Globalisation (Edexcel IGCSE Business)
Revision Note
Written by: Lisa Eades
Reviewed by: Steve Vorster
An Introduction to Globalisation
Globalisation is the business and economic integration of different countries through increasing freedoms in the cross-border movement of people, goods, services, technology and finance
The past twenty years has been characterised by rapid globalisation and growing international business expansion
Businesses that trade internationally import and export goods and services
Imports are goods and services bought by people and businesses in one country from another country
In 2022, the UK’s biggest import was cars, valued at approximately £3.25 billion
Exports are goods and services sold by domestic businesses to people or businesses in other countries
In 2022, China’s biggest export was smartphone manufacturing, valued at approximately $21.4 billion
Exports generate extra sales revenue for businesses selling their goods abroad
Imports result in money leaving the country, which generates extra revenue for foreign businesses
Reasons for Globalisation
The growth of globalisation has occurred for a number of reasons
Diagram: Reasons for Increased Globalisation
Globalisation has been driven by developments in technology, saturation of domestic markets and deregulation
An Explanation of the Reasons for Globalisation
Developments in Technology
| Improved Transport Networks
| Deregulation
|
Government Commitment
| Market Saturation
| Familiarity with Global Brands
|
Opportunities of Globalisation
Since the 1990s, globalisation has led to reduced levels of poverty in developing countries
Employment levels have increased
Living standards, health and education outcomes have improved
Businesses have been able to take advantage of this development
Better qualified and more productive workforces
More attractive markets in which to sell products
New locations for production facilities
The Main Opportunities of Globalisation for Businesses
Opportunity | Explanation |
---|---|
Large markets |
|
Economies of Scale |
|
Labour |
|
Taxation |
|
Examiner Tips and Tricks
In the exam you may be asked to explain a benefit of globalisation. Look at the question carefully to determine whether you are being asked for a benefit to businesses, their workers or consumers. Each have benefitted in their own ways from globalisation.
Threats of Globalisation
Globalisation can also present significant problems and risks for businesses
1. Increased competition
Competition from international rivals may put domestic firms out of business
International firms may benefit from lower costs and greater economies of scale, so they can offer lower prices than domestic businesses to consumers
Large overseas competitors can spend more on research, marketing and distribution than a small domestic business
Access to cheaper labour or materials allows them to sell products at lower prices
2. Increased need to develop a profitable niche
Businesses risk losing sales and market share as a result of globalisation unless they can adapt or exploit a profitable market niche
Exploiting a gap in the wider market is often very profitable
E.g. Walkers Crisps dominate the lunchbox market with their multipacks
3. Vulnerability to international takeovers
Domestic Public Limited companies risk being taken over by foreign rivals
Capital can flow easily across borders
Most countries allow foreign businesses to take ownership of domestic businesses
E.g. In 2009 UK confectionary company Cadburys was acquired by US company Kraft in a hostile takeover
4. Greater risk from external shocks
Interconnected financial systems allow economic difficulties in one part of the world to be felt by businesses operating in another
The UK's vote to leave the EU in 2016 caused immediate financial shocks around the world, with stock exchanges in countries as distant as Australia and Japan reporting sharp falls
Global distribution networks can be affected by natural disasters or other interruptions, such as accidents or terrorism
In 2021, the grounded container ship Ever Given blocked the Suez Canal for six days, causing delays to deliveries of goods such as semiconductors, which impacted technology manufacturing around the world
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