Page 100 - Understanding Economics for Class 10

 MNCs are exerting a significant influence on production at these distant locations through
partnerships with local companies, sourcing supplies from them, engaging in intense
competition or acquiring them outright.
 As a result, production is getting interconnected in these widely dispersed locations.
Goyal Brothers Prakashan
LET’S WORK THESE OUT (Page No. 59)
Read the passage given below and answer the questions:
Ford Motors, an American company, is one of the world’s largest automobile manufacturers
with production spread over 26 countries of the world. Ford Motors came to India in 1995 and
spent `1700 crore to set up a large plant near Chennai. This was done in collaboration with
Mahindra and Mahindra, a major Indian manufacturer of jeeps and trucks. By the year 2017,
Ford Motors was selling 88,000 cars in the Indian markets, while another 1,81,000 cars were
exported from India to South Africa, Mexico, Brazil and United States of America. The company
wants to develop Ford India as a component supplying base for its other plants across the globe.

1. Would you say Ford Motors is a MNC? Why?
Ans. yes, Ford Motors is a MNC. A MNC is a company that owns or controls production in
more than one nation. Ford’s production is spread over 26 countries of the world. It also
working jointly with the local company Mahindra and Mahindra.

2. What is foreign investment? How much did Ford Motors invest in India?
Ans. Investment made by MNCs in assets such as land, building, machines and other equipment
is called foreign investment. Ford has invested `1700 crore in India.

3. By setting up their production plants in India, MNCs such as Ford Motors tap the advantage
not only of the large markets that countries such as India provide, but also the lower
costs of production. Explain the statement.
Ans. The cost of labour is cheaper in India as compared to the developed countries. This means
that an MNC can save lot of money on wages and salaries by setting up production plants
in India. This helps in lowering the cost of production. India itself is a large market with
sizeable population of middle class and upper class and hence provides a big market for
many products.

4. Why do you think the company wants to develop India as a base for manufacturing car
components for its global operations? Discuss the following factors:
(i) cost of labour and other resources in India
(ii) the presence of several local manufacturers who supply auto parts to Ford Motors
(iii) closeness to a large number of buyers in India and China
Ans. (i) In India, cost of labour and other resources is comparatively cheap thereby increasing profits
for Ford Motors. Therefore, Ford has set up its manufacturing unit near Chennai in India.
(ii) Local manufacturers sell auto parts to Ford Motors at a lower cost because of their
lower cost of operation, these companies supply various parts at less than price in
developed countries.
(iii) India and China are the world’s most populous countries (comprise about 30% of the
world population) thereby providing huge market to the companies. Through these

E-86 Economics Class X