globalisation Flashcards
globalisation
growing interdependence with countries and connectivity through trade, culture, technology, capital, resources and goods
Flows of information
The rapid speed of internet and social media means large amount of information can be exchanged
Flows of capital
. Money that is invested to increase profit or income
. The amount of capital invested in foreign countries ( the foreign direct investment)- FDI
Flows of products
Flows of physical goods
Flows of services
Services are economic activities that are not based on producing material goods eg banking
Flows of labour
Movements of people who are in the workforce from one country to another
Marketing is becoming more global
. Promotes selling products or services
. Treats the world as one single marker
. Create a global brand awareness
Factors effecting globalisation (6)
. New technologies, systems and relationships
. Financial systems
. Trade agreements
. Transport and communication systems
. Management and information systems
. Security
New systems, technology and relationships
. Systems include methods of organisation that allow a particular function to be carried out e.g. in 1940 many new systems have been introduced to make it easier for flows to cross national boundaries
. Technology used for information, communications and transport has advanced rapidly
. Relationships between countries based on trade and common rules
Financial systems
. Based on companies called investment banks. They help companies raise capital by selling shares ( these people who buy shares are called investors and they receive a fraction of the profits the company makes)
. Investors ,banks and other companies all over the world are part of a global financial system
In 1980s several things happened to make financial systems more global… (3)
. Investment banks create new financial products that made FDI less risky
. Governments around the world undertook a process called financial deregulation where they relax rules about the banks e.g. allowing banks to charge people more for their services
. Financial deregulation also involves removing barriers for capital coming in and out of the country making it easier for investment banks to buy and sell shares
Trade agreements remove barriers of trade (4)
.Trade is regulated by governments who control products going in and out of the country.
- Controls include tariffs ( taxes on products coming into the country), Non tardif barriers ( rules on quality of products coming into the country) and the banning of certain products e.g. illegal drugs
. To make it cheaper, countries can enter trade agreements- one country agrees to remove controls in exchange for the other country to do so ( benefits both countries)- trade agreements between two countries are called bilateral trade agreements
. Multilateral trade agreements are trade agreements between several countries- all of the countries agree to remove tariffs and other controls
. The global trade system is governed by the World Trade organisation ( WTO), established in 1995
- WTO is a set of rules of how countries should trade with each other ( acts as a forum for countries to negotiate trade deals with each other and settle trade disputes)
Transport and communication systems have improved global business
. Improved transportation systems have allowed people and products to get to places much faster
. Uniform metal containers ( shipping containers) where introduced in the 1950s- this allowed more goods to be loaded into ships and moved quickly and cheaply around the world
. Communication satellites were launched in the 1960s- this allows cheap wireless communication between two devices and companies based in rural or remote areas can access the internet and communicate with others
Management and information system have increased companies’ efficiency
. Companies’ supply chains have become global- a company’s supplier may be in a different country to their factory- this allows companies to minimise cost
. Large companies can benefit from economic of scale- they can reduce the average cost of making each item by purchasing specialised equipment and using production lines. They can also buy raw materials at lower price as they are able to buy it in bulk which gives large companies an advantage over smaller companies
. Outsourcing- when company pays another company to do work that in the past may have been done in the house, usually to save cost
Countries work together to prevent security threats
. By forming trade agreements, countries become interdependent- this means trade makes war less likely
. By working together, countries are able to improve security e.g. North Atlantic Treaty Organisation ( NATO) was found by several countries in 1949 with the aim in providing security during the Cold War - they can deter common threats
. HOWEVER, globalisation can also make conflict More likely e.g. developed countries are Intervened in conflicts in developing countries to secure resources like oil
