Factors of Globalisation

• Things that are becoming more connected due to globalisation

  • Countries
  • Services
  • Consumers
  • Flows of capital
  • Flows of products
  • Flows of labour
  • Marketing
• Globalisation has accelerated in the recent past
• Factors that promote globalisation

  • Rapid spread of information and news
  • Development and rapid spread of the internet and social media
  • Increasing flows of capital
  • Increasing flows of products
  • Increasing flows of services
  • Increasing flows of labour
• Capital


  Money that is invested to produce an income or increased profit
• Historically, capital was mainly invested within a country


  Over time, the amount of capital invested in foreign countries has increased (foreign direct investment)
• Changes in flows of products

  • Manufacturing industries were historically located in more developed countries and products were sold locally
  • Manufacturing has decreased in more developed countries
  • Lower labour costs overseas have caused many companies to relocate production abroad
  • International trade in manufactured goods is increasing
• Services


  Economic activities that aren't based around producing any material goods, e.g. banking
• Improvements in ICT


  Have allowed services to become global industries in recent decades
• Deregulation and opening up of national financial markets

  Made it easier for banks and other financial institutions to do business in other countries
• Types of services


  • Low-level services (e.g. customer services)
  • High-level services (e.g. financial services)
• Flows of labour


  Movements of people who participate in the workforce from one country to another
• Marketing

  The process of promoting and selling products or services
• Marketing is becoming more global

  Products and services are sold all over the world, rather than just in the country where they are produced
• Global marketing

  Involves treating the world as one single market and using a single marketing strategy to advertise a product to customers all over the world
• Global marketing


  Allows economies of scale - it is cheaper to have one marketing campaign than having a different campaign for every country
• Financial systems


  Systems that govern the flows of capital between countries
• Changes to financial systems that promoted globalisation

  • Increased access to information for investors
  • Development of new financial products that made foreign investment less risky
  • Financial deregulation that relaxed rules on what banks could do
• Financial deregulation


  Included allowing banks to charge people more for their services and letting banks invest in a greater range of businesses
• Financial deregulation


  Also involved removing barriers to capital coming in and out of a country, making it easier for investment to cross borders
• The global financial system

  Means that the decisions of banks or investors in one part of the world can affect a company on the other side of the world
• Trade agreements


  Contracts where countries agree to remove trade controls in exchange for other countries doing the same, benefiting companies and consumers in both countries
• Types of trade agreements


  • Bilateral trade agreements (between two countries)
  • Multilateral trade agreements (between several countries)
• World Trade Organisation (WTO)


  An organisation that governs the global trade system, setting rules on how countries can trade with each other
• Globalisation


  Can create new trading relationships between countries that make war less likely, but can also make conflict more likely
• Countries work together through organisations like NATO to improve security and prevent threats