Globalisation Flashcards
What is globalisation
Process that enables products, financial and investment markets to operate across the globe
Why has the interconnection of business throughout the world grown massively over the last 60 years
1 deregulation of markets
2 political changes- opening up of Chinese economy
3 removal of barriers to trade- international agreements lowering tariff on exports
4 lowering of transportation costs
5 improved communication systems
6 falling transportation costs
Summarise trade over the last 20 years
1 up to late 1990s trade flows rose gradually, there was a strong rise in early 2000s and a sharp fall after the economic crisis of 2008. Recent years have seen moderate recovery
2 trade experienced strong growth in 1995-2001 followed by a boom 2002-2008 accompanied by rising commodity prices. Following the 2008 financial crisis trade fell steeply in 2009 before coming back strong in 2010 and 2011. Since then trade growth has been weak
3 various crises had an impact on trade from 1995-2001 including Mexicos monetary crisis Asian financial crisis and the bursting of the dot com bubble in 2001
4 chinas accession to WTO in December 2001 allowed its economic rise and significant contribution to the world trade from 2002-2008 and in the early 2000s the introduction of euro coins and in 2002 notes
5 strong Chinese demand for natural resources contributing to the rise in crude oil between 2002 and 2008
6 the 2008 financial crisis triggered by the sub prime lending crisis in the US led to a global recession between 2008-2011 volume of world exports fell 2% in 2009 whilst world GDP dropped by 2%
Who gains by globalisation
1 consumers have greater choice and much cheaper. Increased competition also improves quality
2 developing countries which increases their wealth by producing goods for export
3 developed western economies have experienced low inflation because of falling price of imports
4 businesses who trade internationally benefit by
A can reduce their costs and increase profits by producing in low cost countries
Breather spread of risk - the impact of a decline in a marker can be lessened by continued trade in other markets
C massive economies of scale can occur
D new markets bring new sales opportunities
E opportunities of partnerships with overseas businesses
F opportunities for employees of developing countries are now greater> skilled and educated can compete in global markets for higher paid positions
Who are the losers from globalisation
1 unskilled workers in western countries - their real wage has fallen or their jobs relocated to low cost economies
2 previously viable businesses who have been out competed by low cost competitor from overseas
3 workers in developing countries who have been exploited working linger hours for low wage and unacceptable conditions
4 the environment excess development of land has led to deforestation and flooding and huge increase of transporting goods contributes to global warming
What is the most common strategy for external growth
Merging with or acquiring a business in another county
How does external growth by purchasing an entire target business give immediate access to the market in that country
The business can be rebranded with the parent company’s name
If horizontal integration occurs (parent company introduces its working practices. To company being taken over) what is required
1 huge direct investment
How is a new product launched in a new market
Often only launched to a target market rather than mass - in depth market research needed can be expensive and doesn’t guarantee success
Give an example of where a product has been used in different ways in different markets
Marmite in the UK is spread on bread in India it flavours cooking
What is globalisation
A global localisation approach - still reach out to customers all over the globe but takes into account local tastes customs and traditions
What are multi nationals
Businesses that operate in a number of countries
What are the advantages of having multinationals based in the UK
1 provide employment and create better living standards
2 investment leads to infrastructure development
3 pay taxes to government
4 introduce4 new technology and working method
5 increased customer choice
6 increased growth in the uk economy - many businesses from supplying multi nations in their locality
Potential disadvantages of multinational companies operating in the UK
1 multinational companies can severely impact local industries because they increase competition in the economy. They can cause both small and large British businesses to go out of business leading to increased unemployment
2 multinationals have been accused of destroying local culture having recognisable super brands will inevitably lead to loss f localised products and a shift in habits
3 they may have negative environmental impacts such as pollution noise congestion and destruction of the environment
Multinationals are accused of creating screw diver economies what are they
When goods are put together in a low cost environment and real value added tasks are done somewhere else
