4.1.1 Globalisation

Question 1

What is globalisation?

Answer 1

The increasing integration of the world’s local, regional and national economies into a single international market

Question 2

What are the characteristics of globalisation? (6)

(What does globalisation look like/how do you know its taking place?)

Answer 2

• increased/free trade in goods and services
• increased FDI
• increased foreign ownership of companies/free movement of capital
• free movement of labour
• free interchange of technology and intellectual capital
• de-industrialisation in developed countries

Question 3

What are MNCs and TNCs?

Answer 3

• Multinational Corporation, operates in many countries and has a clear home country with a headquarters there
• Transnational Corporation, operates in many countries but does not strongly identify one country as its home base

Question 4

How does globalisation lead to increased FDI?

Answer 4

• as manufacturing firms move from developed countries to low-waged developing/emerging countries to cut costs
• e.g. Foxconn (Apple’s supplier) moved production to countries like China, Vietnam and Malaysia, increasing FDI flows to those countries

Question 5

What is meant by free movement of labour in the context of globalisation?

Answer 5

it means that people can move between countries to work without significant restrictions

Question 6

What is meant by free movement/interchange of technology and intellectual capital in the context of globalisation?

Answer 6

• As MNC/TNCs move their operations across the globe without restrictions, technological skills are transferred and exchanged between countries
• benefits the host countries by building their human capital and expertise (e.g. microsoft in india)

Question 7

What is offshoring and outsourcing?

Answer 7

• offshoring: when a company moves part of its own production to another country to cut costs
• outsourcing: contracts tasks to an external third-party provider
  e.g. a UK firm hires a separate Indian call centre company to handle its customer service.

business strategies used to cut costs and improve efficiency

Question 8

What are the factors contributing to globalisation? (5)

Answer 8

• improvements in transport infastructure and operations (containerisation)
• improvements in communication technology and IT
• Trade liberalisation/reduced protectionism
• Increase in the number and size of trading blocs
• Increased influence of global MNCs and TNCs

Question 9

What is the impact of globalisation on countries?

Answer 9

• Economic growth
• Increased FDI
• Knowledge and technology transfer (from TNCs)
• Improved living standards

Question 10

What are the positive impacts of globalisation on the government?

Answer 10

• Increased tax revenue (from income and corporation tax) as TNCs pay tax and the people they employ
• Fiscal deficit of gov goes down due to increased tax revenue and decreased government spending on unemployment benefits

Question 11

What are the positive impacts of globalisation on producers?

Answer 11

• Firms can decrease COP and increase profits through outsourcing labour to lower wage countries, offshoring production to other countries
• Can also benefit from economies of scale as they are selling to a larger market

Question 12

What are the positive impacts of globalisation on consumers?

Answer 12

• lower prices as firms switch to low-cost locations
• increased choice for consumers
• improvement in living standards

Question 13

What are the positive impacts of globalisation on workers?

Answer 13

• TNCs tend to provide training for workers and create new jobs, increasing their incomes
• TNCs can lead to knowledge and technology transfers, making workers more skilled and productive

Question 14

What are the positive impacts of globalisation on the environment?

Answer 14

• the world can work together to tackle climate change by sharing ideas and technology
• reduced pollution from working from home, post-covid
• firms have more money to invest in renewable energy resources if profits increase

Question 15

What are the negative impacts of globalisation on the government?

Answer 15

• TNCs may engage in tax avoidance to minimise costs from corp tax, decreasing tax revenues
• structural unemployment can reduce the amount of tax revenue collected

Question 16

What are the negative impacts of globalisation on producers?

Answer 16

• if commodity prices rise, this might offset the labour cost savings made
• firms who are not able to compete internationally, like small buisnesses will lose out

Question 17

What are the negative impacts of globalisation on consumers?

Answer 17

• there is higher demand for goods and services due to larger markets and rising incomes, which could lead to higher prices

Question 18

What are the negative impacts of globalisation on workers?

Answer 18

• increased migration may lead to lower wages for workers
• structural unemployment in the west due to industry changes e.g. manufacturing industry to service sector jobs in UK

Question 19

What are the negative impacts of globalisation on the environment?

Answer 19

• ↑ world production, ↑ demand for raw materials, bad for environment (mining, quarrying)
• increased trade and production has lead to more emissions (more pollution from transport)