4.1.3 Factors for increased globalisation

• Globalisation is the economic integration of different countries through increasing freedoms in the cross-border movement of people, goods/services, technology & finance.
• Trade liberalisation is the removal or reduction of barriers to trade between different countries.
• Benefits of trade liberalisation

  • Increased international trade - increased market size - leads to increase outputs & business can achieve economies of scale.
  • Free trade = reduced costs as imported raw materials & components can be sourced cheaply.
• Drawbacks of trade liberalisation

  • Domestic firms - infant industries may not be able to compete against established firms.
  • Some industries may be subject to dumping - abroad businesses may sell excess at unfairly lower prices.
• The context of an individual country determines what reason for globalisation has had the greatest impact on their economy.
• Globalisation - Political change

  Changes in the government of a country can influence the country's attitude to trade.
• Globalisation - reduced cost of transport & communication

  • Economies of scale due to innovation in containerisation on large ships has reduced business costs.
  • Technological advancements due to the internet/mobile technology have made it easier for buyers and sellers to connect.
• Globalisation - Increased significance of transnational companies

  • A transnational company is a business that operates in more than one country.
  • They will have their headquarters in one country but have other branches in other countries.
  • Increasing transnational companies operating globally = increased pressure by countries to engage in free trade.
• Globalisation - Investment/FDI

  • FDI is important for job and wealth creation within an economy
  • It allows businesses to establish themselves in countries where they may face trade barriers
• Globalisation - Migration (within and between economies) 

  • Migration is the movement of people from one location to another
  • Migration has led to increased globalisation as better transportation and deregulation have allowed workers to have more flexibility when looking for work
• Globalisation - Growth of global labour force

  • The global labour force- grown significantly - due to the growth of emerging economies such as India and China.
  • More people in work means more income to spend on goods and services boosting global demand
  • An increased supply of labour leads to falling wages which is beneficial in reducing business costs
  • More people working = increased levels of entrepreneurship.
• Globalisation - Structural change

  This occurs when a country, industry or market changes which sector of industry they operate in.

  • Offshoring is common practice and speeds up the process of globalisation