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Define Globalisation

Globalisation is the creation of linkages between nations. It is a process in which barriers separating different regions of the world are reduced or removed stimulating the exchange of goods and services.


Globalisation advantages

Promotes mutual reliance, able to enter new markets, opens up greater choice, lower prices for goods and services and labour/investment


Globalisation disadvantages

Vulnerable to events in foreign economies, threat to domestic producers


Indicators of globalization:
- Financial flows
- Migration

- International trade of goods and services through imports/exports
- Financial flows
o Foreign indirect investment: Transfer of money capital across borders where firm uses money to purchase financial assets in another country
o Foreign direct investment: Firm establishes, acquires or increases production facilities in a foreign control – full ownership and control over asset.
- Migration
o Liberalization of labour flows between developed and developing countries
o Voluntarily: To find work, earn higher wages, reunite with family
o Involuntary: Forced to migrate due to political instability and violation of human rights


Drivers of globalization:

- Political/ legal: Governments increase economic and political linkages but signing treaties
o Free trade agreements: Member states remove tariffs for other members
o Customs union: Free trade but members agree to levy a tariff from non-members
o Common market: Customs union with addition member states allow free movement of goods/services, capital and labour
- Technological: Improvements in communication and reduction in transport has facilitated movement of goods and services
o Can connect/interact over long distances
o Easier for MNCs to control foreign operations
o Firms may globalize if they have outgrown domestic market or reduce costs by achieving economies of scale


Barriers to Globalisation:

- Government regulation – policies can hinder flow of goods/services and movement of capital and people across borders
- Tariffs/subsides – high on import of goods
- Controls on capital – foreign direct/indirect investment