Chpt 9- Economic Impacts Of Globalisation

Question 1

Explain how the economic impact of globalisation affects countries worldwide.

Answer 1

(Positive)
Because
- when country experience economic growth, more tax revenue and more jobs created over time
- more tax=more infrastructure
- population benefit through more trade and business and have greater variety of goods and services for consumption

For example

• Singapore has limited natural resources to support production for their own consumption and thus looks globally for products and services
• Singapore has a small domestic market and invests internationally to remain competitive and sustain their economic growth

(Negative)
Because
- With Free trade agreements(FTA), products produced locally may not be able to compete with the Lower-priced product overseas.
- affecting the livelihood of local businesses
- some may have to shut down as they can’t compete with the cheaper products imported from overseas
- foreign direct investments(FDA) does not necessarily benefit domestic businesses as there is little evidence about it
- in a global economy, when the economy of one country faced a downturn, it may affect other countries, through withdrawing their investments ore reducing its demand for goods and services from other countries
- leads to less income and jobs

For example

• 2008 Global Financial Crisis triggered by USA, affected many other countries
• affected the employment of more than 50million people by the International Labour Organisation

Question 2

Explain how the economic impact of globalisation affects the companies

Answer 2

(Positive)
Because
- companies are able to widen their market reach by expanding their production and sales of goods in many parts of the world
- they have the opportunity to benefit from higher profits and larger market shares

For example

• MNCs, such as Pepsi, can obtain higher profits by expanding their operations overseas
• access or new market abroad and able to access lower labour costs and cheaper resources such as land and raw materials
• components can be sourced from one location and assembled in different parts of the world where production cost is cheaper

(Negative)
Because
-increased competition from other companies
- harder for some companies to compete for a share of profits from the global economy
- since year 2000, globalisation resulted in the increase in the spread of MNCs
- many SMEs cannot compete with larger companies that offer the same products or services
- SMEs also faces challenges such as a small domestic government and a shortage of expertise and labour and can’t earn enough revenue to sustain their business
- MNCs and SMEs can’t anticipate the changing market to ensure that they stay relevant and their competitors can take advantage of this and take this market share from them, lowering their profits and driving them to bankruptcy

For example
-2012, French hypermarket chain, Carrefour, closed its only branch in Singapore after 15 years dues to other companies offering the same products Singapore

Question 3

Explain how the economic impact of globalisation affects individuals

Answer 3

(Positive)
Because
- easier access to knowledge, skills and ideas
- provide opportunities for people to collaborate on a local and global scale using the internet through videoconferencing or face-to-face where the individual travel across the world to learn from others
- allowed individuals to look for better job prospects overseas and higher income

For example
- expatriates working overseas typically receive extra allowance, free accommodation and flights back home

(Negative)
Because
- some workers had to contend with lower income or risk losing their jobs as companies get access to foreign markets offering lower labour costs
- jobs may also be lost when global companies close down their operations to shift to another location

For example
- many Americans loss their jobs in the 1970s when global American companies moved their operations to China or India at a much lower cost