CHAPTER 35-GLOBALISATION

Globalisation: Globalisation is this process of rapid integration or interconnection between

countries. More and more goods and services, investments and technology are moving between
countries. People usually move from one country to another in search of better income, better jobs
or better education.
-Many markets today are global.This means that some firms expect to sell their products anywhere
in the World.Today, the same firm could have a head Office in London,borrow money from a bank in
Japan, buy raw materials from Canada and sell goods to countries all over the World.
KEY FEATURES OF GLOBALISATION:

• 1)Free trade across countires; Products are traded freely between nations.
Example: Nike can sell its products as easily in Qatar as in the USA.
• 2)Free movement of people: people are free to live and work in any country they
choose.
• 3) High level of interdependence: Events in one economy are likely to affect
other economies. For example; COVID-19 pandemic in 2020.
• 4) Capital can flow between countries; for example :This means that a firm or a
consumer in Australia can put their savings in a bank in the USA.
• 5) Free Exchange of technology; Countries share their technological
developments between each other.
REASONS FOR GLOBALISATION
• 1)FEWER TARIFFS AND QUOTAS; Tariff is a tax on imports to make
them more expensive and quota is a physical limit on the quantity of
imports allowed into a country.In recent years, a lot of trade barriers
(tariffs and quotas) have been dropped.An increasing number of
economies are more open and many countries have stopped
protecting domestic businesses.
• 2)REDUCED COST OF TRANSPORT:
• 3) REDUCED COST OF COMMUNICATION:
• 4) INCREASED SIGNIFICANCE OF MULTINATIONALS:
IMPACT OF GLOBALISATION AND GLOBAL
COMPANIES
• INDIVIDUAL COUNTRIES:
• The impact of globalisation on individual countries is likely to vary.It depends on whether a
country is the base for a global company or whether a global company selects a country as a site
for a new factory. Host country(site)is a nation that allows a multinational company to set up
operations in its country.
• For example: United State is a base country of NIKE.. There are about 600 factories located in 46
different countries that exclusively manufacture Nike shoes. About 36% are located in China and
Vietnam each. Another 22% are located in Indonesia.(Site countries)
• - Job creation. Multinational companies create employment opportunities.
• -Increase the country’s Gross Domestic Product (GDP). Therefore, the overall standard of living
will be improved.
• -Increase in choices of products. Domestic customers will have access to a greater variety of
goods and services as there is more competition.
• One negative impact is high level of interdependence so one country can have an impact on
many other countries.
• GOVERNMENTS: Multinational companies are source for an extra tax revenue to the
governments.Governments take business taxes from each company.This money can be spent to
improve government services such as transportation or healthcare.
• PRODUCERS:
• a) Access to huge markets:International markets are bigger than the domestic market such as Nike can sell
all their product to all over the World but witout globalisation they are going to just sell their product within
the USA.They have got a more chance to increase their sales revenue and and profits.

• b)Lower costs: Global companies prefer to locate their factories where there is a cheap inputs or raw
materials such as lots of electronical companies locate their factories in China due to cheap labor.

• c)Reduced taxation: Global business prefer to locate their head Office in a country where business taxes are
low.

d) Access to labour: Business will have Access to a larger pool of labour.

• CONSUMERS: If a multinational can produce goods more cheaply so prices are likely to be lower.For example
factories move from West to countries like China or India is thay many goods are cheaper for consumers and
also consumers have more choices.

• WORKERS: When global companies are open their new factories to diferrent countries this will increase job
opportunities within the country.Unemployment will be lower .Workers or people can easily move from less
developed countries to more developed countries in order to find a job.One negative impact on workers is
long working hours and bad working conditions.

• THE ENVIRONMENT(NEGATIVE IMPACT )

• Many environmentalists oppose globalisation because global economic growth usually means more
environmental damage. For example, as economies grow more cars are purchased and more flights are
taken.Global economic growth will use up resources such as oil,gas,gold once used they cannot be replaced.