Factors Contributing to Increased Globalisation (Edexcel A Level Business): Revision Note

Increased international trade allows businesses to increase their market size

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

Freer trade helps businesses 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 its exports

Economies of scale due to innovation in containerisation on large ships have reduced business costs

Technological advancements due to the internet/mobile technology have 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

These businesses will have their headquarters in one country but have branches in other countries

• E.g. Nike has its headquarters in Oregon, United States. As of 2022, it has 1,046 retail stores throughout the world

With increasing numbers of transnational companies operating globally, there is increased pressure on countries to engage in free trade

Foreign direct investment (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 working 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

Reducing or removing trade barriers, such as tariffs and quotas, makes it easier and cheaper for businesses to export and import goods across borders, encouraging international trade

With fewer restrictions, businesses can more easily expand into new markets, leading to stronger economic links between countries and greater global interdependence