Please enable JavaScript.
Coggle requires JavaScript to display documents.
4.1.3 : Causes of increased globalisation - Coggle Diagram
4.1.3 : Causes of increased globalisation
Political changes can make countries more open to trade.
Changes in a political system may result in the government being more open to trade liberalisation, which in turn increases globalisation.
Examples:
China:
India:
Trade blocs: political agreements between countries have led to trade blocs being formed, which reduce trade barriers between two countries.
Trade liberalisation removes restrictions to international trade.
International trade can be restricted by international trade barriers, such as regulations like tariffs and quotas which make trade more expensive.
Trade liberalisation
is the removal of these barriers, and increased liberalisation has led to an increase in international trade and globalisation.
Advantages and disadvantages:
Adv
Any raw materials a firm
imports
becomes cheaper.
This would lower the firms costs
and therefore make them more competitive.
Exporting goods becomes cheaper/easier so international markets become easier to expand into.
Consumer
choice is increased as more international products/services are imported.
Consumers
will likely receive lower prices as there is an increased competition between firms in different countries: leading to price under cutting.
Dis
As imports become cheaper, smaller + local businesses may be competing with larger MNCs that can afford to sell their products for cheaper. This will decrease their demand and may result in them being forced out of the market if they are not competitive enough (potentially leading to unemployment)
National cultures/differences can be diluted.
Economic development leads to structural change.
A country's economy is structured with the 4 sectors: primary, secondary, tertiary, and quaternary (IT and scientific research).
As a country grows, it begins to become less reliant on primary and secondary production and moves towards tertiary and quaternary.
This structural change often comes hand in hand with a national growth in income, because tertiary and quaternary provide higher rates of return for investors.
Firms operating in these sectors are likely to be specialised with highly trained staff. These firms often find they need to trade internationally to obtain the market share required for economies of scale, leading to businesses being global and using
global recruitment.
More people in the world are able to work.
The global labour force is rising, because of increased number of women in work and a longer life expectancy for example.
Firms are starting to set up businesses wherever they want, with a lack of labour becoming less of a problem.
Instead of focusing on positioning themselves where there is a workforce, they are instead positioning near raw materials or export markets for example.
People are more likely to migrate.
Businesses are able to set up enterprises abroad and move specialised staff to new countries for work, allowing them to become more global easily.
People also create new demand for certain products in places they move to, which creates opportunities for firms to sell in new locations.
Firms are investing more in foreign countries.
Governments may want to obtain the benefits of increased trade by encouraging FDI, and offering financial incentives to businesses that invest in their country.
This makes it more cost - effective for businesses to expand into different countries, which increases the investment flow into the country.
There's been an increase in global companies.
MNCs and TNCs encourage globalisation as they boost the economy of the country they expand into by increasing employment.
This can lead to an increased income and a higher demand for certain products (like food), which encourages other businesses to expand and fill these gaps.
Transport and communication have become cheaper
One of the main causes of globalisation is that there has been a reduction in the cost and time needed for transportation, making goods cheaper to import and export.
Cargo ships and containerisation has been responsible for this: as it has created a standard size for shipping containers making loading and unloading quicker (therefore importing and exporting)
The internet:
information can be sent between countries instantly, so communicating with customers, suppliers and business partners has become more convenient.