Chapter 1: Globalisation Flashcards
Globalisation:
definition
A process consisting of Political, Economical, Socio-cultural and Technological dimensions which interconnects individuals, firms, and governments across national borders.
Factors:
Financial Growth Opportunities and loss minimisation
- Allows small companies to compete with MNCs with low risk
- Businesses have easy access to global market with e-commerce, therefore do not require large capital.
- Trade for cheap raw material and using low cost labour.
- Hence, minimising risk while able to pursue growth opportunities
Factors:
Global Consumer Purchasing Pattern
- Consumers are more willing to try foreign products due to the rise in their standard of living
- They are more confident with their high income, therefore prepared and able to pay for the products produced
Factors:
Roles of WTO
- Growing authority over national governments with restrictions and controls impose on nations requiring assistance
- Sets standard for international trade and countries participating in FTA
Dispute settlement
- Countries can go to WTO if they think that their agreements are ever infringed
- Enforce rules to ensure trade flows smoothly
Trade negotiations
- WTO will negotiate for trade liberalisation but sometimes will be in favour of trade barrier to protect consumers or outbreak of disease
Factors:
Deregulation of Financial Market
- Reduction of financial barriers to increase flow of money between nations to attract foreign investment
- Increase ability to allocate and access international capital efficiently
- Sparked explosive growth in financial trade
- Purely financial transactions > trade of g/s = economic uncertainty and instability
Impact:
Employment levels
- Employment increase in developing countries and decrease in developed countries
- Due to low labour cost, jobs are exported from developed countries to developing countries
- Skilled workers from developed countries also move to developing countries for job opportunities
Impact:
Global spread of Skills and Technology
- MNCs use this to build supply of skilled workers
- With access to IT, developing countries can use technology to leapfrog stages of economic development
- increase in country’s competitive advantage which should encourage business and economic growth
Impact:
International Cooperation
- Two or more actors sharing resources for projects, acquisitions and build in agendas
- Allows the growth of globalisation with FTAs and strategic alliances, facilitating trade
- More developed countries like US are more likely to participate
Impact:
Domestic Market
- Market within a country’s own borders and is targeted at a single market
Opportunities:
- Have access to cheap supplies and products, low cost labour and manufacturing
- Expand market base with e-commerce
Challenges:
- International competition like MNCs
- Cannot achieve the same level of e.o.s
Impact:
Tax Minimisation
- Legally make arrangements to reduce amount of tax paid
Tax Haven countries
- Low tax for non residents and foreign owned companies
- Have secretive tax and financial systems
- Lack of transparency
- Lack of information exchange
Transfer Price
- Intercompany pricing arrangements between related business entities with intercompany transfers to minimise tax paid
Benefits of Home Grown Product:
Good for Australians
- Products are manufactured and produce locally to suit the needs and taste of Australians
- It has not travelled far and risk being mishandled
- It comes with service such as warranty that is only one phone call away
Benefits of Home Grown Product:
Good for friends and family
- There is a direct correlation in consumer purchasing behaviour and employment
- Purchasing local products ensures that the company that friends and family work at are stable, therefore securing their jobs
Benefits of Home Grown Product:
Good for Australia
- Sustainable revenue and profitability in domestic market
- It increases Australia’s gross domestic product, hence improving Australia’s economic growth and welfare
