Consider the following statements regarding the integration of production by MNCs: 1. MNCs typically avoid placing orders with small producers in developing countries to maintain quality control. 2. The products supplied by local companies are sold by MNCs under the MNC's own brand name. 3. The local producers in developing countries determine the price and delivery conditions independently of the MNCs. Which of the statements given above is/are correct?

The correct option is 2 only. Explanation Multinational Corporations (MNCs) integrate production globally to minimize costs and maximize efficiency. A common strategy involves outsourcing manufacturing to small producers in developing countries while retaining control over branding and quality standards. Statement-wise Analysis - Statement 1 is Incorrect. MNCs do not avoid placing orders with small producers; in fact, for industries such as garments, footwear, and sports goods, it is a standard practice. Large MNCs place orders with small producers across the world to leverage low production costs. - Statement 2 is Correct. The products manufactured by these local producers are supplied to the MNCs, which then sell them under their own brand names. The local producer acts as a contract manufacturer, and the consumer identifies the product with the MNC's brand, not the local manufacturer. - Statement 3 is Incorrect. Local producers in developing countries generally do not have the power to determine prices or delivery conditions independently. Due to the immense economic power of the MNCs, they determine the price, quality, delivery, and labour conditions for these distant producers. Key Takeaway Key Takeaway: MNCs control global production networks by outsourcing manufacturing to small producers in developing nations, strictly dictating terms regarding price, quality, and delivery, while selling the final goods under their own global brands.

NCERT Class 10 Economics — Chapter 4: Globalisation and the Indian Economy

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Consider the following statements regarding the integration of production by MNCs:

MNCs typically avoid placing orders with small producers in developing countries to maintain quality control.
The products supplied by local companies are sold by MNCs under the MNC's own brand name.
The local producers in developing countries determine the price and delivery conditions independently of the MNCs.

Which of the statements given above is/are correct?

Official previous-year question

Verified 1 Aug 2026.

Options

A2 only
B1, 2 and 3
C1 only
D1 and 3 only

Did you get this right?

Solution

The correct option is 2 only.

Explanation

Multinational Corporations (MNCs) integrate production globally to minimize costs and maximize efficiency. A common strategy involves outsourcing manufacturing to small producers in developing countries while retaining control over branding and quality standards.

Statement-wise Analysis

Statement 1 is Incorrect. MNCs do not avoid placing orders with small producers; in fact, for industries such as garments, footwear, and sports goods, it is a standard practice. Large MNCs place orders with small producers across the world to leverage low production costs.
Statement 2 is Correct. The products manufactured by these local producers are supplied to the MNCs, which then sell them under their own brand names. The local producer acts as a contract manufacturer, and the consumer identifies the product with the MNC's brand, not the local manufacturer.
Statement 3 is Incorrect. Local producers in developing countries generally do not have the power to determine prices or delivery conditions independently. Due to the immense economic power of the MNCs, they determine the price, quality, delivery, and labour conditions for these distant producers.

Key Takeaway

Key Takeaway: MNCs control global production networks by outsourcing manufacturing to small producers in developing nations, strictly dictating terms regarding price, quality, and delivery, while selling the final goods under their own global brands.

Your note

More from Chapter 4: Globalisation and the Indian Economy

The term "Containerisation" in the context of globalisation has primarily led to: 1. Huge reduction in port handling costs. 2. Increased time required for the delivery of goods to export markets. 3. Ability to load goods intact onto ships, railways, planes, and trucks. Which of the statements given above is/are correct?

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Which international organisation is primarily mandated to establish rules regarding global trade and ensure their compliance?

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The rapid improvement in which of the following has been the major factor stimulating the globalisation process?

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Which one of the following is NOT a primary factor considered by Multinational Corporations (MNCs) when establishing production units in a country?

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In the context of globalisation in India, which one of the following industries has generally remained resilient compared to others where small manufacturers faced stiff competition?

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The correct option is 2 only.

Explanation

Statement-wise Analysis

Statement 1 is Incorrect. MNCs do not avoid placing orders with small producers; in fact, for industries such as garments, footwear, and sports goods, it is a standard practice. Large MNCs place orders with small producers across the world to leverage low production costs.
Statement 2 is Correct. The products manufactured by these local producers are supplied to the MNCs, which then sell them under their own brand names. The local producer acts as a contract manufacturer, and the consumer identifies the product with the MNC's brand, not the local manufacturer.
Statement 3 is Incorrect. Local producers in developing countries generally do not have the power to determine prices or delivery conditions independently. Due to the immense economic power of the MNCs, they determine the price, quality, delivery, and labour conditions for these distant producers.