Globalisation Flashcards
Define Globalisaton
Globalisation is the growing interconnection of the world’s economies
Define Interdependence
where the actions of one country or large firms will have a direct effect on others
Define MNCs
Multinational Companies that operate in many different countries
Define a saturated market
A market in which there is more of a product for sale than people want to buy
Define Off-shoring
The practice of getting work done in another country to save money
What are the benefits of people living freely and working in any country?
There will be more and increasingly multicultural societies in which people from many different nations live and work in the same city
There is also a free exchange of technology and intellectual property across borders and capital is able to flow between different countries which can lead to investors buying shares in foreign companies and allowing firms to buy companies that operate in other countries
What are the reasons for globalisation
Fewer Tariffs and Quotas
Reduced Cost of Transport and Communication
Increased Significance of MNCs
Why are fewer tariffs and quotas a benefit from globalisation?
- Countries use tariffs to restrict the flow of imports so that domestic industries are protected.
- They also restrict the development of foreign business when they try to sell their goods overseas because it’s more difficult to sell exports when countries impose trade restrictions
How are tariffs and quotas avoided?
To avoid tariffs & quotas, people set up production facilities inside the countries that use trade restrictions which explains why larger companies are growing by developing operations in other countries
Why is reduced cost of transport a benefit from globalisation?
More people can travel to business meetings easily and goods can be transported more cheaply
Why is reduced cost of communication a benefit from globalisation
Developments in technology have helped globalisation to accelerate as modern computing allows firms to transfer complex data instantly to any part of the world meaning more people can work at home which can result in more people not having to be based in an office to do their jobs making it easier for firms to have operations all over the world
Why is there increased significance of MNCs from globalisation
Many firms want to sell abroad as domestic markets may have been saturated and large MNCs, which have a global reach, dominate some markets they benefit from having international markets and producing goods anywhere in the world whereby, then, costs can be minimised
What are the impacts of Globalisation and global companies on individuals?
- Countries, where MNCs are based, will benefit from globalisation as their headquarters are in developing countries where taxes may be low and labour costs may be low hence, they benefit from low production costs
- The gains generated from business development overseas in developing countries, like growth, will contribute to an increase in the wealth of that developing country as jobs are being created at a faster rate and output generated by a multinational in a developing country is recorded as output for the developing country it’s operating in hence if the output is sold out, it’s counted as an export resulting in an appreciation in the exchange rate which has a positive impact on their current balance
What are the impacts of Globalisation and global companies on governments?
- Profits made by global companies are taxed by the nation which increases tax revenue and can be spent to improve public services or lower taxes
- the arrival of global companies may have provided the encouragement and skills required to develop new businesses which can help support the government’s economic policy to reducing unemployment
What are the limitations of globalisation?
Globalisation can only advance if governments are committed to it
Countries can’t trade and people can’t be free to live and work overseas if the government keeps international borders closed
International trade will be very limited if governments use protectionism
**However, governments can aid globalisation by relaxing restrictions on trade and businesses
What are the impacts of Globalisation and global companies on producers?
They have:
Access to huge markets
Lower costs
Access to labour
Reduced tax
Why do producers have access to huge markets from globalisation?
Global markets are bigger than domestic markets as they have access to billions instead of millions providing opportunities to increase sales resulting in higher sales revenue and increased profits for businesses
Why do producers have lower costs from globalisation?
If a business is able to sell output towards larger markets, they can lower their costs as firms can exploit economies of scale
Why do producers have access to labour from globalisation?
Considering people are more free to move around the world and find employment, businesses will have access to a large amount of labour which is important because is a business grows fast, they may have shortage of labour.
Additionally, workers from overseas can help boost labour supply and rising labour supply might help prevent wages from rising and lower wages can help businesses to lower their costs
Why do producers have reduced tax from globalisation?
Global businesses can reduce tax they pay by locating their head office in a country where business taxes are low
What are the impacts of Globalisation and global companies on consumers?
If multinationals can produce goods more cheaply in foreign factories, prices are likely to be low
Globalisation results in a wider range of goods and services for consumers, especially in less developed countries (where the MNCs are based).
What are the impacts of Globalisation and global companies on workers?
- Globalisation results in new jobs, especially in developing countries when multinationals open up new factories
- Workers in less developed countries learn new skills as a result of training when employed by multinationals
- Better geographical mobility has allowed workers from less developed countries to look for jobs in developed countries
What are the limitations on workers with Globalisation
However, some workers lose out as a result of globalisation as global companies tend to locate operations where labour costs are low resulting in a trend called off shoring where some companies shift production from factories in the West to far locations. This is done as key resources like land and labour is cheaper
What are the impacts of Globalisation and global companies on environments?
Global economic growth means more environmental damage like for instance, as economic growth increases, more cars are purchased and more flights are taken hence, increasing greenhouse gases that result in global warming
Global economic growth uses up non-renewable resources faster like oil and gas which can’t be replaced meaning future generations will have fewer resources
Alternatively, certain species become extinct as their habitats are destroyed as they get used for production
How does a tariff affect the supply and demand diagram?
- Supply shifts to the left
How does a quota affect the supply and demand diagram
A vertical line going up on the left side; causes a movement up in the demand curve DONT FORGET TO LABEL IT “QUOTA”
