Factors effecting Globalisation Flashcards
Globalisation is a result of new systems, technology and relationships
The development of new systems, technology and relationships in a range of sectors including finance, transport and management have been the driving force behind globalisation.
> Systems include ways of working, procedures and methods of organisation that allow a particular function to be carried out. Since the 1940s, many new systems have been introduced to make it easier for flows of information, capital, products, services and labour to cross national boundaries.
> The technology used for information, communications and transport has advanced rapidly. For example, the internet allows people from all over the world to access information, and aeroplanes allow people and goods to be transported around the world swiftly and efficiently.
> Before the second world war, most relationships between countries involved one country losing and another gaining. Nowadays, relationships are based on trade and common rules- in theory, this allows everyone involved to gain.
How do financial systems promote globalisation?
1) Financial systems are based on companies called investment banks. The main role of investment banks is to help companies raise capital by selling shares on behalf of those companies.
People or groups who buy shares are called investors, and they receive a fraction of the profits that the company makes.
In the 1980s several things happened to make the financial system more global:
- Information technology, such as the internet, allowed investors greater access to information. Investors and investment banks could easily find out whether a company was doing well or struggling.
- Investment banks created new financial products that and foreign investment less risky.
- Governments around the world undertook a process called financial deregulation, where they relaxed rules about what banks were allowed to do.
- Financial deregulation involved removing barriers to capital coming in and out of the country, making it easier for investment banks to buy and sell shares and other products across the world.
Do trade agreements remove barriers to trade?
The global trade system governs the flow of products between countries.
1) Trade is regulated by countries’ governments, who control which products they let into the country and at what price. Controls include tariffs ( taxes on products coming into the country), non-tariff barriers and the banning of certain products e.g. illegal drugs.
2) Controls make it more expensive for companies to sell their products abroad, as well as for consumers to buy them.
3) To make it cheaper, countries can enter into a trade agreement. Trade agreements act like contracts- one country agrees to remove controls in exchange for the other country doing so. Trade agreements between two countries are called bilateral trade agreements.
4) Multitrade agreements are trade agreements between several countries- all of the countries involved agree to remove tariffs and other controls.
5) The global trade system is governed by the world trade organisation (WTO). The WTO set rules on how countries can trade with each other e.g. to stop countries from imposing unfair tariffs on each other’s companies.
How have transport and communication systems improved global business?
> Improved transport systems have allowed people and products to get to places around the world more easily than ever before.
> Shipping containers were introduced in the 1950s- this allowed more goods to be loaded onto ships at once and transferred straight onto other forms of transport.
This made it easier for goods to be transported cheaper and quicker.
> Communication satellites were first launched into the earth’s orbit in the 1960s. They allow relatively cheap wireless communications between two devices, regardless of what they are. This means even people in rural and remote areas can access the internet and communicate with others.
> Optic fibre cables use signals of light to transmit more information than any other cable. They allow fast communication between two devices, allowing almost instant communication between two people or companies.
How have management and information systems increased companies’ efficiency?
New ways of working have made companies more efficient- they can make the same products more cheaply.
1) Companies’ supply chains have become global- a company’s supplier may be in a different country to their factory, which is in a different country to their research and development department. This allows companies to minimise costs.
2) Large companies can benefit from economies of scale. Large companies can reduce the average cost of making each item by purchasing specialised equipment and using production lines. They may also be able to buy raw materials at a lower price as they are able to buy in bulk. This gives large companies an advantage over small companies.
3) Outsourcing is when a company pays another company to do work that in the past may have been done in-house, usually to save costs. Cheap labour costs mean many companies choose to outsource abroad.
4) Companies working practices have also changed. e.g. casual and temporary contracts allow companies to take on workers as and when they are required- they don’t have to pay them a fixed yearly wage, so they save money.
How do countries work together to prevent security threats?
1) Globalisation creates new trading relationships between countries. By forming trade agreements, countries become interdependent- if two countries need each other to buy and sell products, it would not be in their interests to be at war with one another. This means trade makes war less likely.
2) By working together, countries are able to improve security. e.g NATO was founded by several countries in 1949, with the aim of providing security during the Cold War - by grouping together, they were able to deter common threats.
3) However, globalization can also make conflict more likely. e.g. developed countries have intervened in conflicts in developing countries to secure resources from oil.
