Question

What are the factors that multinational companies take into account before setting up a factory in different countries?

Answer 1

Before setting up a company or a factory, an MNC takes into account the following things:

1. Availability of cheap labour and other resources:
   MNC’s set up offices and factories for production in various regions of the world, where cheap labour and other resources are available in order to earn greater profit.

2. Partnership with local companies:
   MNC’s set up partnerships with local companies, by closely competing with local companies or buying local companies for supply. As a result, production in these widely dispersed locations gets interlinked

3. Favourable Government Policy:
   If the Government Policies are favourable, it helps MNC’s. For example, the Flexibility of labour laws will reduce the cost of production. MNC’s are able to hire workers on casual and contractual wages for a short period instead of a regular basis. This reduces the cost of labour for the company and increases its margin of profit.