17. The impact of Globalisation

Question 1

Define Globalisation

Answer 1

Globalisation is a process by which the world’s economies have become increasingly integrated and inter-dependent.

Question 2

What are the factors of globalisation?

Answer 2

1. Greater trade in goods and services between the world’s economies.
2. Greater transfer of financial capital between the world’s economies and greater FDI.
3. Greater transfer of technology and information between the world’s economies.
4. Greater specialisation in production, including outsourcing and offshoring.
5. Greater labour migration, both within and between the world’s economies.

Question 3

What is FDI?

Answer 3

FDI is the net transfer of funds to purchase and acquire physical capital, such as factories and machines, e.g. Nissan a Japanese firm building a car factory in the UK.

Question 4

What are the 3 factors that have caused FDI to increase?

Answer 4

Lower transport costs

Improved technology which has helped increase low capital intensive start ups

Increased global trade and lower tariff costs

Question 5

What is ‘Outsourcing’?

Answer 5

Outsourcing refers to an organization contracting work out to a 3rd party. Costs are arguably the chief motivation behind outsourcing. Often companies find that contracting work out to a 3rd party is cheaper.

Question 6

What is ‘Offshoring’?

Answer 6

Offshoring refers to getting work done in a different country. Companies usually offshore manufacturing or services to developing countries where wages are low, thus resulting in cost savings.

Question 7

Why do workers migrate?

Answer 7

1. To gain higher incomes
2. To follow friends and relatives
3. To avoid persecution or famine

Question 8

Why is Migration increasing?

Answer 8

1. Globalisation has made it more natural- (e.g. Apple need Americans based in China).
2. Technology has made it less emotionally difficult (e.g. skypeing home).
3. Ageing populations in developed countries has led to shortage of workers.
4. Higher standards of living in developed countries has made it more difficult to persuade workers to do menial jobs.