Globalisation Flashcards
What is globalisation?
Is a process in which liberalization (the reduction/ removal of barriers) stimulates cross-border exchanges in goods, services, capital and people
Removal of barriers leads to interdependency and integration between countries & regions
What is a political union as a type of integration?
Integration of political and economic affairs
What is an economic union as a type of integration?
Common economic policies
What is a common market as a type of integration?
Free movement of goods, capital and people
What is a customs unions as a type of integration?
Common external tariff
What is a free trade area as a type of integration?
Removal of intragroup tariffs
What are the contributors to interdependency?
Cross-border movements of resources:
Goods and services
Capital
Labour
Movement of resources entails transfer of knowledge/know-how/ ideas
What are the globalisation indicators?
Foreign Direct Investment
Controlling or owning assets in a foreign country
Trade
Import and exports
Foreign Monetary/ Financial/ Indirect investment
Movement of cash and stocks
Migration
Movement of people across borders
Why is globalisation not global yet?
Most foreign trade and investment takes place within and between four economic blocs:
- Western Europe, dominated by EU member states
- North Atlantic Free Trade Area (NAFTA) comprising the USA, Canada and Mexico
- Japan
- China
Which countries are highly dependent on international trade?
Exports and imports equate to 95% of Germany’s GDP
54% for China, 63% for UK, 30% for USA
How does the UK depend on Germany and the USA in terms of international trade?
UK depends on Germany and USA for ¼ of export goods - recession could mean a significant fall in turnover and profits
What is Foreign Indirect Investment?
FII occurs when money is used to purchase financial assets in another country - comprise of foreign stocks, bonds issued by governments or companies, or even currency
What is an example of increasing FII demonstrating the interdependence of countries?
FII has increased 20% p/a since 1990 showing the increased integration of financial markets
What are migrant remittances?
Migrants sending money to their home countries
$530 billion in 2012
Tajikistan, Liberia and the Kyrgyz Republic are countries whos remittances from abroad equate to more than 25% of GDP
What is FDI?
Occurs when a firm establishes, acquires or increases production facilities in a foreign country.
How are the inflows and outflows of FDI distributed around the world?
USA heads the league of FDI recipients, followed by China and Russia.
Poorer countries receive more than half of FDI inflows with much of the investment going to Asia and Latin America
What statistic demonstrates that MNCs are responsible for a huge portion of FDI investment?
Biggest countries operate internationally: oil companies like BP, Shell, ExxonMobil and Total all generate more than 50% of turnover from foreign sales
What is greenfield investment?
The establishment of completely new production facilities such as Ford setting up its new car factory near St Petersburg in Russia
What is brownfield investment?
Purchase of already existing production facilities - the acquisition of Asda by Walmart for example
Which sector is responsible for the most brownfield investment?
Service sector is the dominant player in cross border mergers with finance firms like banks, hedge funds and commodity firms playing a significant role
What are the benefits of cross border mergers?
- Already established in the market and have experience of the local political, legal and cultural environment
- Efficient due to EOScale /scope
- Reduces number of competitors
- Spreads risk over several markets
- Quicker method of expansion than internal growth
What are the drawbacks of cross border mergers?
- Language/cultural differences
- Differences in demand due to tastes and preferences
- Risk due to lack of knowledge and experience in the foreign country
Do migrants migrate more to developing countries or developed countries?
The UN reports that migrant flows between developing countries are as common as those from poor to rich countries.
How are migrants distributed around the world?
- Europe has the most migrants = 76 million
- Asia has 75 million
- North America has 54 million
Why do people migrate?
- To find work
- To earn higher wages
- To study
- To reunite with family
- Stimulation from employers actively recruiting employees from abroad
- Political instability
- Violation of human rights
- Conflict
- Natural disaster
What are the facilitators of globalisation?
- Political/regulatory factors: EU, NAFTA, WTO
- Technological factors: transport, communications, production techniques
- Infrastructural development: soft and hard infrastructure, enabling business environments
What economic market factors facilitate globalisation?
- Growth opportunities
- Global customers
- Convergence of customer needs
- Globalisation of competitors
- Outgrown home market
What economic cost and supply related factors facilitate globalisation?
- Economies of scale
- Differing country costs
- Access to natural resources
What are the benefits to business of globalisation?
- Access to markets
- Access to cheaper supplies - lower costs
- EOS
- Access to quality inputs
- Access to natural resources
- Faster growth
- Increased revenue
What are the costs/challenges of globalisation to business?
- Increased competition
- Falling revenues
- Riskier environment - volatility
- Complexity
- Dependency and contagion
What are the criticisms of globalisation?
- Worsens poverty in developing countries
- Threatens jobs in developed countries
- Is a threat to the natural environment
- Is a threat to national sovereignty
What are the legal and regulatory barriers to globalisation?
- Tariffs and subsidies
- Tied foreign aid
- Controls on capital
- Public procurement
- Border controls
- Technical standards
- Intellectual property rights
What are the cultural difference in terms of barriers to globalisation?
- Language
- Tastes and preferences
- Norms, values and behaviours: religion, work culture, corruption
How is there a rise in protectionism?
The number of international investment agreements is declining
How is there still an appetite for megaregional agreements?
- African Continental Free Trade Area (CFTA) = 55 countries
- African, Caribbean and Pacific (ACP) - group of states, 79 countries
