Globalisation Flashcards
(11 cards)
What is Globalisation?
Globalisation is the process that enables product, financial and investment markets to operate across the globe. The interconnection of business throughout the world has grown massively in the last 60 years.
Factors resulting in Globalisation
- The deregulation of markets
- Political changes
- The removal of barriers to trade
- The lowering of transportation costs
- Improved communication systems.
Other than businesses, who else has benefitted from Globalisation?
- Consumers who have greater choice and much cheaper goods. Increased competition also improves quality.
- Developing countries which increase their wealth by producing goods for export. Most recently, China and India have been the big winners; other countries that have benefited include Brazil, South Korea and Taiwan.
- Developed (Western) economies have experienced low inflation because of the falling prices of imports (the so-called China effect).
How have businesses who trade internationally benefitted from Globalisation?
- They can reduce their costs and increase profits by producing in low-cost countries.
- They have a greater spread of risk. The impact of the decline in one market can be lessened by continued trade in other markets.
- Massive economies of scale occur. Selling to a number of countries increases the scale of production; average costs fall, making them more competitive.
- New markets bring new sales opportunities. By selling in new markets sales can increase quickly: this has been especially important when the home market is saturated.
- Opportunities of partnerships with overseas businesses. For example, within the airline industry British Airways (BA) has relationships with American, Australian and Far Eastern airlines. This improves the service that they are able to offer to customers.
- The opportunities available for employees of developing countries are now far greater. Skilled and educated workers can now complete in a global marketplace for high-paying positions.
Who are the ‘losers’ in Globalisation?
- Unskilled workers in western economies who have found their real wages falling or their jobs being ‘relocated’ to low-cost economies.
- Previously viable businesses who have been outcompeted by low-cost competition from overseas.
- Workers in developing countries who have been exploited, working excessively long hours for very low wages in unacceptable conditions.
- The environment where the excessive development of land has led to deforestation and flooding. The huge increase in the transportation of goods contributes to global warming.
What are the developing strategies in the Global market?
- External growth e.g. mergers or acquisitions
- Global branding: Businesses that have established a strong brand identity in their domestic market are sometimes able to introduce their product or service into other countries based on the recognition of their brand in other parts the world.
- Identifying target markets
- Glocalisation
What is Glocalisation?
a market-orientated approach: When a business bases its marketing mix on its perception of what the market wants.
What are multinationals?
Multinationals are businesses operating in a number of countries, whether extracting resources, manufacturing, retailing or a combination of these activities.
Advantages of having multinationals based in the UK
6
- Provide employment and create better living standards
- Investment leads to infrastructure development
- Pay taxes to the government
- Introduce new technology and working methods
- Increased customer choice
- Increased growth in the UK economy – many businesses from supplying multinationals in their locality
Disadvantages of having multinationals operating in the UK
3
- Multinational companies can severely impact local industries because they increase competition in the economy. They can cause both small and large British businesses to go out of the business, leading to increased unemployment.
- Multinationals have been accused of destroying local culture. Having recognisable ‘superbrands’ will inevitably lead to a loss of localised products and a shift in habits.
- They may have negative environmental impacts, such as pollution, noise, congestion and destruction of the environment.
What are multinational companies often accused of creating?
‘screwdriver economies’, when goods are just put together in a low-cost environment. The real value-added tasks are then done elsewhere. These impacts are likely to continue until consumers in the developed world refuse
to purchase goods produced in unacceptable conditions. The role of pressure groups in resolving worker exploitation has proved successful, but there is still much to be done.
