globalisation

• Globalisation is known as the ​increasing interdependence​ between countries through flows of ​capital, trade, goods and services​ as well as ​culture and ideas​. The rate of globalisation is increasing, with LEDCs becoming more involved in global markets and forums, whilst MEDCs become increasingly interdependent on one another. There are many causes for accelerating globalisation and the apparent ‘shrinking’ of the modern world
• Steam power


  In the 1800s, Britain was leading the world in the use of steam technology. This allowed the British to move their goods and armies very quickly into key areas, such as Asia and Africa.
• Jet aircraft


  Newer and more efficient aircraft have allowed goods to be transported quickly between countries. Increasing competition between affordable airlines (e.g. EasyJet, RyanAir, Jet 2) has led to more people being able to travel abroad.
• Containerisation


  There are more than 200 million container movements every year and this is extremely important to the global economy. All sorts of goods are transported across the world, lower costs of transport is beneficial for both businesses and consumers.
• 1. The World Bank, similar to the IMF,​ loans money to developing nations​ with the aim of improving development, and so enabling globalisation. Like the IMF, The World Bank is also seen as controversial and many critics say both these organisations don’t benefit developing countries. Instead, they promote LEDCs to increase their ​debts​ and limit the ​government’s sovereignty.
• the WTO is headquartered in Geneva, Switzerland which aims to ​liberalise trade​ byremoving tariffs, subsidies and quotas​. The WTO has been criticised because it has failed to prevent the EU and USA from implementing protectionist measures like subsidies, and so it has been unsuccessful from creating ​equal opportunities​ for all countries to trade.
• 1. The IMF is an organisation based in Washington that ​loans money to poorer developing nations​. One of the key conditions for recipient nations is that the country opens up its markets and industries from government control, which in turn leads to ​privatisation​. TNCs now have the opportunity to enter those markets more easily which would generate financial activity and tax, but mainly for their host country (which tends to be an MEDC).
• Free Market Liberalisation​ - This is governance model strongly associated with the policies implemented by ​Ronald Reagan in the US and Thatcher in the UK​. It is the belief that government interventions in markets would ​hinder​ economic growth and development in the long term. As a result of market liberalisation, the banking and finance sectors were deregulated in the UK which led to London becoming one of world’s major financial centres.
• Privatisation​ - Until the 1980s, important assets in the UK, such as ​railways and utilities​, were owned and run by the government. Thatcher privatised these state-owned industries; private companies bought and ran​ these services, which has continued to the present day. Privatisation allowed the government at the time to raise a lot of ​money​. However, some critics believe that privatisation ​compromises the quality​ of services (such is the case for northern rail, despite raising prices for consumers there are increasing strikes which are negatively affecting commuters).
• Encouraging business start-ups​ - Around the world, ​incentives ​(grants, tax breaks, infrastructure constructed) are provided by governments in order to ​attract businesses​. After Sunday trading began in the UK, many foreign businesses (e.g. Disney) were attracted to establish shops here to profit from this lucrative opportunity.
• Types of FDI


  • Offshoring
  • Foreign Mergers
  • Foreign Acquisitions
  • Transfer Pricing
• Offshoring


  TNCs set up production facilities in developing countries, which have large, cheap workforces (e.g. Bangladesh)
• Foreign Mergers


  TNCs from different countries join to form one larger company
• Foreign Acquisitions


  A TNC acquires another company from abroad, often in a hostile way (may involve local job loss, lack of interest in the local environment, etc)
• Transfer Pricing


  TNCs sometimes channel their profits through subsidiaries in tax havens (e.g. Ireland)
• Benefits of Trade Blocs:

  • ▪  Businesses have a ​larger potential market​ to sell to, and so larger potential revenue to make.
  • ▪  As businesses cater for more demand by increasing their volume of production, many ​other businesses can benefit​ by providing raw materials, skilled workers or providing outsourcing opportunities. Hence increased business for one may in turn benefit many in a ​positive feedback loop​.  Trade of essential materials or services become more ​reliable​ within a trade bloc. There may be less economic risk and ​better pathways​ for essential imports (food, energy, etc).
• the interests of countries within major trade blocs are focussed upon themselves. Outside trading countries become ​excluded​ and find it very difficult to join in trading. Foreign industries and suppliers can be ​directly damaged​ as a result of competition or lack of opportunities due to trade blocs forming.

  • ▪  Trade Blocs still don’t ​guarantee​ fair treatment within, for example the relationship between Mexico and USA has not strengthened through trade bloc NAFTA.
• Disadvantages of Trade Blocs:

  • ▪  The interests of countries within major trade blocs are focussed upon themselves. Outside trading countries become ​excluded​ and find it very difficult to join in trading. Foreign industries and suppliers can be ​directly damaged​ as a result of competition or lack of opportunities due to trade blocs forming.
  • ▪  Trade Blocs still don’t ​guarantee​ fair treatment within, for example the relationship between Mexico and USA has not strengthened through trade bloc NAFTA.
• AT KEARNEY GLOBAL CITIES INDEX

  Ranking 156 cities based on level of globalisation
• Factors considered

  • Business activity
  • Political engagement
  • Cultural experience
• Top 3 cities cited are New York, London, and Paris
• KOF GLOBALISATION INDEX

  Measures 195 countries' level of globalisation
• KOF GLOBALISATION INDEX

  • Measures 42 variables covering economic, social, and political indicators of globalisation
  • Combines these to produce an overall score between 0 (low) and 100 (high levels of globalisation)
• Glocalization

  When a TNC adapts to local markets (e.g. by changing the design of a product so it complies with local laws or gets better with local culture)
• Glocalization

  • TNCs use it to make their product more appealing to new, local markets
• Glocalization

  • clothing sized differently for people from different countries
  • tobacco companies have to use plain packaging in some countries by law
  • McDonald's changing menu to comply with local religious observances
• TNCs' largest operations are in the USA and Western Europe
• This means these companies unintentionally spread Western culture to other parts of the world through their products and services
• Generally, TNCs manufacture products regardless of the market they are targeting, though some TNCs (like McDonald's) will modify products to local tastes
• Global media corporations

  • Produce visual, audio and online content that is quickly spread around the world
  • Help spread cultural/political viewpoints to a large number of people
  • Can lead to a more homogenous culture as people tend to believe what they see in the media
• China's industry was under state control from 1949 to the late 1970s
• This led to China being isolated from the global economy and experiencing famines and high levels of poverty
• In 1978, radical economic and political reforms made China more competitive in the global economy through the 'open door policy' which opened China to overseas investment
• 4 Special Economic Zones were established along the coast to encourage foreign companies to set up in China, leading companies like Apple and Dell to outsource jobs to China
• The growth of FDI in China led to improvements in working conditions, though some labour practices (like making people work more than the legal maximum hours) have been criticised by human rights campaigners
• In the 2000s, China started to manufacture home-grown products to rival other large international brands like Huawei mobile phones
• The global shift has also created a growing middle class in China who have become an important global market for the goods now produced there
• Factors that made China attractive for manufacturing


  • Large population offering abundant supply of cheap, well-educated labour
  • Lower production costs for businesses compared to Europe and USA
• Initially, working conditions in China's manufacturing factories were poor but attractive wages led to rural-to-urban migration
• In the 1980s, the goods produced in China tended to be cheap and throwaway