4.1.1 - Globalisation Flashcards
Define the term globalisation.
The deepening of relationships between countries of the world reflected in an increasing level of cross-border trade and investment and migration.
Name some characteristics of globalisation. - Use for application !!!!!
1. Increase moment of labour and financial capital
-The migration of skilled workers from India to Silicon Valley, contributing to the US tech industry.
- Foreign Direct Investment (FDI) by Tesla in Germany, building a gigafactory to serve the European market. ( This is an example of the movement of financial)
2. Integration of Financial Markets
-The 2008 Global Financial Crisis, which started in the US housing market but quickly affected banks worldwide.
-The impact of US Federal Reserve interest rate changes on global stock markets and currency values.
3. Increased international trade
4. Advancements in Technology and Communication
- The rapid expansion of e-commerce platforms like Amazon and Alibaba, which allow businesses to sell internationally.
- How 5G technology has enabled faster global communication and digital business operations.
5. Expansion of Multinational Corporations (MNCs)
- Apple’s global supply chain, where design occurs in the US, chips are made in Taiwan, and assembly happens in China.
- McDonald’s operating in over 100 countries, adapting menus to local tastes (e.g., McPaneer in India).
6. Global supply chains
-Are a key characteristic of globalization because they involve the international division of labor. Companies like Nike sources rubber from Thailand and textiles from China, while assembly occurs in Vietnam and Indonesia. This global supply chain reduces costs through comparative advantage and economies of scale.
What Trade-to GDP ratios and what can they indicate about a country ?
- The Trade-to-GDP ratio measures the total value of a country’s trade (exports + imports) as a percentage of its Gross Domestic Product (GDP).
- Higher trade to GDP ratios can indicate that a country is reliant on trade for economic growth
- Luxembourg has a trade-to-gdp ratio of 400%
How do you calculate a countries trade-to-GDP ratio ?
Trade-to-GDP ratio is also a characteristic of globalisation.6
Name the 4 causes of globalisation
How has improvements in transport and operations led to globalisation ?
- Improvement in transportation e.g planes have made it easier and quicker to travel around the work. This has led to an increase in the international movement of labour (1st characteristic of globalisation)
- Improvements in transportation infrastructure, such as containerization and the expansion of shipping routes, have made it easier and cheaper to move goods globally (via economies of scale leading to a fall in long-run average costs). As well as making int quicker and more efficient.
How has improvements in technology and IT led to globalisation ?
Improvements in IT e.g google, Skype, email and PayPal have:
1. Companies can now communicate and agree on business operations as well as send financial capital across countries to fund business projects. Which has led to an increase in movement of financial capital.
2. Increase trade across countries as good/services can now be sold online. ASOS a fashion retailer are able to communicate cheaper as you can now advertise on social media platforms (no need to purchase expensive billboards) and reach targeted audiences which will help to increase trade across countries as people are aware of different goods around the world.
How has trade liberation led to globalisation.
- Removal of trade barriers like tariffs has decreased the cost of importing goods & services from abroad. This would Increase the demand from imports so foreign countries will export more of their goods and services increasing international trade.
- The growing strength and influence of organisations such as the World Trade Organisation (WTO), which advocates free trade, has contributed to the decline in trade barriers.
What 6 areas does globalisation and global companies impact ?
Benefits of globalisation on individual countries
Costs of globalisation on individual countries
- Also increased vulnerability to external shocks. The oil and gas sector in Saudi aurabia now accounts for 50% of their real GDP
Impacts of globalisation on government
Transfer pricing resulting in tax avoidance.
Impacts of globalisation on government
Bigger companies benefits from economies of scale.
- Also add LRAC diagram
Impacts of globalisation on consumers
Impacts of globalisation on workers
New jobs
Globalization → increases economic integration between countries → improved access to information and technology → firms in developed economies gain better insights into cost structures worldwide, particularly labor costs.
* As a result → multinational corporations identify lower-cost production locations (e.g., India, Vietnam) → firms choose to offshore production to these developing economies where wages are significantly lower than in developed countries.
* Offshoring → leads to large-scale investment in local industries, particularly in manufacturing and services → firms set up factories, call centers, and offices, creating new job opportunities for local workers.
Example: Apple expanded iPhone manufacturing into India, investing in Foxconn and Wistron factories. This led to thousands of direct factory jobs and further employment in logistics, retail, and maintenance due to increased economic activity.
Evaluation : * However, wages in these newly created jobs may remain low due to weak labor rights and limited collective bargaining power → firms prioritize cost-cutting, leading to potential exploitation of workers
* Additionally, job security is uncertain as TNCs can easily shift production elsewhere due to better transportation and technological advancements if conditions change (e.g., rising wages, stricter regulations) → seen when Nike moved production from China to Vietnam in response to rising labor costs. Meaning workers lose their jobs
Impact of globalisation on the environment
- Increase global cooperation and communication Koyoto protocol - Forcing countries to commit to reducing green house gas emissions by 12.5%
