Chapter 4

NCERT
Class 10
Economics
Solutions
1. Read the passage on the left 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.

Question:

Read the passage on the left 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 Rs. 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 the United States of America. The company wants to develop Ford India as a component supplying base for its other plants across the globe.

  • Would you say Ford Motors is a MNC? Why?
  • What is foreign investment? How much did Ford Motors invest in India?
  • 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.
  • 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:

(a) cost of labour and other resources in India

(b) the presence of several local manufacturers who supply auto parts to Ford Motors

(c) closeness to a large number of buyers in India and China

  • In what ways will the production of cars by Ford Motors in India lead to interlinking of production?
  • In what ways is a MNC different from other companies?
  • Nearly all major multinationals are American, Japanese or European, such as Nike, Coca-Cola, Pepsi, Honda, Nokia. Can you guess why?

Answer:

  • Ford Motors is a multinational company because this American-origin company is doing its business in 26 countries of the world. Ford Motors is the world's largest automobile manufacturer.
  • Investment made by a multinational company in another country is called foreign investment. Ford Motors had invested ₹1700 crores in India.
  • Often, multinational companies choose the same place to set up production plants, which are near the market, where low cost and skilled and unskilled labor are easily available, where the availability of high factors of production is ensured and the government policies of the countries concerned are in their favor. Friendly . Due to the availability of all these facilities, India has become a favorable and preferred country for multinational companies. In India, not only because of the huge population, there is a huge market available and here both skilled and unskilled laborers are available at low cost. Other multinational companies like Ford Motors have also taken advantage of these facilities in India.
  • India is a developing country where the demand for cars can increase tremendously in the coming times due to which Ford Motors can get a decent market. That's why Ford Company wants to develop India as a manufacturing hub of car parts to expand its business globally.

(a) Due to the huge population in India, unemployment and under-employment are very high. Sufficient skilled and unskilled laborers are available here at very low wages. Apart from this, the cost of other resources is also less in India.

(b) A number of small scale local industrial units in India supply components to Ford Motors as manufacturers who have sufficient ability to determine the price, quality and labor conditions.

  • Production of cars by Ford Motors in India will be related in such a way that many small companies of India will be able to jointly operate manufacturing centers with Ford Motors Company.
  • MNCs are different from other companies in the following ways :

(i) Multinational companies establish their industrial units/offices in more than one country, whereas local companies have industrial units/offices established in a single country.

(ii) Capital investment of multinational companies is high as compared to local companies.

(iii) The production of multinational companies is demanded and supplied on a large scale, while the units of other companies have small investment, less labor, less raw material, often from local sources and the sale of products is limited to a few countries or supplies of multinational corporations.

  • The reason why these multinational companies are related to America, Japan or Europe is that all these three areas are fully developed. The concerned companies have excellent technology, efficient management, high level of enterprise capability, immense capital and ability and efficiency to buy all kinds of resources, invest them and enter into business agreements with the governments of various nations.

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