QA Globalisation

Chapter: Globalisation

Answer the following questions

Q 1. What do you mean by a Multi National Corporation (MNC)? Explain their production technique?

Ans. A multinational corporation is a company that owns or controls production in more than one nation.

Ex:- Hindustan Lever Limited, Ford Motors.

The MNCs set up offices and factories in those regions where labour and other resource are available at cheap rates. So they can reduce cost of production and earn more profits.

Q 2. What are the factors which influence the setting up of the units of Multi National Corporations (MNCs)?

Ans. Factors which influence the setting up of the units of MNCs are-

a. Closeness to the market.

b. Availability of skilled labour at cheap rate.

c. Availability of raw materials at cheep rate.

d. Favourable Govt. policies.

Q3. What is called investment?

The money which is spent to buy assets such as land, building, machines and other equipments is called investment.

Q4 What are the various ways in which MNCs set up or control production in other countries?

a. MNCs set up production jointly with some of the local companies of the other countries.

b. MNCs buy up local companies and then expand production.

c. MNCs give order for production to small companies of the developing countries. The small companies supply products to the MNCs. The MNCs will sell those products in their brand name.

d. MNCs start their own production units or offices to run their business.

Q5. What are the benefits which the local companies get when they setup production jointly with an MNC?

a. MNC will provide money to the local company for additional investments like buying machines.

b. MNC will provide the latest technology for production.

Q6. What do you understand by Globalisation?

Globalisation is the process of integrating the economies of the world. It is a process of promoting the free movement of goods and service, investments, technology and people across different countries.

Q Explain advantages of globalization.

Answer:

Globalization means integrating the economy of the country with the world economy.

1 Under this process, goods and services along with capital, resources and technology can move freely from one nation to another.

2 It has increased the movement of people between countries.  People usually move from one country to another in search of better income, better jobs or better education. Earlier the movement of people between countries was less due to various restrictions.

3 Rapid improvement in technology has been one major factor that has stimulated the globalization

process. For instance, advancement in transportation technology has made much faster delivery of goods across long distances possible at lower costs. Container services have led to huge reduction in port handling costs. The cost of air transport has fallen which has enabled much greater volumes of goods being transported by airlines.

4 Developments in information and communication technology (IT in short) has brought a revolution in telecommunications. It has made e-banking, e-commerce, e-leaming, e-mail and e-governance a reality.

5 Globalization has resulted in greater competition among producers and has been of advantage to consumers, particularly the well-off section. Rich people now enjoy improved quality and lower prices for several products.

Q What is a trade barrier? Why did the Indian Government put up trade barriers after Independence? Explain. 

Answer:

The restrictions set by the Government to regulate foreign trade are called trade barriers. Tax on imports is an example of a trade barrier.

The Indian government after independence had put barriers to foreign trade and investment- 

1 This was done to protect the producers within the country from foreign competition.

2 To protect the Indian economy from foreign infiltration in industries affecting the economic growth of the country as planned.

Q Define the term liberalization. Explain the reasons why the Indian Government started the policy of liberalization in 1991. 

Answer:

Removing barriers or restrictions set by the government on foreign trade and foreign investment is what is known as liberalization. 

The Indian Government removed these barriers because:

1 Liberalization of trade and investment policies allows Indian producers to compete with producers around the globe leading to an improvement in performance and quality of products.

2 After the barriers on foreign trade and foreign investment were removed to a large extent, goods could be imported and exported easily and also foreign companies could set up factories and offices in India. This has led to an increase in trade with different countries.

3 Businesses are allowed to make decisions freely about what they wish to import or export due to the liberal policies of the government.

4 Doors of investment opened up for MNCs. They have been investing large sums of money in India and have been seeking to earn large profits.

Q How has information and communication technology stimulated globalisation process? Explain with examples. 

Answer:

Information and communication technology has helped globalisation in the following ways:

1 Rapid improvement in technology has contributed greatly towards globalisation. Advanced technology in transport systems has helped in the delivery of goods faster across long distances at lower costs.

2 Development in information and communication technology has also helped a great deal. Telecommunication facilities — telegraph, telephone, mobile phones, fax are used to contact one another quickly around the world, access information instantly and communicate from remote areas. This is possible due to satellite communication devices. Teleconferences help in saving frequent long trips across the globe.

3 Information technology has also played an important role in spreading out production of services across countries. Orders are placed through internet, designing is done on computers, even payment of money from one bank to another can be done through e-banking through internet. Internet also allows us to send instant electronic mail (e-mail) and talk (voice-mail) across the world at negligible cost.

Q What is the meaning of SEZ? Mention any three features of SEZ. 
Answer:
SEZ or Special Economic Zones are industrial zones set up by the Central and State Governments with world class facilities in electricity, water, roads, transport, storage, recreational and educational facilities. Three features of SEZ:

1. The companies who set up production units in the SEZs do not have to pay taxes for an initial period of five years.
2. Government has also allowed flexibility in the labour laws to attract foreign investment. This is done to reduce the cost of labour for the company.
3. These are being set up to attract foreign companies to invest in India.

Q. How has globalization been advantageous to both the producers as well as the consumers in India? Explain.
Answer:
To Producers-  

• Several of the top Indian Companies have been able to benefit from the increased competition.
• They have invested in newer technology and production methods and thereby raised their production standards.
• They have gained from successful collaborations with foreign companies.
• Globalization helped in the development of IT sector.
• Good quality products are being produced at lower prices.

To Consumers. 

• There is greater choice before consumers who can enjoy improved quality and lower prices for several products.
• People today, enjoy much higher standards of living than was possible earlier.

Q. What is the major aim of WTO? Mention any two shortcomings of WTO?
Answer:
WTO (World Trade Organization) believes that there should not be any barriers between trade of different countries. Trade between countries should be free.
Aims of WTO:

• To liberalize international trade.
• To establish rules regarding international trade.

Two shortcomings of WTO:

1. Though WTO is supposed to allow free trade for all, in practice, it is seen that the developed countries have unfairly retained trade barriers and continued to provide protection to their producers. For example, farmers in the US receive huge sums of money from the government and as a result can sell the farm products at abnormally low prices in other countries, adversely affecting farmers in those countries.
2. On the other hand WTO rules have forced the developing countries to remove trade barriers.