Factors Contributing To Increased Globalisation Flashcards
Define globalisation
The process where national economies become increasingly integrated and interdependent
1) First cause of increased globalisation
What’s trade liberalisation
The reduction and removal of restrictions to trade
E.g. tariffs, quotas, regulations
- EU is a trading bloc where tariffs have been removed
What does the world trade organisation (WTO) do
Often used to help negotiate trade agreements and promotes trade liberalisation
Advantages of trade liberalisation
- Raw materials that a firm imports will become cheaper- therefore lower firms costs, more competitive as it could reduce prices
- Exporting goods can become easier and cheaper, more markets for firms to expand to
- Consumer choice increased to include products from all over the world
- Increased competition between firms in different countries will mean products are cheaper for consumers as firms compete for sales
Disadvantages of trade liberalisation
- Removal of trade barriers will reduce cost of imports. Domestic businesses can be forced out by increased imports if they’re not competitive, increasing unemployment
- Trade liberalisation is removing national cultures
2) Second cause of globalisation
How does political change make countries more open to trade
- Restrictions to international trade put in place by one government might be removed if political system changes to support trade liberalisation
- Political agreements between countries have led to a growth in trading blocs- These reduce trade barriers between countries
- Tensions with other countries may affect trade
3) Third cause of increased globalisation
Economic development leads to what…
Structural change
The structure of a country’s economy can be thought of as the different sectors it contains:
- Primary= Sectors that are concerned with obtaining raw materials like agriculture, mining
- Secondary= Sectors that manufacture goods from those raw materials
- Tertiary= Sectors that are services, like financial and health services
- Quarternary= Sectors that are knowledge-based services, like IT and scientific research
As a country develops what happens to those sectors
- The reliance on primary and secondary sectors fall. Decline in profits of manufacturing (secondary) and extraction (primary) industries
- Whilst the tertiary and quarternary sectors grow. This creates growth and more demand for goods and services
What’s this structural change often matched by
Matched by a growth in national income, as tertiary and quarternary sectors often provide higher rates of return for investors
What kind of workforce do tertiary and quarternary sectors need
Highly skilled and specialised staff
Firms in tertiary and quarternary sectors often do what to obtain market share
They often find they need to trade internationally to obtain market share required to maximise economies of scale
This leads to the businesses being global, with global recruitment
4) Fourth cause of increased globalisation
More people in the world are able to work
What does this mean
- World population is increasing as people are living longer therefore working longer, and with more women in work.
- This means the global labour force is rising
With more people able to work, what does this mean for firms
Firms have more freedom to set up business operations wherever they want (e.g. near to raw materials or export markets) and are less likely to be restricted by a lack of labour
5) Fifth cause of increased globalisation
People are more likely to migrate
How does this cause globalisation
- Because people might create a new demand for certain products in the place they move to, creating opportunities for firms to sell in new locations
- Supply for low cost labour, cost competitiveness
- Highly skilled labour, improving productivity
- However, can be overcrowding and lead to domestic unemployment
How else would people more likely to migrate cause globalisation in terms of skilled staff
Businesses can find it easier to set up operations abroad when skilled staff are willing to migrate to new countries for work
Allows business to become global easier
6) sixth cause of globalisation
How does firms investing more in foreign countries (FDI) a cause of globalisation
- Governments that want to obtain the benefits of increased trade often try to encourage FDI by offering firms financial incentives, such as reduced tax rates on profits
- This makes it more cost-effective for firms to invest overseas, increasing investment flow into the country, therefore increasing globalisation
- Increases employment
- Spreads business activity (reduction of reliance to one revenue stream)
7) A seventh cause of globalisation
An increase in global companies
How do these help globalisation
- MNC’s function in several countries, and number of these businesses is growing
- MNC’s encourage globalisation as they can boost the economies of the countries that they locate in by increasing employment. This can lead to more demand for products, and encourage other businesses to expand
- Also, can invest in infrastructures to reduce costs of transportation
8) Eighth cause of globalisation
Transport and communication have become cheaper
What would this make cheaper and how
- This would cause goods to be cheaper to export and import due to a reduction in cost and time needed for transportation.
Partly due to development of larger cargo ships and containerisation.
- Improved internet connection allows greater communication at a lower cost than before
What’s containerisation
Where goods are shipped in standard-sized cargo containers, making cargo loading and unloading quicker
- costs of ocean shipping have come down, due to containerisation, bulk shipping and other efficiencies
How does improvements in technology have a huge effect on globalisation
Growth of internet across the world means information sent between countries is easier and cheaper.
So communication with overseas customers, suppliers and business partners has become more convenient and less expensive, leading to growth in international trade
