There are many factors that MNCs take into account while setting up factories and offices for production in a country:
- Proximity to markets where they can sell their products
- Availability of cheap labour, both skilled and unskilled,
- Availability of other resources like raw material, and infrastructure
- Favorable Government Policies
To set up factories, MNCs put in money or foreign investment to buy land, machinery and other equipment.
There are various ways in which the MNCs invest in countries:
- They collaborate with local companies
- They buy local companies
- They place orders with small local producers. MNCs invest in small producers to make and supply the products to them and sell it under their banner.
Thus, by setting up partnerships with local companies, closely competing with the local companies or by buying them up, and by using the local companies for supplies, MNCs exert influence on production at distant locations and interlink them.
Through the ages, foreign trade has been a major link between different countries and civilisations. By trading with other countries and regions, producers can sell their products in new markets and compete there with the local goods.
Consumers hence can have a greater variety to choose from than what is produced domestically. Prices also tend to become more and more competitive as local goods are forced to contend with goods made in another country.
With globalisation, such integration, linking and competition, of markets and trade has increased tremendously.