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Summary Edexcel comprehensive guide on globalisation
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Edexcel comprehensive guide on globalisation
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Globalisation is the growing economic interdependence of countries evidenced through increasing trade to GDP rations,international capital flows and the diffusion of technology. Also shown through global processes like cultural diffusion,
climate change and the widespread impacts of natural hazards.
Causes of globalisation
1. Trade
2. Transport
3. Technology and communications
4. TNCs
Trade economies and emerging economies
over agricultural subsidies
Reduction in trade barriers, free market Transport, technology and trade
capitalism and economic liberalisation. This
increases imports which allows for greater Lower transport costs due to railways,
consumer choice and lower prices, stimulate job steamships, containerisation, international
creation and stock of valuable foreign currency aviation and airfreight which reduced the costs
Free markets promote specialisation, the of moving goods internationally.
division of labour, greater competition, Containerisation is a system of transporting
increased efficiency and lower prices which goods in steel containers that can be easily
allows wealth creation and capital formation transferred between different ships which carry
which increases economic growth up to 25,000kg. Decreases need for human
Global trade agreements have increased free labour and makes it more efficient and less
market trade: expensive and reduced unit costs by 29%. They
o General Agreement on Tariffs and Trade are multifunctional and can be used as
(GATT) evolved into the World Trade storerooms. Technology can automate this
Organisation (WTO) which is signed by process by working out loading times. Container
123 countries agreeing to minimise ships are rapidly increasing in size which
trade barriers allowing full access to increases the value of trade to 3/5 of global GDP
goods from developing countries and Telegraphs can transmit information quickly
extension of property rights which facilitated the growth of railroads,
o UN promotes peace and cooperation financial and commodity markets and reduced
which benefits trade information costs within and between
o World Bank provides development businesses. Later replaced by a more efficient
loans form: the internet
o IMF provides loans to government Coordinating manufacturing efforts in different
o Doha Development Agenda was the locations can be done through using computer
WTO’s unsuccessful attempt at reducing software like computer aided design and
barriers to trade between developed manufacturing (CAD/ CAM) for transferring
ideas. Social media has enabled the creation of
globally recognisable brands
ICT, communications and business
Gave rise to the ‘digital economy’ from e-commerce to social media and changed the accessibility of ordinary
individuals to the world market where this increased exponentially since the creation of the WWW in 1989
Digital economy estimated to be worth $1.5 trillion in 2015
High street chains and established brick and mortar businesses have been put out of business by companies like
Amazon which lower prices which undercut book shops for example. Manufacturing has adapted to increase
online presence with the sale of clothing on sites like Nike. Small businesses have the opportunity to increase
awareness through online platforms like Amazon.
Changed consumer spending patterns for fast delivery, greater brand loyalty and rise of the gig-economy
TNCs
TNCs are the architects of globalisation which invest in FDI and capital infrastructure
Invest in new markets to make profits which expands the consumer base and thus higher potential profits
Opening of global trade to populous new markets like China and India has encouraged FDI. Increase in global
stock markets and share prices
, Outsourcing where businesses make contracts with another company and offshoring where a company moves
part of its operations to another company due to lower economic costs or conditions for profit making
Glocalisation is a marketing technique for TNCs which involves adapting goods or services to increase consumer
appeal in different local markets. Commonly used to address cultural differences.
o Tesco doesn’t wrap fruit and vegetables in plastic in Thailand due to their ‘wet market’ tradition
o Different sided driving
o McDonalds sells vegetarian burgers in India as the majority is vegetarian
Jaguar Land Rover – outsourcing and offshoring
JLR is the UK’s largest automotive manufacturer £1 billion invested into Chinese plant where a
owned by Tata since 2008 and sells joint partnership was made with a Chinese
internationally company in North Shanghai in 2014. The same
JLR has 3 manufacturing sites which employ year, JLR built a new manufacturing facility in
17,000 employees Brazil creating 400 jobs
To gain better access to emerging markets like In 2015, it announced plans to build a plant in
China and India and reduce costs, its invested in Slovakia and Austria.
international manufacturing sites and
established an assembly plant in India in 2011
Cargill – developing the rural economy and opening up new markets in countries weakly connected to the global
economy
Cargill is the largest grain trader in the world and lends money to wheat farmers and runs a vast transportation
and storage business which enables huge economies of scale
Cargill has built 9 animal feed mills in Vietnam in the last 17 years creating huge demand for shrimp farmers and
other input producers in Vietnam and transport infrastructure to connect areas to the mills. This spurs agricultural
and economic development
Positive impacts
Raising trend economic growth and living standards as Technology transfer TNCs transfer technology from their
FDI increases the productivity of the labour force leading parent companies to their branch plants. This can
to higher wages and better living standards. Redistribute accelerate economic development in emerging
income through higher tax revenue. This can create economies. E.g. Computer Aided Design (CAD) enabling
greater political stability as TNCs can reduce conflict small manufacturing firms in developing countries to
between rural and urban population by employing the become suppliers to OECD manufacturers
rural workers.
Higher environmental standards as TNCs have
international brands to maintain. They bring good
practice into countries like when Unilever launched its
‘sustainable living’ plan in 2020.
Negative impacts
Tax avoidance. TNCs pay in the lowest tax regimes they Growing global inequality where TNCs cluster at SEZs
can. E.g. in 2012, Amazon paid only £2.4 million where concentrated FDI occurs would increase regional
corporation tax on billions of sales. Panama papers inequalities
highlighted how those TNC elites can avoid paying
income tax. Environmental degradation where TNCs export negative
externalities of their activities to their less developed
Unemployment and exploitation in the developed and countries. For example, they may move manufacturing
developing economy with higher social security production out of the EU to avoid carbon tax.
spending. Health and safety standards may be dismissed
as a result.
Acceleration of globalisation: economic and political decision making
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