1.9 Flashcards
Globalisation
Key features of globalisation
● Goods and services traded across international borders.
● People are more free to live and work in the country of their choice, which
has resulted in increasing multicultural societies.
● High level of interdependence between countries.
● Capital can flow easily between different countries.
● Free exchange of technology and intellectual property across borders.
Reasons for globalization
Reasons for globalisation
● Technological developments have helped globalisation gather pace.
● International transport networks have improved in recent years.
● There has been a huge amount of deregulation, removal of trade barriers
and an increasing number of economies are more open.
● Many countries have simplified their monetary system and legal system
to make international trading easier.
● An increase in tourism has also helped globalisation to thrive.
● Many firms want to sell abroad, especially when domestic markets
become saturated.
Reasons for globalisation
Government and globalisation
● Globalisation can flourish if governments are committed to it. For
example:
○ Countries cannot trade if the government keeps international borders closed
○ International trade is limited if governments put up trade barriers
○ People cannot be free to live and work in overseas countries unless borders are kept
open
○ Firms cannot develop their businesses overseas if planning permission is denied.
● Governments can aid globalisation by relaxing certain laws and
regulations that prevent, restrict or complicate trade and business.
Opportunities of globalisation for businesses
Opportunities of globalisation for businesses
● Access to larger markets
● Lower costs
● Access to labour
● Reduced taxation
Access to larger markets
● Global markets are considerably larger than domestic markets.
● This growth opportunity for businesses could result in higher sales and
increased profits.
Lower costs
● As firms grow they can exploit
their economies of scale.
● With lower costs, businesses
become more competitive.
Access to labour
● People are more free to move around the world and find employment in
other countries (subject to border controls). So, businesses can have
more people to choose from when recruiting employees.
● A rising labour supply might help to prevent wages from rising. Lower
wages help businesses lower their costs.
● Businesses can recruit highly skilled staff from all over the world. In some
countries there are skills gaps which can make business development
thrive.
Reduced taxation
● Businesses can
choose where to
locate their base.
They can,
consequently,
reduce the amount
of tax they pay.
Threats of globalisation to businesses
● Competition
● International takeovers
● Increased risk of external shocks
Competition
● Businesses will face increased competition as a result of globalisation. As
more companies around the world try to sell their goods and services in
an increasing number of countries, some businesses will have their
survival threatened.
● Often, the companies that are able to exploit globalisation are strong,
well-resourced and influential.
● As the pace of globalisation accelerates, increased competition is a
worrying threat for businesses - both large and small.
International takeovers
● It is possible for a business in one country to take over a business in
another. Consequently, companies may feel more vulnerable to a
takeover since there are larger number of predator businesses.
● Some businesses may also experience a hostile takeover (when a
company is taken against its will).
