How were the production and

movements carried out in pre

globalization pre period ?

• Trade was the main channel connecting distant countries.

• Production was largely organised within countries.
• Raw materials, food stuff and finished products crossed
the boundaries of these countries.
MULTI NATIONAL COMPANY
 MNC
• A MNC is a company that owns or controls production in
more than one nation.
• MNCs set up offices and factories for production in regions
where they can get cheap labour and other resources.
• Aim : Earning more profits by keeping cost of production
low.
• MNC is not only selling its finished
products globally, but more
important, the goods and services
are produced globally.
 Factors affecting the
location of production units
under MNC
• MNCs set up production where it is close to the markets.
• Skilled and unskilled labour available at low costs.
• Government policies that look after their interests.
• Availability of other factors of production
 FOREIGN INVESTMENT
• The money that is spent to buy assets such as land,
building, machines and other equipment is called
investment.
• Investment made by MNCs is called foreign investment.
• Any investment is made with the hope that these assets
will earn profits
 Relation between MNC and
Local companies
• MNCs set up production jointly with some of the local companies of
these countries.
• The benefit to the local company of such joint production is two-
fold:-
a. MNCs can provide money for additional investments, like
buying new machines for faster production.
b. MNCs might bring with them the latest technology for
production
 How does MNC expands
Local producers ?
1. MNC invest to buy local companies and then to expand
production.
2. Large MNCs in developed countries place orders for
production with small producers.
• Garments, footwear, sports items are examples of
industries where production is carried out by a large
number of small producers around the world.

• The products are supplied to the MNCs, which then sell

these under their own brand names to the customers.
 How MNC’s spread out their
production across nations ?

• By setting up partnerships with local companies,

• By using the local companies for supplies
• By closely competing with the local companies & Buying
them up.
Thus production in these widely dispersed
locations is getting interlinked.
 Foreign Trade and
Integration of Markets
• For Producers /MNC
• foreign trade creates an opportunity for the producers to
reach beyond the domestic markets, i.e., markets of their
own countries.
• Producers can sell their produce not only in markets
located within the country but can also compete in markets
located in other countries of the world.
• For the buyers
a) Import of goods produced in another country is one way of
expanding the choice of goods beyond what is domestically
produced.
b) Prices of similar goods in the two markets tend to become
equal due to competition in market.
 Result of Interlinking of MNC with local
companies
• Producers in the two countries now closely compete
against each other even though they are separated by
thousands of miles.
• Choices increases and Price decrease
Foreign trade thus results in
connecting the markets or
integration of markets in
different countries.
What is Globalization ?
• Globalisation is the process of rapid integration or
interconnection between countries resulting in
movement of goods and services, investments and
technology between countries.
• MNCs are playing a major role in the globalization
process.
 Movements under Globalization
• Movements of goods & services
• Movement of investments
• Movement of technology technology
• Movement of people between countries. People usually
move from one country to another in search of better
income, better jobs or better education.
 Factors that
enabled
Globalization ?
 Development of Technology
• Rapid improvement in technology
Improvement in Transportation technology –
Technological advancements made much faster the delivery of
goods across long distances possible at lower costs.
• Goods are placed in containers that can be loaded intact onto
ships, railways, planes and trucks.
• the cost of air transport has fallen. This has enabled much
greater volumes of goods being transported by airlines
.
Developments in information and communication technology
• Telecommunication facilities (telegraph, telephone including
mobile phones, fax) are used to contact one another around the
world to access information instantly, and to communicate
from remote areas.
• Satellite communication devices
• Internet also allows us to send instant electronic mail (e-mail)
and talk (voice-mail) across the world at negligible costs
 Trade Barrier
• A Trade Barrier includes some restrictions that
Governments use to regulate the international trading
relations.
• To increase or decrease (regulate) foreign trade.
• To decide what kinds of goods and how much of each,
should come into the country.
• Tax on imports is an example of trade barrier.
 Liberalization of Economy
• Removing barriers or restrictions set by the government is
what is known as liberalization.
• With liberalization of trade, businesses are allowed to make
decisions freely about what they wish to import or export.
 Foreign Investment Policy
in India
• Phase 1 - After Independence : put
barriers to foreign trade and foreign investment
• protect the producers within the country from foreign
competition
• competition from imports at that stage would not have
allowed Indian industries to develop.
• India allowed imports of only essential items such as
machinery, fertilisers, petroleum etc.
• 1991 Phase 2 - Liberalization -
changes in policy were made.
• Indian Government felt that competition would improve
the performance of producers within the country since
they would have to improve their quality.
• This decision was supported by powerful international
organizations.
• Barriers on foreign trade and foreign investment were
removed.
• Goods could be imported and exported easily.
• Foreign companies could set up factories and offices here .
 WORLD TRADE
ORGANISATION
• International organization whose aim is to liberalize
international trade.
• WTO establishes rules regarding international trade,
and sees that these rules are obeyed.
• 160 countries of the world are currently members of
the WTO.
• Headquarters : Geneva, Switzerland
 IMPACTS OF
GLOBALIZATION IN
INDIA
 MNCs have increased their
investments in India over the past
20 years
• MNCs increased their investments in industries such as
cell phones, automobiles, electronics, soft drinks, fast food
or services such as banking in urban areas.
• In these industries and services, new jobs have been
created.
• Local companies supplying raw materials to these
industries have prospered.
 Top Indian companies have
been able to benefit from the
increased competition
• Successful collaborations with foreign companies.
• Invested in newer technology and production methods
and raised their production standards
 Globalisation has enabled some
large Indian companies to emerge
as multinationals themselves.
Globalisation has also created new
opportunities for companies
providing services, particularly
those involving IT
• Data entry, accounting, administrative tasks, engineering
are now being done cheaply in countries such as India and
are exported to the developed countries.
Fair Globalisation would create
opportunities for all, and also
ensure that the benefits of
globalisation are shared better.

• Not everyone benefited from globalisation.

• People with education, skill and wealth have made the best
use of the new opportunities.
ROLE OF GOVERNMENT IN
ENSURING FAIR
GLOBALIZATION
 Role of Government in Fair
Globalization
• Policies must protect the interests, not only of the rich and the
powerful, but all the people in the country.
• Labour laws are properly implemented and the workers get
their rights.
• Support small producers to improve their performance till the
time they become strong enough to compete.
• The government can use trade and investment barriers
• It can negotiate at the WTO for ‘fairer rules’. It can also align
with other developing countries with similar interests to fight
against the domination of developed countries in the WTO.
 Role of People in Fair
Globalisation
• Campaigns and representation by people’s organisations
have influenced important decisions relating to trade and
investments at the WTO.