4.1.3 Factors Contributing to Increased Globalisation

• Globalisation


  The economic integration of different countries through increasing freedoms in the cross-border movement of people, goods/services, technology & finance
• Trade liberalisation


  The removal or reduction of barriers to trade between different countries
• Benefits of trade liberalisation


  • Increased international trade allows businesses to increase their market size
  • Freer trade helps businesses to reduce costs as imported raw materials and components can be sourced more cheaply
• Drawbacks of trade liberalisation


  • Domestic firms, in particular Infant industries, may not be able to compete against international firms
  • Some industries may be subject to dumping as businesses abroad may sell excess products at unfairly low prices
• Factors contributing to increased globalisation


  • Political change
  • Reduced cost of transport and communication
  • Technological advancements
  • Increased significance of transnational companies
  • Increased investment flows (FDI)
  • Migration (within and between economies)
  • Growth of the global labour force
  • Structural change
  • Offshoring
• Political change


  Changes in the government of a country can influence the country's attitude to trade
• Reduced cost of transport and communication


  Economies of scale due to innovation in containerisation on large ships has reduced business costs
• Technological advancements


  The internet/mobile technology have improved and made it easier for buyers and sellers to connect with one another
• Transnational company


  A business that operates in more than one country, with headquarters in one country and other branches in other countries
• FDI (Foreign Direct Investment)


  Important for job and wealth creation within an economy, allows businesses to establish themselves in countries where they may face trade barriers
• Migration


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


  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 generates increased levels of entrepreneurship
• Structural change


  When a country, industry or market changes which sector of industry they operate in, e.g. the UK has shifted from the manufacturing sector to the tertiary sector over the last 50 years
• Offshoring


  The common practice of moving business processes to lower-cost locations, which speeds up the process of globalisation