Globalisation
, BACKGROUND
WHAT:
A multi-faceted process of change that has made the world increasingly interconnected
Includes opening up world trade + markets to TNCs
Result = wide range of associated effects on people, culture, political systems + the envo
5 FACTORS THAT PROMOTE GLOBALISATION:
Flows of Information -> Shared worldwide within and between TNCs
The development + rapid spread of email, social media + internet means that large amounts
of info can be exchanged instantly across the globe
o Allows people from different countries to communicate + work together
Increasing flows of info make the world more interconnected e.g. people can learn about
different countries & cultures without leaving their own
Flows of Capital -> Capital = money that’s invested e.g. HICs invest in LICs - cheaper production
Capital used to be invested within a country e.g. companies building new factories or new
branches within country of origin
BUT amount invested in foreign countries increased -> this = FDI (foreign, direct investment)
o E.g. global FDI increased from $400bn 1996 to $1500bn 2016
Flows of Products -> cheap + efficient global transport networks encouraged intercontinental trade
Manufacturing industries used to be located in HDEs + the products sold their too
Now manufacturing in HDEs decreased
o E.g. UK -> no. people employed in manufacturing 1985 = 5m – 2014 = 2.6m
Cause = lower labour costs overseas so companies relocate the production
o They then import the products to countries where they’re sold
o E.g Dyson moved to Malaysia 2002 but still sold product in UK
Consequently – international trade in manufactured goods is increasing
o E.g. UK imported £200bn of manufactured goods 1990 & £550bn 2008
Changing flows of products made world more interconnected
Flows of Services -> economic activities that aren’t based around producing material goods e.g.
banking
ICT improvements mean services can become global industries
o Banking + insurance depend on communication + transfer of information -> tech
improvements allow services to locate all over the work + access their customers
70s + 80s deregulation + opening up of financial markets -> easier for banks + other financial
institutions to do business in other countries
High level (e.g. financial services) tend to be concentrated in HDE cities e.g. London/NYC
o Companies increasingly exporting production to LDEs/EMEs – cheaper labour
Increasing flows of services is making the world more interconnected e.g. people are
connected just via having a bank account
Flows of Labour -> movements of people who participate in workforce from 1 country to another
More people moving overseas -> international migration increased 40% 2000-2015
Some migrants = highly skilled moving to get better wages + working conditions
o Unskilled mostly looking for work because of poor wages + conditions in own C’s
Increasing flows of people make world more interconnected e.g. people bring aspects of
culture with them + counties are connected because people have family all over the world
GLOBAL MARKETING: The process of promoting + selling products or services
GM involves treating world as 1 single market + using 1 marketing strategy to advertise a
product
GM gives economies of scale – cheaper to have 1 marketing campaign for whole world
GM can create global brand awareness – people buy brands over unknown competitor
BUT market needs to be adapted to fit cultures/laws e.g about consuming alcohol
Factors Affecting Globalisation:
,1. NEW TECHNOLOGIES, SYSTEMS & RELATIONSHIPS
Systems inc ways of working, procedures + methods of organisation that allow for a
particular function to be carried out
o E.g. just-in-time manufacturing system = making products in response to demand
New tech e.g. internet allows people all over the world to access info + aeroplanes allow
people & goods to be transported around the world swiftly + efficiently
Before WW2 relationships involved (mostly) 1 country losing & 1 gaining – now
relationships are based on trade + common rules – so everyone can gain
2. GLOBAL FINANCIAL SYSTEMS
Allows flows + lending of money but may also cause negative feedback/limits (financial crisis 2008)
Based on investment banks who help companies raise capital by selling shares on behalf of
those companies to investors
1980s several things happened to make financial system more global
o Information tech e.g. internet = greater info for investors
o Investment banks created financial products that made foreign investment less risky
o Governmental financial deregulation incs letting banks charge more for services +
invest in greater range of businesses + removed barriers to capital – easier for banks
to buy + sell shares + other products across the worlds
o Led to greater range of companies involved in finance e.g. commercial banks
started selling shares + allowed companies to take on more services e.g. exchanging
currencies between countries to allow them to trade across borders
3. TRADE AGREEMENTS
Trade primarily regulated by gov’s – control tariffs, non-tariff barriers (e.g. rules of quality of
products coming in) + banning certain products (e.g. illegal drugs)
Control make it more expensive for companies to sell products abroad + consumers to buy
Trade agreements make it cheaper – between 2 countries = bilateral trade agreements
o Multilateral trade agreements = several countries – together these agreements
make up the global trade system
WTO governs the global trade system -> ensures trade agreements between countries +
trade blocs are followed
4. TRANSPORT & COMMUNICATIONS SYSTEMS
Containerisation introd 1950s -> more goods loaded & transferred easily + quickly + cheaply
Communicating satellites launched 60s – allow relatively cheap communication between 2
devices -> instant connection even for isolated people/communities
Optic fibre cables can transmit the most info + allow fast communication
5. SECURITY -> cybersecurity is a growing concern for governments + companies
Globalisation creates new trading relationships -> causes interdependency -> war unlikely
Countries can improve security by working together e.g. NATO aimed at providing security
during Cold War -> grouping people together deters common threats
BUT can make conflict more likely e.g. developed countries intervening in conflicts in
developing countries to secure resources like oil
6. MANAGEMENT & INFROMATION SYSTEMS:
, o Means of working, procedures + methods of organisation
o E.g. adopting the JIT (just in time) system in manufacturing
o Adopting EASIER systems across national boundaries; labour but also services, products
Management systems:
Increased efficiency of companies
Commodity chains – supply globally – minimise cost
Economies of scale – specialised equipment, production lines + lower prices for raw materials
Outsourcing – cheap labour
Company working practices – casual + temporary = 0 hour contracts
, BACKGROUND
WHAT:
A multi-faceted process of change that has made the world increasingly interconnected
Includes opening up world trade + markets to TNCs
Result = wide range of associated effects on people, culture, political systems + the envo
5 FACTORS THAT PROMOTE GLOBALISATION:
Flows of Information -> Shared worldwide within and between TNCs
The development + rapid spread of email, social media + internet means that large amounts
of info can be exchanged instantly across the globe
o Allows people from different countries to communicate + work together
Increasing flows of info make the world more interconnected e.g. people can learn about
different countries & cultures without leaving their own
Flows of Capital -> Capital = money that’s invested e.g. HICs invest in LICs - cheaper production
Capital used to be invested within a country e.g. companies building new factories or new
branches within country of origin
BUT amount invested in foreign countries increased -> this = FDI (foreign, direct investment)
o E.g. global FDI increased from $400bn 1996 to $1500bn 2016
Flows of Products -> cheap + efficient global transport networks encouraged intercontinental trade
Manufacturing industries used to be located in HDEs + the products sold their too
Now manufacturing in HDEs decreased
o E.g. UK -> no. people employed in manufacturing 1985 = 5m – 2014 = 2.6m
Cause = lower labour costs overseas so companies relocate the production
o They then import the products to countries where they’re sold
o E.g Dyson moved to Malaysia 2002 but still sold product in UK
Consequently – international trade in manufactured goods is increasing
o E.g. UK imported £200bn of manufactured goods 1990 & £550bn 2008
Changing flows of products made world more interconnected
Flows of Services -> economic activities that aren’t based around producing material goods e.g.
banking
ICT improvements mean services can become global industries
o Banking + insurance depend on communication + transfer of information -> tech
improvements allow services to locate all over the work + access their customers
70s + 80s deregulation + opening up of financial markets -> easier for banks + other financial
institutions to do business in other countries
High level (e.g. financial services) tend to be concentrated in HDE cities e.g. London/NYC
o Companies increasingly exporting production to LDEs/EMEs – cheaper labour
Increasing flows of services is making the world more interconnected e.g. people are
connected just via having a bank account
Flows of Labour -> movements of people who participate in workforce from 1 country to another
More people moving overseas -> international migration increased 40% 2000-2015
Some migrants = highly skilled moving to get better wages + working conditions
o Unskilled mostly looking for work because of poor wages + conditions in own C’s
Increasing flows of people make world more interconnected e.g. people bring aspects of
culture with them + counties are connected because people have family all over the world
GLOBAL MARKETING: The process of promoting + selling products or services
GM involves treating world as 1 single market + using 1 marketing strategy to advertise a
product
GM gives economies of scale – cheaper to have 1 marketing campaign for whole world
GM can create global brand awareness – people buy brands over unknown competitor
BUT market needs to be adapted to fit cultures/laws e.g about consuming alcohol
Factors Affecting Globalisation:
,1. NEW TECHNOLOGIES, SYSTEMS & RELATIONSHIPS
Systems inc ways of working, procedures + methods of organisation that allow for a
particular function to be carried out
o E.g. just-in-time manufacturing system = making products in response to demand
New tech e.g. internet allows people all over the world to access info + aeroplanes allow
people & goods to be transported around the world swiftly + efficiently
Before WW2 relationships involved (mostly) 1 country losing & 1 gaining – now
relationships are based on trade + common rules – so everyone can gain
2. GLOBAL FINANCIAL SYSTEMS
Allows flows + lending of money but may also cause negative feedback/limits (financial crisis 2008)
Based on investment banks who help companies raise capital by selling shares on behalf of
those companies to investors
1980s several things happened to make financial system more global
o Information tech e.g. internet = greater info for investors
o Investment banks created financial products that made foreign investment less risky
o Governmental financial deregulation incs letting banks charge more for services +
invest in greater range of businesses + removed barriers to capital – easier for banks
to buy + sell shares + other products across the worlds
o Led to greater range of companies involved in finance e.g. commercial banks
started selling shares + allowed companies to take on more services e.g. exchanging
currencies between countries to allow them to trade across borders
3. TRADE AGREEMENTS
Trade primarily regulated by gov’s – control tariffs, non-tariff barriers (e.g. rules of quality of
products coming in) + banning certain products (e.g. illegal drugs)
Control make it more expensive for companies to sell products abroad + consumers to buy
Trade agreements make it cheaper – between 2 countries = bilateral trade agreements
o Multilateral trade agreements = several countries – together these agreements
make up the global trade system
WTO governs the global trade system -> ensures trade agreements between countries +
trade blocs are followed
4. TRANSPORT & COMMUNICATIONS SYSTEMS
Containerisation introd 1950s -> more goods loaded & transferred easily + quickly + cheaply
Communicating satellites launched 60s – allow relatively cheap communication between 2
devices -> instant connection even for isolated people/communities
Optic fibre cables can transmit the most info + allow fast communication
5. SECURITY -> cybersecurity is a growing concern for governments + companies
Globalisation creates new trading relationships -> causes interdependency -> war unlikely
Countries can improve security by working together e.g. NATO aimed at providing security
during Cold War -> grouping people together deters common threats
BUT can make conflict more likely e.g. developed countries intervening in conflicts in
developing countries to secure resources like oil
6. MANAGEMENT & INFROMATION SYSTEMS:
, o Means of working, procedures + methods of organisation
o E.g. adopting the JIT (just in time) system in manufacturing
o Adopting EASIER systems across national boundaries; labour but also services, products
Management systems:
Increased efficiency of companies
Commodity chains – supply globally – minimise cost
Economies of scale – specialised equipment, production lines + lower prices for raw materials
Outsourcing – cheap labour
Company working practices – casual + temporary = 0 hour contracts
