Globalisation EQ 1

Question 1

What is globalisation

Answer 1

Is the growing economic interdependence of countries worldwide through increasing volume and variety of cross border transactions in goods and services. Flows could be:

• capital
• technology
• information
• tourists
• migrants

Question 2

What is time space compression

Answer 2

The heightened connectivity changes our conception of time, distance and potential barriers to migration of people, goods money and info.

Question 3

What is the shrinking world

Answer 3

As travel times fall due to new inventions, different places approach each other in time space and begin to feel closer together. Improvement to containerisation have contributed to a shrinking world.

Question 4

How have developments in trade and transport contribute to a shrinking world.

Answer 4

• in 1990 ships held on average 4000 containers, now days they hold 19000.
• the uniform of size for containers increase speed
• container size has increased

Question 5

How have developments in IT and communications give opportunities to businesses

Answer 5

• internet technology is used to exploit new markets
• global communication including social media has enabled the recognition of global brands
• as global communications improves trading communications happen a lot quicker
• transfer money quickly

Question 6

What are the Breton wood institutions and there aims

Answer 6

World bank
International Monetary Fund
World trade organisation

They aim to stabilise the world economy and promote free trade polices between countries which will increases exports and wealth generation but also FDI.
FDI is investment made by overseas company or organisation into a company which is based in another country.p

Question 7

What does the World bank do

Answer 7

World bank- provide loans for developments in developing areas if they can repaid and promote development.

Question 8

What does the IMF do

Answer 8

They lend money for development purposes but also to maintain financial stability. They must agree to run free market economies that are open to outside investment.

Question 9

What does the world trade organisation don

Answer 9

Advocates trade liberalisation (free trade without subsidies and tariffs) for all goods and asks countries to abandon protectionism in favour of untaxed trade.

Question 10

How has time space compression been lowered

Answer 10

Rapid developments in icy and mobile communication lowers communication costs and contributes to time space compression heighten the connectivity changing time and distance.

Question 11

What are trade blocks

Answer 11

Countries grouping together to promote free trade between them. They rompe tariffs between member states and place barriers on none member states. This protects their own economies allowing rapid growth. They hope to invest more into their work force and products. This will increases the tax base creating high skilled levels and high wage employment. Their will be an increases in FDI. However non members are hindered. Examples are the European Union and ASEAN

Question 12

Advantages of trade blocks

Answer 12

• Bigger markets bot no extra taxes
• National forms merge to form transnational firms
• Protection from foreign competitors

Question 13

Disadvantages of trade blocks

Answer 13

• Loss of independence as countries rely on each other.

- Must allow foreign firms to gain domestic market share

Question 14

What is liberalisation of markets

Answer 14

Is removing government control and opening up markets to private companies.

Question 15

China’s open door policy

Answer 15

In 1978 china opened to globalisation. It’s economy needed western technology and development and opened to FDI. China offered tax incentives and huge pools of cheap labour in special economic zones. As a result 50% of exports in 2005 came from SEZs. China now has the worlds largest economy.

Question 16

The uk

Answer 16

The uk gave tax breaks to companies investing in the London dockland area. This encouraged large overseas financial institutions to relocate to London. They also grants and subsidies to encourage foreign companies to locate new manufacturing plants.

Question 17

Three factors that have led to the spread of globalisation by TNCs

Answer 17

Motive
Means
Mobility

Question 18

What are the Motives for globalisation

Answer 18

Profit. They gain this by minimising their costs and increase their revenues by expanding their market and taking over competitors. They do this by:

• achieve economies of scale by expanding their capacity
• developing new markets
• horizontal integration, Apple required emagic and Logic Pro
• vertical integration, owning all stages of production
• diversifying product range

Question 19

What are the Means of globalisation

Answer 19

Motives can’t be reality without means. Banking and the free flow of capital around the world. These flows vary:

• year to year
• over medium term e.g. In 2008 there was a financial crisis but largely recovers by 2014
• over long term, the top 10 countries receiving and investing FDI have changed

A reverse Colonialism has happen Hong Kong, china, India and Malaysia are established high or middle income countries and are all net providers of overseas investment.

Question 20

What Mobility makes globalisation happen

Answer 20

• faster cheaper transport e.g. Larger shipping container ships
• rapid communication systems
• new production technology
• global production networks, which link sources of raw material, finance, manufacturing

Question 21

How do TNCs contribute to the spread of globalisation

Answer 21

-TNCs outsource this is where make a contract with another company to complete some work.
-offshoring is where TNCs move part of its operation to another country because labour is cheaper, or the economic situation is more beneficial.
-this creates a global production network.
An example is the jaguar Land Rover where they invested manufacturing site in India (offshoring) and partnered with a Chinese company to produce engines (outsourcing).

Question 22

Why are some areas switched off from globalisation

Answer 22

There are 4 factors:
Physical- e.g. Landlocked, located near a hazard
Environmental- e.g. Landlocked, low agricultural potential
Political- e.g. Corrupt government, dependant on other countries
Economic-e.g. Relies on a particular industry

Question 23

How is Zambia switched off from globalisation

Answer 23

Physical- a long distance from the market which discourages TNCs from offshoring or FDI

Environmental- it is landlocked making hard to import and export goods, also there is low agricultural potential cannot grow cash crops

Political- a weak committed government to develop the economy, dependant on good relations with its neighbouring countries to access ports.

Economic- is reliant on a particular industry (copper) which is loosing its value due to fibre optics. However there has been investment in railways to transport exports and imports. Debt has been cancelled so they can invest money into copper and other industries.

Question 24

How is Tanzania switched off from globalisation

Answer 24

Physical- located near a volcano this means there is a high risk of a hazard

Economic- is dependant on a particular industry cotton. Prices frequently fall due to over production and when this happens they are less able to buy imported manufacturing goods, making it hard for them to switch on.

However growing links with India and China due to Tanzam railway.

Question 25

AT Kearney index

Answer 25

Has 4 main indicators:
Political encouragement- a countries participation in international treaties and organisations as well as peace keeping.

Technological connectivity- number of internet users, hosts and servers

Personal contact- through telephone calls, travel, remittance payments

Economic integration- volumes of international trade and FDI.

Question 26

Define global shift

Answer 26

Movement of the global economic centre of gravity to Asia

Question 27

What is free market liberalisation

Answer 27

It is when rules are reduced or removed which are restricting economic activity. They do this because rules make business inefficient and reduces motivation and innovation.

Question 28

What is privatisation

Answer 28

Is when ownership is transferred from the government to the private sector. It also means outsourcing services.

Question 29

Case study of privatisation and free market liberalisation

Answer 29

In the uk when Margret thatcher won the election she starts a programme of deregulation and privatisation. This included British telecom, British gas, British rail and local bus services. In 1997 the Bank of England was taken out of the governments control.

Question 30

What is FDI

Answer 30

Is an investment made by a company or individuals into a business in another country.

Question 31

KOF index

Answer 31

Has 3 indicators that are weighted

• economic globalisation: cross border transactions
• social globalisation : cross border contacts (telephone calls, tourists) and informations flows (internet and tv)
• political globalisation: number of foreign embassies

This measures international interactions

Question 32

What are the role of TNCs in globalisation

Answer 32

They contribute to the spread of global production networks, glocalisation and the development of new markets

Question 33

What is outsourcing

Answer 33

Is where business makes a contract with another company to complete some of the work rather than doing it within the company. This reduces the cost as another company does the work at a lower cost. For example jaguar outsources its engines from china.

Question 34

What is offshoring

Answer 34

When a company moves parts if it operation to other countries where labour is cheaper, for example jaguar moved its operations to India. Globalising India giving people jobs and switching it on.

Question 35

What is glocalisation

Answer 35

Is when the good or service are adapted to increase consumer appeal in different local markets. This is necessary as tastes differ from place to place.
For example in USA Disney don’t serve alcohol in parks but they serve wine in Disney land Paris.

Question 36

How do TNCs positively impact host countries

Answer 36

• Raise standards of living: FDI increases productivity and leads to higher wages
• Technology transfer: transfer from parent companies to branch companies which accelerates economic development.
• Political stability: help reduce conflict between rural and urban populations

Question 37

How do TNCs impact negatively on host countries

Answer 37

• Tax avoidance: they pay the lowest tax regimes they can
• Growing global inequalities: TNCs cluster in select regions which concentrates FDI
• Environmental degradations: less regulation so waste is dumped in lakes and rivers
• Unemployment: outsourcing and offshoring can create unemployment in developed economies

Question 38

Reasons of global isolation in Zambia

Answer 38

Physical:
-Long distance from markets
Environmental:
-A landlocked country
-Low agriculture potential
Political:
-Weak commitment of government to develop
-dependant on good relationships with its neighbours to access ports and exports
Economic:
-dependant on a particular industry (copper) which is losing its value to fibre optics

Question 39

Reasons for global isolation in Zambia

Answer 39

Physical:
-located near a volcano this means there is a high risk of a hazard
Economic:
-Dependant on a particular industry (cotton)
-serous debt problems
-price of cotton frequently fluctuates due to over production.