Question

Where do MNCs choose to set up production?

Answer 1

Hint: An MNC or multinational corporation is a large organization based in one country that manufactures or provides products or services in a number of countries. MNCs have two traits in common: their huge scale working factor and the reality that their global operations are centralized by the parent corporations.

Complete answer:
MNCs have their management offices in one region, which is referred to as the 'home country', and they reside in many other nations, which are referred to as the 'host countries'. Most transactions take place in the host countries itself. An MNC may have investments in other countries, but its product offers across each market are not organized. It is more concerned with tailoring its goods and services to each specific local market. The key requirement for establishing an MNC is the existence of cheap labor options in at least one host nation other than the country where its existence began or other than its home country.

In general, areas having the following characteristics are preferred for the establishment of an MNC to carry out their production work;
- MNCs provide manufacturing units in locations where they can generally produce their products at a low cost. So they always look for the availability of cheaper resources.
- The regions or locations where markets that sell in bulk are closer together. This helps them because the more number of markets means there will be a higher level of competition so their products get a wider scope for getting acknowledged.
- A location where low-cost unskilled or skilled labor is readily available is an apt location where the MNCs set up to carry out production.
- Another extremely important criterion the location must satisfy is that regions must have stability in the common production factors.
- The regions where the government's initiatives are beneficial, is a spot the MNCs usually choose to establish in.

Note: Another corporation that often gets referred to along with MNCs are TNCs. TNC stands for a transnational corporation that operates independently of other countries rather than from its country of origin. Most TNCs and MNCs are enormous, with budgets that surpass the GDPs of smaller countries. As a result, both TNCs and MNCs have influence including in globalization, economics in most countries.