4.1.1 Globalisation

Question 1

Globalisation Definition

Answer 1

The increasing integration of economies internationally

Question 2

Main 5 Characteristics of Globalisation

Answer 2

1. The free movement of labour and capital across international boundaries
2. Free trade in goods and services between different countries
3. The availibility of technology and intellectual capital to be used (and patented on a global scale)
4. Political factors e.g. international bodies like the UN which leads to a convergence of political decisions
5. Cultural factors e.g. spread of things like McDonald’s across the world
6. Growth of MNCs

Question 3

Other characteristics of globalisation

Answer 3

1. International trade becoming a greater proportion of all trade
2. Increased financial capital flows between countries
3. Increased integration of production - GVCs
4. More countries involved in international trade
5. Increased foreign ownership of firms
6. De-industrialisation of dveloped countries/Industrialisation of developing/emerging countries
7. More international division and movement of labour - foreign companies produce goods in developing/emerging countries

Question 4

MNC definition

Answer 4

Firms which function in at least one other country aside from their country of origin e.g. Nissan, KFC

Question 5

Factors which attract MNCs to invest in a country

Answer 5

1. The availability of cheap labour and raw materials
2. Good transport links
3. Access to different markets
4. Pro-foreign investment government policies

Question 6

How do MNCs divide their operations

Answer 6

Locate each part in the country with the lowest costs
Through offshoring and outsourcing

Question 7

Offshoring definition

Answer 7

Setting up a company abroad

Question 8

Outsourcing definition

Answer 8

Subcontracting work to another organisation

Question 9

Causes of globalisation(10)

Answer 9

1.Trade liberalisation
2.Reduction in real cost and time needed for transportation of goods = makes it cheaper to export and import
3. Improvements in communication technology = easier for international trade
4. Profit seeking firms - Increase in FDI by MNCs/Firms expanding to expolit economies of scale
5. More MNCs with more significance and influence
6. Opening of new markets to trade
7. Growth of trading blocs
8. Inceasing investment by sovreign states
9. More international specialisation
10. Increased global product standards by WTO which raises confidence in imports

Question 10

Benefits of globalisation on individual countries (5)

Answer 10

1. More economic growth - higher GDP due to increased output
2. Improved living standards
3. Reduced absolute poverty due to job creation
4. Less unemployment
5. Increased awareness to foreign disasters and global issues

Question 11

Benefits of globalisation on producers (4)

Answer 11

1. More output due to specialisation
2. Increased static efficiency
3. External economies of scale which lowers costs
4. Global sourcing means lower raw material costs

Question 12

Benefits of globalisation on consumers

Answer 12

1. Lower prices due to lower production costs and competition
2. More choice - allocative efficiency
3. Better quality products - more innovation due to competition

Question 13

Costs of globalisation

Answer 13

1. Price of some goods and services rises
2. Economic dependency
3. Global imbalances in balance of payment accounts which leads to increased protectionism
4. Specialisation leads to overreliance in an economy
5. Individual firms may be outcompeted by foreign firms

Question 14

Benefits of MNCs

Answer 14

1. FDI by MNCs creates new jobs
2. FDI by MNCs brings new skills and wealth to an economy
3. MNCs buy local G/S which leads to inflows of foreign currency
4. MNCs provide employment which raises living standards

Question 15

Costs of MNCs

Answer 15

1. MNCs may exploit workers in developing countries by paying them lower wages than in developed countries
2. MNCs can force local firms out of business
3. MNCs can relocate rapidly and cause mass unemployment
4. MNCs can withdraw profits and place them in another country with low tax rates so the other country wont gain tax revenue from profits
5. MNCs can influence gov policies in other countries which affects domestic economies
6. Gov may reduce corporate tax levels to attract or keep MNCs in their country

Question 16

Impact of globalisation on the environment

Answer 16

1.More fossil fuels used due to increased interntaional transportation of goods
2. More carbon emissions by rising production of manufactured goods to meet rising demand
3. Deforestation
4. Increased depletion of non-renewable resources

Question 17

Consequences of globalisation for developing countries

Answer 17

1. MNCs take advantage as health and saftey laws are less strict
2. MNCs may exploit workers by offering very low wages
3. Skilled workers leave to work in more developed countries which reduces potential growth
4. It does create jobs which redues unemployment
5. MNCs bring more efficient production methods and technology to developing countries
6. More investment due to FDI

Question 18

Consequences of globalisation for developed countries

Answer 18

1. High structural unemployment as cheap overseas production of goods has reduced some industries e.g. textiles in UK
2. De-industrialisation - fall in exports
3. Increased imports has negatively affected the balance of payments of developed countries
4. Greater access to raw materials and semi-manufactured goods from other countries, which is used in production of domestic goods
5. MNCs gain access to cheap labour which leads to lower production costs and lower prices for consumers