SECTION D
Chapter Definition Explanation
42 Globalisation The growing integration of the world’s economies.
As trade increases as a proportion of GDP, increased importance of MNCs and increased FDI.
Firms today can use resources, production services and facilities, advice or help from any
country in the world. Firms and people behave as though there is just one market or one
economy. It is often defined as the growing integration of the world’s economies.
● Goods and services are traded freely across international borders.
● There is a high level of interdependence (one thing will affect many countries)
● Capital can flow more freely between countries.
Reasons for globalisation:
Developments in Modern ICT allows firms to transfer complex data instantly to any part
technology of the world and more people can work at home or any other location.
This makes it easier for firms to have operations all over the world.
International They have improved, so people can commute further and travel for
transport business meetings more easily and goods can be transported more
networks cheaply.
Deregulation Privatisation has allowed more competition and barriers have been
dropped. International trade has become more easy.
Firms want to sell Many firms want to sell abroad due to oversaturation of local markets.
abroad Some markets are dominated by multinational companies.
Multinational A large and powerful firm that sells goods and services into global markets and owns
company (MNC) production plants and other operating facilities all over the world.
They play a large part in the world’s economy and contribute 10% of world GDP.
Why do they exist?
Economies of Costs can be reduced by firms that exploit economies of scale.
scale Multinational will be in a better position to exploit these because they
are so large.
● They therefore lower costs.
● They are so powerful they can exert low-price pressure on
suppliers.
Marketing If companies are successful in brand they may begin to exploit it
globally. Starbucks and McDonald’s, for example, rely on image for
their global success.
Technical and Most multinationals have developed into large businesses over a
financial period of time and developed sophisticated technologies.
superiority ● They can invest in research and development.
● They can afford highly skilled workers.
● They can take more risks and diversify.
● They have more resources.
Advantages Disadvantages
, Employment opportunities Exploitation of country’s natural resources
and environmental degradation
Provides training for local workers Profits may be repatriated
Increase in tax revenue for government Exploitation of labour
Improvements in infrastructure Training may be limited as MNCs can bring
their own workers.
Positive multiplier effect for income
Corporate social A business approach that contributes to sustainable development by delivering economic,
responsibility social and environmental benefits for all stakeholders.
43 Foreign Direct Business investments undertaken by a firm in another country.
Investment (FDI)
This may involve construction or development, or instead purchasing of shares in a foreign
business. A common approach is for the host nation to join forces with abroad nations.
Government and FDI:
Many countries are keen for foreign multinationals to develop business interests in their
countries. To encourage FDI, they:
● Offer tax breaks, subsidies, grants and low interest loans
● Lift restrictions and relax regulations
● Invest in their own infrastructure
● Invest in education so that people can work abroad
Development Aid Money and other forms of assistance that is given to less developed countries by governments
in developed countries.
It aims to help the long-term development of a nation, rather than short-term aid.
Types include:
● Bilateral aid - Given by one country to another.
● Multilateral aid - Governments give money to an international agency, e.g World
Bank.
● Grants - Governments give an LEDC a cash sum.
● Loans - A lot of aid is in the form of low interest or interest free loans. Expected to be
repaid.
● Tied aid - Usually bilateral and assistance is given in return for something.
FDI, development aid and globalisation:
Both FDI and development aid will help globalisation to gather pace. If money flows into LEDCs
from foreign multinationals these countries may develop their economies faster. It will also help
economic growth if investments are made such as in education.
Aid Any assistance that is given to a country that would not have been provided through normal
market forces.
Official aid Aid provided by a government or a government agency.
For example,
● Long-term loans
● Tied aid - loans, but the money must be used to buy from the donor.
● Project aid - for infrastructure
● Technical assistance aid - technology and technicians
● Commodity aid - increase productivity
Unofficial aid Aid provided by non-governmental organisations (NGOs).
Humanitarian aid Aid to alleviate short term suffering (food aid, medical aid, emergency aid).
44 Benefits of To developed countries:
Chapter Definition Explanation
42 Globalisation The growing integration of the world’s economies.
As trade increases as a proportion of GDP, increased importance of MNCs and increased FDI.
Firms today can use resources, production services and facilities, advice or help from any
country in the world. Firms and people behave as though there is just one market or one
economy. It is often defined as the growing integration of the world’s economies.
● Goods and services are traded freely across international borders.
● There is a high level of interdependence (one thing will affect many countries)
● Capital can flow more freely between countries.
Reasons for globalisation:
Developments in Modern ICT allows firms to transfer complex data instantly to any part
technology of the world and more people can work at home or any other location.
This makes it easier for firms to have operations all over the world.
International They have improved, so people can commute further and travel for
transport business meetings more easily and goods can be transported more
networks cheaply.
Deregulation Privatisation has allowed more competition and barriers have been
dropped. International trade has become more easy.
Firms want to sell Many firms want to sell abroad due to oversaturation of local markets.
abroad Some markets are dominated by multinational companies.
Multinational A large and powerful firm that sells goods and services into global markets and owns
company (MNC) production plants and other operating facilities all over the world.
They play a large part in the world’s economy and contribute 10% of world GDP.
Why do they exist?
Economies of Costs can be reduced by firms that exploit economies of scale.
scale Multinational will be in a better position to exploit these because they
are so large.
● They therefore lower costs.
● They are so powerful they can exert low-price pressure on
suppliers.
Marketing If companies are successful in brand they may begin to exploit it
globally. Starbucks and McDonald’s, for example, rely on image for
their global success.
Technical and Most multinationals have developed into large businesses over a
financial period of time and developed sophisticated technologies.
superiority ● They can invest in research and development.
● They can afford highly skilled workers.
● They can take more risks and diversify.
● They have more resources.
Advantages Disadvantages
, Employment opportunities Exploitation of country’s natural resources
and environmental degradation
Provides training for local workers Profits may be repatriated
Increase in tax revenue for government Exploitation of labour
Improvements in infrastructure Training may be limited as MNCs can bring
their own workers.
Positive multiplier effect for income
Corporate social A business approach that contributes to sustainable development by delivering economic,
responsibility social and environmental benefits for all stakeholders.
43 Foreign Direct Business investments undertaken by a firm in another country.
Investment (FDI)
This may involve construction or development, or instead purchasing of shares in a foreign
business. A common approach is for the host nation to join forces with abroad nations.
Government and FDI:
Many countries are keen for foreign multinationals to develop business interests in their
countries. To encourage FDI, they:
● Offer tax breaks, subsidies, grants and low interest loans
● Lift restrictions and relax regulations
● Invest in their own infrastructure
● Invest in education so that people can work abroad
Development Aid Money and other forms of assistance that is given to less developed countries by governments
in developed countries.
It aims to help the long-term development of a nation, rather than short-term aid.
Types include:
● Bilateral aid - Given by one country to another.
● Multilateral aid - Governments give money to an international agency, e.g World
Bank.
● Grants - Governments give an LEDC a cash sum.
● Loans - A lot of aid is in the form of low interest or interest free loans. Expected to be
repaid.
● Tied aid - Usually bilateral and assistance is given in return for something.
FDI, development aid and globalisation:
Both FDI and development aid will help globalisation to gather pace. If money flows into LEDCs
from foreign multinationals these countries may develop their economies faster. It will also help
economic growth if investments are made such as in education.
Aid Any assistance that is given to a country that would not have been provided through normal
market forces.
Official aid Aid provided by a government or a government agency.
For example,
● Long-term loans
● Tied aid - loans, but the money must be used to buy from the donor.
● Project aid - for infrastructure
● Technical assistance aid - technology and technicians
● Commodity aid - increase productivity
Unofficial aid Aid provided by non-governmental organisations (NGOs).
Humanitarian aid Aid to alleviate short term suffering (food aid, medical aid, emergency aid).
44 Benefits of To developed countries:
