How do multinational companies manage to keep the cost of production o

1.	How do multinational companies manage to keep the cost of production of their goods low? Explain with examples.
Answer» The multinational companies manage to keep the cost of production of their goods low in the following ways: They set up production jointly with some of the local companies of these countries. For example, Ford Motors spent Rs. 21700 crores to set up a large plant near Chennai in collaboration with Mahindra and Mahindra. In India, labour and transportation cost is very low which cuts down the cost of production. They buy up local companies and expand production. For example, Cargill Foods, a large American MNC bought Parakh Foods. The company got ready made infrastructure. As production increases, cost comes down. They place orders for production with small producers. They purchase garments, footwear, sports goods and sell them under their brand name.

How do multinational companies manage to keep the cost of production of their goods low? Explain with examples.

Answer»

The multinational companies manage to keep the cost of production of their goods low in the following ways:

They set up production jointly with some of the local companies of these countries. For example, Ford Motors spent Rs. 21700 crores to set up a large plant near Chennai in collaboration with Mahindra and Mahindra. In India, labour and transportation cost is very low which cuts down the cost of production.
They buy up local companies and expand production. For example, Cargill Foods, a large American MNC bought Parakh Foods. The company got ready made infrastructure. As production increases, cost comes down.
They place orders for production with small producers. They purchase garments, footwear, sports goods and sell them under their brand name.