4.1 Globalisation

• Reason for faster growth in emerging economies

  • Growth of the manufacturing sector
  • Lower labour costs
  • Access to raw materials
• Globalisation


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


  • BRICS (Brazil, Russia, India, China and South Africa)
  • MINT (Mexico, Indonesia, Nigeria and Turkey)
• Emerging economies have a growing middle class


  With increasing incomes which allows their citizens to spend more on domestic goods and imported goods from abroad
• Emerging economies having a growing middle class


  Increases the profitability of international firms who sell their goods and services in these emerging economies
• Economic growth


  Helps to generate income in a country
• Impacts of economic growth on businesses


  • Potential for increased profits
  • Reduced costs of production
  • Increased trade opportunities
  • Increase in investment
• Impacts of economic growth on individuals


  • Reduced unemployment
  • Increased average incomes
  • Access to quality public services
• Key indicators used to assess the economic growth of emerging economies


  • GDP Per Capita
  • Health
  • Literacy
  • Human Development Index
• GDP per capita


  Calculated by taking the total output (GDP) of a country and dividing it by the number of people in that country
• High GDP per capita


  Associated with a high standard of living
• Literacy


  The percentage of adults within an economy who can read and write
• Human Development Index (HDI)


  Combines the factors of life expectancy, education and income to determine the quality of development of citizens within a country
• The problem with using HDI as a measure of development is that it does not account for inequalities within a country and there is a lack of reliable data in some countries
• Imports


  Goods and services bought by people and businesses in one country from another country
• Exports

  Goods and services sold by domestic businesses to people or businesses in other countries
• Exports generate

  Extra revenue for businesses selling their goods abroad
• Imports result in

  Money leaving the country which generates extra revenue for foreign businesses
• Specialisation

  When a country/business decides to focus on producing a particular good/service
• Benefits of specialisation

  • Lower unit costs due to Economies of scale
  • Allows businesses to lower prices for consumers leading to more sales
  • Allows businesses to increase their profit margins if they do not lower selling prices
  • Any excess output can be sold abroad as exports
• Competitive advantage

  When businesses specialise, it can help them to increase the value added on their goods/services, which can help to gain an edge over their competitors
• Competitive advantage

  • Having access to local markets, resources and materials that competitors do not have access to
• Foreign Direct Investment (FDI)

  Investment by foreign firms which results in more than 10% share of ownership of domestic firms
• Benefits of FDI for countries

  • Increased economic growth
  • Increased job opportunities
  • Access to knowledge and expertise from foreign investors
• Inward FDI

  When a foreign business invests in the local economy
• Outward FDI

  When a domestic business expands its operations to a foreign country