Globalisation EQ 1 Flashcards
How many countries does McDonalds have shops in?
Shops in 120 countries
History of Globalisation
1400s Columbus raw material from America
Colonialism 19th century Britain owned 1/4 of the world
Railways and globalisation
1904s Trans-siberian railway connects Moscow with Japan/ China
HS2 to half journey times between London and the North travelling up to 360kmph
Telephones and globalisation
1973 The mobile phone, portable connection
2007 the IPhone, connected to the internet.
70% of Africa own a mobile phone, technology leap frog, aid rural farmers in business and taxes.
Containerisation
Modern containers carry up to 20,000 containers and make up to 200 million individual movements a year,
considered the backbone of global trade and bulk economies
Jet aircraft and globalisation
1960s international Boeing 747
EasyJet fly British tourist to Estonia for £40 each.
Internet and globalisation
2000 The internet reaches 361 million users
1995 Amazon.com launched Online banking
Social networking and globalisation
5 million facebook likes daily
2003 Skype launched
GPS and globalisation
first satellite launched in 1970s
Google maps and tracker launched in 2005
Impact of ICT and communication on globalisation
Cultural traits and information is rapidly adopted, mitigated and hydrolysed.
Growth of flexible online business communication.
Impact of Trade and Technology on globalisation
Interdependent economies through global production networks Time-space compression/ shrinking world effect
Bretton Woods Institutions
Established after WW2 to re-stabilise the world economy
Agreed to allow free trade over protectionism to avoid a repeat of the 1930s Great Depression
Established successful international trade
International Monetary Fund
Channel loans from rich nations to those applying for help.
Recipients must agree to be open to free market economies, encouraging free trade and outside investment such as TNCs
Impose strict rules on borrowing countries, controlling what the loan can be spent on.
Benefits western economies
IMF case study
2008 Greece, blamed for financial crisis and restrictions on social services such as pensions
World Banks
Lends money on a global scale with the aim to help economic development and reduce poverty. Aim to help countries enter the global market.
Give grants, humanitarian and natural disaster aid
Impose strict conditions, all previous presidents have been American.
World Bank example
2014 US$470 million Philippines poverty reduction program, economic growth, opened borders to TNCs
World Trade Orgainsation
Deals with the flows of commodities and services.
Encourages trade liberalisation, all countries must be treated with the same low tariff and low subsidies on goods.
World Trade Organisation positive example
2015 removed all import duties and quotas between EU and Vietnam,
Western consumers benefited from low prices, jobs in European exports protected, access to market of 90 million.
World Trade Organisation negative example
1995 Pakistan must open fishing borders to foreign competition, TNCs leave rural villages in poverty and fishing stock declines. Action Aid ‘Taking the fish’ Reduced social development
Positives of free trade blocks
State boundaries crossed freely by goods and capital
Market growth - 2004 new nations joined the EU, +75 million customers for Tesco
Firms with a competitive advantage grow -French wine
Encourage economies of scale
Protect from foreign competition 2006 EU- China Bra wars
TNC access grows
Negative of free trade blocks
loss of sovereignity
Prices can be distorted or fixed at market value so producers lose out
Political instability
The European Union
28 member states
Single market with a shared currency reducing trade barriers
Allows the free movement of people, commodities and capital
Removed tariffs between members, restrictions on non-members
ASEAN
Association of South East Asian Nations
Free Trade area of 10 states and population of 625 million
Gradually reducing tariffs sector by sector.
Contribute more to political globalisation through co-operation and negatiation, e.g 1995 agreed to remain nuclear weapon free.
Government policy
Free market liberalisation
‘neo-liberalism’
Believe government intervention slows economic development.
Promotes free markets, removes government interventions and barriers to foreign competition.
Removal of monopolies creates competion, lowers prices for consumers and market growth
However, resulted in increased wealth inequality.
Free market liberalisation example
Promoted by Margaret Thatchers government
1986 Deregulation of the City of London
Global financial firms relloacted to London, essential to the regeneration of Canary Walf, nom dom billionaies and businesses. leading hub for global financial services.
Government policy
Privitisation
Allow foreign firms to gain influence in once state owned services, e.g gas electric
Foreign ownership create competition and increase FDI.
Hoped to reduced government and consumer cost.
Reality = worse services and lack of accountability, can’t be reversed
Privitisation example
French company Keolis has large stake in British railways network and EDF energy company.
Government policy
Encouraging business start ups
Methods include low business taxes, susidies, to changes in the law allowing local and foreign owned businesses to make more profit.
Often a method used in science parks with free wifi, reduce building cost, located near skilled graduates.
Encouraging business start ups example
1994 Sunday trading, Burger King and Disney Store opened in England
Italy eased restrictions on Chinese textile companies, City of Prato now has the largest Chinese population in Europe.
How have new global regions opened up to globalisation?
Special Economic Zones
Attitudes to FDI
What is a Special Economic Zone?
An industrial area, often near the coast, with favourable conditions (e.g low tax/ exampt from tariffs) to attract foreign TNCs.
Become areas of rapid urbanisation and industry growth
China 1978 Open Door Policy
Communist government became more open to international trade and foreign investment.
TNCs can invest in China’s domestic market e.g rail
China exports rare earth mineral world wide after abandoning resources nationalism.
China FDI
FDI Exports expected to reach US$1.25 trillion by 2025
China Pearl River Delta
Mega industrial area caused by rapid urbanisation.
Large, low-wage work force attracted TNCs to the ‘workshop of the world’
Now industrial powerhouse for elctronics, toys and garments.
China Special Economic Zones
1990s, 50% of China’s GDP was generated in SEZs.
Arabia government policy
Encouraging business start-up
Abandoned thursday and Friday as official weekend in favour of Friday and Saturday.
What is the KOF Index?
Method of measuring globalisation
Measures the extent to which countries are connected to others considering 24 weighted variables to give a score out of 100
economic: trade, FDI tarrif rates
social: number of Mcdonalds, telephone use
political: membership in international organisations
KOF index positives
wide range of variables
weighted by significance
compares countries with each others and historically
KOF index negatives
not all data available
due to weighting small countries with large amount of FDI are over represented 2015 Ireland ranked 1st
Does not consider internal interaction or informal economies
AT Kearneys World Cities Index
Identifies how globalised cities are giving a rank based on weighted variables.
Index indentifies global cities now.
Outlook identifies emerging cities
Considers business activity, human capital, cultural + information exchange and political involvement
Positives of AT Kearneys Word Cities
weighted so balances types of globalisation,
considers wide range of data
allows prediction over time
Negatives of AT Kearneys index
city data not always available
who determins weighting
cultural exchange is difficult to measure.
TNCs overview
Contribute to spread of globalisation through GPN, glocalisation and development of new markets.
Take advantage of economic liberisation
Do not locate in areas not suitable for production or with low market potential.
BMW global production network
BMW mini has over 2500 different suppliers ranging from EU to Brazil
Global Production Networks
chain of connected supplies through offhsoring and outsourcing that contribute to the manufacturing/ supply of consumer goods for a TNC
Reduced due to difficult to monitor, natural disasters can disrupt chains, UK horsemear scandal, Bangladesh garment factory collapse Walmart.
Glocalisation
Adapting global products to suit local tastes, maximise profit and maximise market potential
Caused by local variation in taste, laws, religion, culture, interest and raw materials.
Disney glocalisation
2009 gained the rights to Marvel and created ‘Spiderman India’ with Aunt Maya and Uncle Bihm
McDonalds glocalisation
stores in 120 countries
Opened vegetarian resteraunts serving McVeggies for Muslims, Hindus and Sikhs in India.
Drawbacks of TNCs
Vulnerable to disruption along GPN
Accused of exploiting workers
Outsourcing jobs leads to job losses in domestic markets
‘Americanisation’ causes erosion of local culture in favour of western ideals.
Disney globalisation
Employs 130,000 people
40,000 suppliers over 50 countries.
Macthing theme parks in Europe and America.
Why is North Korea switched off?
citizens have no access to internet or social media
political autocracy
mobile phones were temporarily banned for memebers of the public 2004 to 2008.
Why is the Sahel region swithced off?
Arid conditions, desertification and extreme environmental conditions limit potential agricultural production and infrastructure.
landlocked so limited trade
Poverty from low cash crop wages, limited consumer market for TNCs.
80% of population live on less than $2 a day
One of the heavily indebted countries from intrest rate rise in 1980s.
Physical reasons why the Congo is switched off?
2/3 the size of Europe with only a 17 mile coastline.
Limited infrastructure between major cities, lacking motorways and airports.
Political reason why the Congo is switched off?
1994 to 2003 Africa’s First World War, 5 million deaths high levels of poverty and disease.
Rebel groups such as M23 still cause conflict.
TNCs are concerned about disruption to supply chains and the safety of workers.
Bad TNCs case studies
Shell Niger Delta oil spill and bunkering causing fires and environmental damage
Wintek in China workers poisoned by chemicals used to treat glass on IPhone screen
Good TNCs case study
Shell employs over 400,000 NIgerians directly
90% of workforce NIgerian
1/4 million people have access to shell healthcare and infrastructure
Primark, Asda and Tesco signed the ethical trade initiative setting out basic rights for workers in the supply chain.
