globali sat ion & Small Producers

For sm all produ cers globalisat ion pose serious

ch allenge o f ei th er to com pete or perish .

Industries like batteries, plastics, toys, dairy products &

vegetable oil ore some examples which hove been h it
hard due to competition.

Many hove shut down m aking workers jobless

Notably, small industries in Indio employ the largest

number of workers (20 million) in the coun try, ne>1t to
agriculture.

Competition and Uncertain Employment

+ Globalisation h ove substantially

impacted the workers life.

+ No job security- Now workers ore

employed flexibly.

+ Lorge MNCs in the garment industry in

Europe order their products from
Indian e>1porters.

+ These MNCs look for ch eapest goods

to maximise their profit.

+ E.g.• to get bulky orders, Indian

garment exporters try hard to cut the
cost.

Compettt,on and U n certain Employment

Exporters try t o cut labour cost - sinc e co st o f

row materials c anno t be cut.

Hire labour on temporary basis to ovoid giving

t h em wages for full year.

Workers ore mode to work long hours than usual

such os night sh ifts on regular basis durmg the
peak season
 The cond1t1on of orgon1sed sector hos started
resembling to thot of unor90n1sed sector due to
hordsh1p faced by workers 1n 1ndustr1O\ and
service sector •

THE STRUGGLE FOR A FAIR

GLOBALISATION

➔ It is visible that not everyone hos

benefited from globalisation.

➔ The rich, powerful ond educated

hove benefited the most while the
poor ond less educated hove not.

➔ To ensure thot everyone get their fair

shore of benefits, Govt. can play huge
role in policy making.

Some poss ible st ep s that

government can ta ke:

It con ensure thot labour laws ore properly

implemented and workers get their right.

2. It con support small producers initially to expand

their business till they get in competing stage.

3. Trade ond investment barriers con be used to

create a check.

4. It con negotiate at WTO for fairer rules. Govt. con

colloborote with other developing countries to
tackle dominated of developed countries in WTO.
In lost few years, massive compoigns ond reprnsentotion
h ove influenced decisions rela ti ng t o trode and
inves tments ot WTO.

.
. I- _
JO:
XIT .. or I
fll~ IT! · 1

J•~~
CONCLUSION

-+ In nutshell, we studied present phase

of globoli sotion. It is the process of
rapid integrat ion of c ountries through
foreign trade and foreign investment.

-+ Major role ployed by: MNCs and IT

technology.

-+ Liberalisat ion of trade & investment:

facilitated globalisation.

-+ International level, WTO hos put o

pressure on develop ing countries to
liberalise their trade & investment.

-+ Globolisotion hos benefited-

Consumers & Producers.

-+ But, small produ cers & workers h ave

suffered loss.

h ot 1s needed

➔ Fair globalisat ion to ensu re shored

benefits & increased opportunities for
all.
Explain how globalisation can be mode fairer.

· CBSE 2010

ANSWER

~ ■11wu11tur
B
D _ ,_.,p
-~1111111.hif~
the market and compete.

'
NCERT QUESTIONS

: 1. , What do you understand by globalisation? Explain

; in_yo~.ir own words.

ANSWER

;e • Global isation is this process of rapid .integrati.On

ar interconne<tion between co untries.

• MNCs play major .~ole in ~he globoli~t~~n :

process .

.• Globalisation is facilitated by on increase in

fore ign t rade, movement of people from one ,
country to another, the flow of capital finance >
from one country to another, and private and
public investments from other natior'ls.

2. What wa1 the rea10n1 for putting barrier1 ta foreign

. trade and foreign invcstmonl by tho Indian :
, government? Why did it wi1h to rcmavo 1ho10
_bar~icr11 · ·

ANSWER ·

The ma in rea10n for the Indian government creating

restrictions to fore ign trade and foreign investment '
' was to safeguard our country's producers and small
ma_!'IU~C!u~•rs !ro~__ ro~lgn c_o mp•~i_tlo ri: - -
However, the government sub..equently agreed that
1
international competition would drive IndiGfl
manufacturers to enhance the quality of their '.
products, and that eliminating these barriers would
promote trode and the quality of products p ~oduced
in the country.
3. How would flexibility in labour laws help companies?

ANSWER

Labor law flexibility will helped companies in

remaining competitive and progressive.
In recent years, the government hos permitted
businesses to ignore many of the labour rules that
are in place. Instead of hiring workers on a regular
or permanent basis, companies might hire people on
a flexibly for short periods of time when there is
heavy work demand.

Companies can negotiate pay and lay off workers

based on market conditions. As a result, the
company's competitiveness will improve.

HOMEWORK QUESTIONS
'

1. An important factor causing globalisation is :

A. More income

B. Expansion of markets

C. Technological developments

D. Urbanisation

2. Zn th• competition between Indian and Chinn•

toys In I ndian market, China proved better
because of:

A. Good shape

B. Trade relation

C. High price and quality

D. Low price and variety