Factors contributing to globalisation Flashcards
What are the features of a globalised world?
- Expansion of financial capital flows between countries - Increased FDI and cross border deals
- Rising number of global brands, including those from emerging countries
- Deeper specialisation of labour: the components come from many nations
- Global supply chains and new trade and investment routes
- Increasing levels of international labour migration and migration within borders
- Increased connectivity of people and businesses through mobile/Wi-Fi
What factors contribute to globalisation?
- Trade liberalisation
- Political change
- Reduced transportation and communication costs
- Increased significance of global companies
- Increased investment flows
- Migration
- Growth of global labour force
- Structural change
Define TRADE LIBERALISATION
Trade liberalisation is the removal of trade barriers e.g. quotas and tariffs.
Explain how trade liberalisation contributes to globalisation
The removal of trade barriers (mainly thanks to the work of the WTO) has led to an increase in the number of trade agreements across the world.
The increased freedom of movement of goods/services increases export opportunities.
What are the advantages of trade liberalisation?
- Allows more trade
- Encourages specialisation and increased output
- Higher standards of living
- There is a greater choice at a lower price
- Improved quality
- Increase competition, leading to innovation and improvements in products
What are the disadvantages of trade liberalisation?
- Increases unemployment in certain countries
- Causes environmental problems
- Potential for market domination
- Lack of protection for ‘infant industries’
Explain how political change contributes to globalisation
Large countries like China and Russia who were previously closed to trade have become more integrated. They play a vital role in the creation of new markets and provision of low cost labour.
They also contribute to global economic growth though imports and exports.
Explain how reduced transportation and communication costs contribute to globalisation
- Containerisation - raw materials and products are packed in large containers that can easily be dealt with at any port - helps to reduce the price of ocean shipping and keeps markets competitive.
- Infrastructure - transport links and communication (internet, phone, email) have improved.
- The ‘now-economy’ - the use of the internet, e-commerce, mobile technology has made it quicker easier and cheaper to communicate long distances.
Explain how global corporations contribute to globalisation
Global businesses have increasingly invested abroad in the pursuit of higher revenues and profit growth. e.g. McDonalds through McDonaldization.
Explain how increased investment flows contribute to globalisation
There has been a significant relaxation of the rules surrounding the movement of capital in countries such as China. This leads to an increase in FDI. This allows businesses to invest outside their country of origin, which may lower their production costs and improve economic prospects in the host country.
Explain how migration contributes to globalisation
Workers are more willing to cross borders to find work, made easier by the freedom of movement of labour (e.g. in the EU), reduced travel costs and improved infrastructure.
Highly skilled workers are able to move to service/knowledge based economies and in the same way low-skilled workers can move to primary/secondary based economies to find work.
Explain how a growth of the global labour force contributes to globalisation
Quantitative and qualitative growth has led to a diverse international workforce.
Explain how structural change contributes to globalisation
National economies have transformed as there has been a trend for them to move from primary production into manufacturing. Likewise, manufacturing economies are increasingly moving to service/knowledge based economies.
What are the economic benefits of globalisation?
- Increased choice of products from different countries
- Increased quality
- Lower costs as labour and raw materials can be sourced from the cheapest location
- Greater potential for growth
- Increased international economies of scale
- Greater employment opportunities
What are the advantages of globalisation for a business?
- Expanding revenue and profits as products are sold to new markets
- Lower costs due to offshoring/outsourcing
- Investment in innovation
- Access to new territories and raw materials
- Access to more cheap but skilled labour
- Controlling key supplies
- Global economies of scale
