- There are many reasons for the increasing levels of globalisation
- The context of an individual country determines which of these reasons has had the greatest impact on their economy
- E.g. The USA has lost numerous manufacturing sectors as production has moved to lower cost countries such as India or China
An Explanation of the Factors Contributing to Increased Globalisation
Factor
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Explanation
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Political change
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- Changes in the government of a country can influence the country's attitude to trade
- E.g. China joined the World Trade organisation in 2001 which led to a significant increase in exports
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Reduced cost of transport and communication
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- Economies of scale due to innovation in containerisation on large ships has reduced business costs
- Technological advancements due to the internet/mobile technology have improved made it easier for buyers and sellers to connect with one another
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Increased significance of transnational companies
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- A transnational company is a business that operates in more than one country
- They will have their headquarters in one country but have other branches in other countries
- E.g. Nike has its headquarters in Oregon, United States. As of 2022, they have 1046 retail stores throughout the world
- With increasing numbers of transnational companies operating globally, there is an increased pressure by countries to engage in free trade
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Increased investment flows (FDI)
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- FDI is important for job and wealth creation within an economy
- It allows businesses to establish themselves in countries where they may face trade barriers
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Migration (within and between economies)
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- Migration is the movement of people from one location to another
- Migration has led to increased globalisation as better transportation and deregulation have allowed workers to have more flexibility when looking for work
- E.g. In 2022, the United Arab Emirates had the highest proportion of immigrants at 88%
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Growth of the global labour force
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- The global labour force has grown significantly especially due to the growth of emerging economies such as India and China
- This has increased globalisation due to the following reasons
- More people in work means more income to spend on goods and services boosting global demand
- An increased supply of labour leads to falling wages which is beneficial in reducing business costs
- More people working generates increased levels of entrepreneurship
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Structural change
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- This occurs when a country, industry or market changes which sector of industry they operate in
- E.g. the UK has shifted from the manufacturing sector to the tertiary sector over the last 50 years
- Offshoring is common practice and speeds up the process of globalisation
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