GLOBALISATION

Globalisation is the growing integration of the world economies. Most of today’s markets
are global. This means that some firms expect to sell their products all over the world.
Some key features of globalization include:

a) Goods and services are traded freely across international borders. There are no
government laws preventing firms from selling goods in overseas markets.
b) People are free to work and live in any country they choose. This results to
multicultural societies.
c) There is a high level of interdependence between countries. This means that events
in one country can affect other economies.
d) Capital can flow freely between different countries. A firm in Australia can save their
money in a bank in USA and investors can buy shares in foreign companies.
e) There is free exchange of technology and intellectual property across borders. This
means that patents granted in one country can be recognized in other countries.

Reasons for the Growth of Globalisation

i. Development in technology has helped globalization to gather pace. Modern
technology has enabled people to work from any part of the world.
ii. International transport networks have improved over years. This means that people
and merchandise can be moved easily across the world.
iii. Deregulation has massively aided globalization. Many barriers to trade have been
removed.
iv. An increase in tourist has helped globalization to thrive. People are more willing to
try goods from other countries.
v. Many firms want to sell abroad because domestic markets have been saturated.

Government and globalisation

Globalisation can only flourish if governments are committed to it. For example:

 Countries cannot trade if governments keep international borders closed.

  International trade will not thrive well if governments put trade barriers.
 People cannot be free to live and work in overseas countries unless borders are kept
open.
 Firms cannot develop their business overseas if planning permission is denied.

Government can aid globalisation by relaxing laws and regulations that govern trade.

Benefits of Globalisation to Businesses

There are specific opportunities opened up by globalisation that many businesses may be
able to exploit.

 Access to larger markets. Clearly, global markets are considerably larger than
domestic markets. This results to higher sales revenue and hence profit.
 Lower costs. If businesses are able to grow by selling more output, they may be able
to lower their costs since they benefit from economies of scale.
 Access to labour. A business will have access to a large pool of labour since people
are free to move around looking for employment.
 Reduced taxation. Business can reduce the amount of tax by locating their head
offices where taxes are low.

Disadvantages of globalisation

 Competition. As more companies around the world try and sell their goods and
services in an increasing number of countries, some other businesses will have
their survival threatened.
 International takeovers. With free movement of capital that globalisation
brings, it is possible for a business in one country to take over a business in
another country.
 Increased risk of international shocks. Events in one country are likely to
affect other economies. Eg. Immediately UK voted to quit EU, stock markets
around the world fell sharply.