Factors Contributing to Increased Globalisation (Edexcel A Level Business)

Increased international trade allows businesses to increase their market size

• This leads to increased output and countries can benefit from economies of scale

Freer trade helps businesses to reduce costs as imported raw materials and components can be sourced more cheaply

Domestic firms, in particular, Infant industries may not be able to compete against international firms

Some industries may be subject to dumping as businesses abroad may sell excess products at unfairly low prices

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

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 

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

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

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%

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

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