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Flashcards in Chapter 1 - Globalisation Deck (6):
1

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.

2

Globalisation advantages

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

3

Globalisation disadvantages

Vulnerable to events in foreign economies, threat to domestic producers

4

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

5

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

6

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