Why do you think the company wants to develop India as a base for manufacturing car components for its global operations? Discuss the following factors:
cost of labour and other resources in India
India offers lower costs of production compared to developed countries. MNCs like Ford Motors tap the advantage of cheaper cost of labour and other resources in India. This helps reduce the overall manufacturing expenses significantly, making it economically viable for companies to set up production plants.
the presence of several local manufacturers who supply auto-parts to Ford Motors
The presence of several local manufacturers who supply auto-parts to Ford Motors provides a strong support system. For instance, Ford Motors collaborated with Mahindra and Mahindra, a major Indian manufacturer of jeeps and trucks. Additionally, Indian companies like Sundaram Fasteners (nuts and bolts) have emerged as reliable suppliers. This established network of local suppliers makes India an attractive base for manufacturing.
closeness to a large number of buyers in India and China
India and China represent large markets with a huge number of potential buyers. By developing India as a manufacturing base, Ford Motors can easily access these markets. The company sold 88,000 cars in Indian markets by 2017, while also exporting 1,81,000 cars to other countries. This proximity to large consumer bases in India and China ensures steady demand and reduces transportation costs for selling in these regions.
Explanation
This question tests students' understanding of why MNCs choose specific locations for their operations. The textbook clearly outlines three main factors: lower production costs in India (labour and resources), established local supplier networks (like Mahindra and Mahindra, Sundaram Fasteners), and strategic access to large markets in India and China. Students should connect these factors to the concept of MNCs seeking to maximise profits by optimising production costs while ensuring market access.