Globalisation (Edexcel IGCSE Economics)
Revision Note
Written by: Steve Vorster
Reviewed by: Jenna Quinn
Introduction to Globalisation
Globalisation is the economic integration of different countries through increasing cross-border movement of people, goods/services, technology and finance
This integration of global economies has impacted national cultures, spread ideas, speeded up industrialisation in developing nations and led to de-industrialisation in developed nations
Globalisation has existed for hundreds of years; it is not a new phenomenon
Improvements in technology and the speed of global connections have exponentially increased the level of interdependence between nations in the past 50 years
Consumers now source products globally recognising global brands wherever they travel
In 2000, the value of global trade was approximately $6.45 trillion. By 2023, this figure was at $31 trillion
The Causes of Globalisation
Numerous factors have contributed to the rapid increase in the pace of globalisation including free trade, transport improvements, communication and MNCs
Reasons for the rise in globalisation
Free trade
The increased effectiveness of the World Trade Organisation (WTO) in negotiating new trade agreements has meant that countries are open to free trade (reduced tariffs and quotas)
Reduced cost of transport
This allows businesses to increase the volume of goods traded globally
For example, containerised shipping transports goods in bulk using metal containers on a boat
Reduced cost of communication
Communication costs are very low due innovations in technology
E.g. Skype, WhatsApp, and WeChat make it easier for firms to connect and promote themselves globally
Multinational Corporations (MNCs)
The rapid growth and influence of MNCs contribute to globalisation by expanding their operations and presence across borders
Worked Example
A firm is described as a multinational corporation (MNC) if it:
A. has shareholders in many countries
B. exports goods to other countries
C. imports goods from other countries
D. operates in more than one country
D is the correct answer: it operates in more than one country
MNCs often have their headquarters in one country, but may manufacture their output in one or more different countries.
A is incorrect, as shareholders are owners of a business and their ownership country does not indicate the firm conducts business in that country
B is incorrect, as the firm would be known as an exporter
C is incorrect, as the firm would be known as an importer
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