4.1 - Globalisation Flashcards
(17 cards)
Define globalisation
The spread of the trade of financial products, goods, information and jobs across national boarders, resulting in an increasing interconnectedness between countries.
Globalisation is the economic integration and increasing interconecctedness of different countries through increasing freedoms in the cross-border movement of people, goods/services, technology & finance.
Explain why globalisation prompts businesses to specialise
Increase Efficiency: By focusing on a specific product or service, companies can streamline their operations, reduce costs through EoS, and become more efficient.
Leverage Expertise: Specialization enables businesses to build deeper expertise and offer higher-quality or more innovative products, helping them differentiate in a crowded global market.
Give 4 indicators of growth (or development)
- Gross Domestic Product (GDP) per capita
- literacy
- health
- Human Development Index (HDI) (Life expectancy, Gross national income (GNI), years of schooling)
Define Foreign direct investment (FDI)
A substantial, lasting investment made by a company or government into a foreign concern.
PRIIGS RM
Give 8 factors contributing to increased globalisation
Similar ones grouped
* Political change (e.g. China joining WTO in 2001, increased privatisation - deregulation lowers trade barriers - companies seeking profit abroard, lower tax rates attract FDI)
* Reduction of international trade barriers/ trade liberalisation
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* Reduced cost of transport and communication (containerization)
* Structural change (e.g. increasing tertiary sector - digitally providing services like finance)
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* Increased significance of global (transnational) companies (Increasingly oligopolistic markets)
* Increased investment flows (FDI)
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* Migration (within and between economies) - fill skills gaps, bring culture, make remittances, low cost labour
* Growth of the global labour force
PRIIGS RM
* Political change (e.g. China joining WTO in 2001, increased privatisation - companies seeking profit abroard)
* Reduced cost of transport and communication (containerization)
* Increased significance of global (transnational) companies (Increasingly oligopolistic markets, P5F)
* Increased investment flows (FDI)
* Growth of the global labour force
* Structural change (e.g. increasing tertiary sector)
* Reduction of international trade barriers/ trade liberalisation
* Migration (within and between economies) - fill skills gaps, bring culture, make remittances, low cost labour
Define trading block
A group of countries that form an agreement to reduce or eliminate protectionist measures between each other
Describe the EU trading block and single market
- 28 member countries
- Free movement of goods and people - Countries within the union have no trade restrictions between themselves
- Countries within the union have common external barriers (e.g. tariffs) to countries outside of the union
Describe the USMCA trading block
United States–Mexico–Canada Agreement - an Free trade agreement agreement between North American Nations (i.e. US, Mexico & Canada) that reduced trade barriers. Formerly called NAFTA
Describe the ASEAN trading block
Association of Southeast Asian Nations (ASEAN)
* In February 2023, ten countries were part of this free trade area
- The ASEAN free trade area is less integrated than the European Union as it does not allow for the free movement of people between the countries, whereas the European Union does
- A free trade area aims to achieve free flow of goods in the region (eliminating trade barriers)
- Free trade areas lower business costs, increase market size and help businesses to generate economies of scale
- Members are Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam.
Describe structural change as a factor causing increased globalisation
- Economies gradually move from primary (agricultural) to secondary (manufacturing) to tertiary (services) sector as they grow.
- Secondary sector - countries become more industrialised, manufacturing increases and incomes rise.
- Tertiary sector - easier to offer services across boarders thanks to technology, higher profit margins leads to business growth and expansion
Give the BRIC and MINT emerging economies
Emerging ecomomies
MINT
Mexico, Indonesia, Nigeria, Turkey
BRIC
Brazil, Russia, India, China, and South Africa
What is purchasing power parity (PPP)?
An economic theory that compares the relative value of different countries currencies based on the relative value of a fixed basket of good and services.
What is meant by comparative advantage?
The ability of an economy to produce a good / service in a more efficient and economically competitive manner than its peers. Links to specialisation
Define Horizontal & Vertical FDI
Horizontal FDI occurs when a company establishes the same type of business operation in a foreign country as it operates in its home country. For example, a U.S.-based cellphone provider buying a chain of phone stores in China is an example of horizontal FDI.
Vertical FDI - acquiring a complementary business above or below in the supply chain (e.g. supplier)
Give different forms of FDI (e.g. Joint ventures)
- Joint venture
- Strategic alliance
- Global merger
- Building on greenfield land (independently)
Define an emerging ecomomy
An economy that is becoming a developed nation and charicterised by high ecomomic growth rates and expansion of trade and investment flows.
growing middle class
rising welfare standards (HDI)
decreasing unemployment
Define free trade area, common market and customs union
All have free trade between countries within the bloc
* Free trade area - different external barriers (e.g. tariffs) for each member country towards non-member countries
* Customs union - Same external trade barriers
* Common market - Same external trade barriers and free movement of people & capital
