globalisation

Question 1

what is globalisation

Answer 1

the process through which an increasingly free flow of ideas people goods services and capital leads to the integration of economies and societies

Question 2

what is foreign direct investment (FDI)

Answer 2

occurs when a businesses or governments invest in other countries

Question 3

characteristics of globalisation- increasing FDI

Answer 3

funds are coming from one country and being used to finance investment projects in another country
growing in FDI is one of the most striking characteristics of globalisation

Question 4

characteristics of globalisation- world trade rising as a proportion of world gross domestic product (GDP)

Answer 4

world GDP has increased over the last few decades due to economic growth but world trade has increased faster due to globalisation
more and more of the global production of goods and services are being traded across borders rather than sold in home markets
average growth rather in world trade was 5.8% whereas growth rate for GDP was 4.4%

Question 5

characteristic of globalisation- increased migration

Answer 5

globalisation has seen increased movement of people as they move to places where there are job opportunities
this has been made easier by the breakdown of authoritarian regimes an creation of trading blocs with reduced trade barriers between countries
281 million international migrants are living in the world today

Question 6

trade liberalisation

Answer 6

it becomes easier to trade when trade barriers are dismantled and more firms are attracted to doing business internationally
several factors contributed to this on going process
after WW2 there was the general feeling of needing to bind nations together to prevent further catastrophe, many people believed we could set up interns institutions that would encourage international cooperation and reduce aggression
late 1940s IMF and world bank were set up
permanent arrangements were made to facilitate trade negotiations
discussions began that would lead to formation of EU

Question 7

what is IMF

Answer 7

international monetary fund
coordinates the international monetary system
it tries to maintain stability and provide adequate finance for world trade to continue without interruption

Question 8

what is the world bank

Answer 8

lends to developing countries in order to fund projects which will help them to raise incomes and make their economies more efficient

Question 9

what is capital market liberalisation

Answer 9

promoted by IMF during 1980s and 90s as a means of stimulating economic growth in developing countries
FDI helps both big businesses and give to expand productive capacity
much FDI comes from one rich developed country to another but it has also played a large role in the development of the chinese and other economies helping reduce poverty
interdependence means that economic instability can spread from one economy to another

Question 10

political change resulting in the opening up of China and the former soviet union

Answer 10

Fall of communism (Eastern Europe 1989, Soviet Union 1991) opened up markets to international trade.
• Russia relies on exports (oil, gas, energy). Eastern European countries joined the EU.
• China opened up under Deng Xiaoping (1978 onwards) — moved from isolation to global trade.
• These changes gave businesses access to new markets, resources, and cheaper production.

Question 11

reduced cost of transport and communication

Answer 11

made it easier and cheaper to communicate with other countries and travel to them so trade has increased
Containerisation and transport improvements cut costs and made trade faster.
Online platforms (digital communication, video calls, etc.) help global business operations.

Question 12

increased significance of global (transnational) companies

Answer 12

MNCs (or TNCs) operate in more than one country.
They benefit from globalisation, economic liberalisation, and cheaper communication/transport.
Expansion overseas = higher profits due to rising incomes in emerging markets since a lot of domestic markets are saturated

Question 13

what is a multinational corporation (MNC’s or TNC’s)

Answer 13

businesses which are active in more than one country
the might have distribution outlets or factories abroad or may offer services which are bought by organisations or people located in other countries

Question 14

examples of MNC’s

Answer 14

nike sources from east asia

Car manufacturers (Peugeot-Citroën, Ford, VW, Hyundai) produce in Slovakia for cheap skilled labour.

Question 15

what is outsourcing

Answer 15

means buying inputs from foreign suppliers or locating the whole production process abroad
the objective is to exploit cost savings and most often lower wage rates