GG: Globalisation

Question 1

What is globalisation?

Answer 1

The process through which an increasingly free flow of ideas, people, goods, services and capital leads to the integration of economies and societies

Question 2

How is globalisation measured?

Answer 2

The KOF Index of globalisation, introduced in 2002, measures three dimensions of globalisation:
- The economic dimension: long-distance flows of goods, capital and services, as well as info and perceptions that accompany market exchanges (36% of the index)
- The social dimension: the spread of ideas, info, images and people (38% of index)
- The political dimension: the diffusion of gov policies (26% of index)
The KOF also calculates an overall index of globalisation based on:
- actual economic flows
- economic restrictions
- data on information flows
- data on personal contact
- and data on cultural proximity.

Question 3

What are the 5 dimensions of globalisation?

Answer 3

• flows of capital
• flows of info
• flows of products
• flows of labour
• flows of services

Question 4

What is flows of capital?

Answer 4

• capital is money that is invested - it’s spent on something to produce an income or increased profit from it.
• capital was mostly invested within a country, e.g. companies expanding by building new factories within their country.
• over time, the capital invested into foreign countries has increased (this is FDI)
• makes world more interconnected, e.g. countries now dependant on flows of investment to and from other countries.
• aid is a capital flow, as well as migration, remittances, etc.

Question 5

What is flows of products?

Answer 5

• manufacturing industries were in developed countries, and the products sold in country made.
• now manufacturing has decreased in developed countries, (e.g. number of employees in manufacturing fell from 5m (1985) —> approx 2.4m (2014))
• lower labour costs overseas caused companies to relocate production side of business abroad and then import the products to countries where sold.
• international trade in manufactured goods is increasing, so the world is more interconnected.

Question 6

What is flows of info?

Answer 6

• info can be spread across the world very quickly and easily (e.g. news articles)
• the development and rapid spread of email, the internet and social media means large amounts of info can be exchanged instantly across the globe.

Question 7

What are flows of services?

Answer 7

• improvements in ICT meant services becoming global industries recently. E.g. banking and insurance depend on communications and transfer of info.
• services can locate anywhere and still serve the needs of customers anywhere else in the world.
• high level services (e.g financial) are concentrated in cities in developed countries (e.g. London/New York). Companies increasingly relocating low level services to LICs where labour is cheaper.

Question 8

What are flows of labour?

Answer 8

• movements of people in workforce from one country to another
• more people moving overseas - international migration increased over 40% between 2000-2015. Some people move because they have to and others choose to move.
• some migrants are highly skilled workers, moving to developed countries so wages and working conditions are better. unskilled move to developed countries due to unemployment and poor working conditions in their own country.

Question 9

What is global marketing?

Answer 9

• marketing is the process of promoting and selling products or services.
• now, products and services are sold all over the world, meaning marketing has to become global
• treats world as one single market and uses one marketing strategy to advertise around the world
• economies of scale - cheaper with one marketing campaign than different for each country.
• gives brand awareness - consumers around the world identify the logo/name.
• however, needs to adapt to regional markets, as have different laws/cultural attitudes e.g. consuming alcohol.

Question 10

What are the patterns of production, distribution and consumption?

Answer 10

Globalisation created a fairly simple division of labour between
1.Highly skilled, highly paid, decision-makers largely concentrated in developed countries; and
2.Unskilled poorly paid assembly occupations located in developing countries.
However, there have been radical changes in the last few decades with many traditional LICs undergoing rapid economic development and classified now as NEEs or MICs.

Question 11

What are the factors affecting globalisation?

Answer 11

• technology
• systems and relationships
• financial systems
• communications
• transport
• security
• management and info systems
• trade agreements

Question 12

How does transporting goods affect globalisation?

Answer 12

• innovations in transport have made it easier to transport good faster in larger quantities.
• larger and faster aircraft’s and integrated air traffic networks
• high speed rails, bigger boats and computerised logistics systems
• cargo aircraft’s - built for transporting goods
• containerisation - move items in huge containers onto ships and planes for more efficiency

Question 13

How has transporting people affect globalisation?

Answer 13

• high speed rail and growth in low cost airlines and quantity/size of planes
• air travel technology has improved: flight times are quicker and more destinations available. (E.g. in March 2018, the first non-stop flight between Australia and Uk took place, taking just over 17 hours.)

Question 14

How are financial institutions affecting globalisation?

Answer 14

• IMF (International Monetary Fund) oversees the financial and technical support. Provides loans to prevent economic crisis and help members stabilise their economies. Acquires its finances via subscriptions from it 189 member countries
• the World Bank - promotes economic development in developing countries. Provides long term investment for development projects and free loans to impoverish countries. Encourages start up private enterprises and acquires resources by borrowing on the international bond market
• multinational corporations invest their profits for more interest, meaning billions of dollars are put into the system
• people buy and sell stocks and shares form global corporations

Question 15

How has financial technologies affected globalisation?

Answer 15

• made financial info and money easily accessible for people across the world.
• informed decisions about investments, buying and selling and and other info is available due to global communications (e.g. stock market trends)
• ability to connect with international banks have allowed people to have offshore bank accounts to increase their wealth.
• buy and sell things globally
• remittances can be sent home with speed and ease
• cryptocurrency - a whole new market for online currency and trading

Question 16

Why does security and systems affect globalisation?

Answer 16

• Stricter regulations upon entering a country and transporting goods
• international customs, which control the flow of people and goods (e.g. X-ray tech at airports allowing suspicious objects to be traced)
• cybersecurity is a global concern and attacks can originate from anywhere in the world. Technologies have been developed to ensure cyber attacks can be traced - security threats monitored and stopped
• global systems put into place to limit disagreements and war, protecting civilians and ensuring security within countries. The UN Security Council is an international organisation that aims to diffuse disagreements with the intention of maintaining international peace.

Question 17

How does relationships affect globalisation?

Answer 17

Before WWII, most relationships between countries involved one country losing and another gaining.
- now relationships are based on trade and common rules - these allow everyone involved to gain.

Question 18

How has communications affected globalisation?

Answer 18

The ability to communicate globally has allowed flows of info, services and capital to accelerate
- e.g. satellites and fibre-optic communication enabled the growth of internet and Mobil phone systems
- services accessed through the internet, allowing millions of jobs to be created
- the global availability of phones and apps (such as GPS) and social groups added a new dimension to migration allowing people to move without restraints and relationships can be maintained from great distances.

Question 19

How does management and info systems affect globalisation?

Answer 19

The way companies are managed have changed due to the global relationships and systems in place.
1. Economies of scale - increasing profits by producing a larger amount of products as overall average to manufacture each is lowered. upscaling - e.g. raw material brought in bulk, products made quickly on production lines, large amount of products can be shipped. These all require good management.
2. Global supply chains - organised management of product flows, from when they are manufactured to when they are delivered to consumers. Specialisation minimises costs so companies have different stages of production in different counties.
3. Outsourcing - hiring other companies to complete company tasks that are essential, but don’t need to be completed by the company itself (e.g. call centres, advertising, etc), normally do this in low income countries
4. Offshoring - relocating a company process abroad. This management strategy saves a lot of money when relocating to lower income countries. Some relocate due to relocate due to lower taxes and availability of materials

Question 20

How do trade agreements affect globalisation?

Answer 20

Global trade systems governs the flow of products between countries.
- trade agreements has made globalisation deepen and accelerate as they make international trading less expensive and easier.
- there are lots of controls and restrictions on trade, making trade more expensive (e.g. tariffs, quotas and bans)
- to lower these costs countries can enter trade agreements, which work to benefit all parties involved. Certain restrictions can be removed within the agreement
- all agreements are overlooked by the WTO to ensure they are fair.
- an example of a trade agreement is the North American Free Trade Agreement (NAFTA) - which has lowered and removed tariffs and exports between Canada, USA and Mexico.