Globalisation (Cambridge (CIE) O Level Economics) : Revision Note
Globalisation
Globalisation is the economic integration of different countries through increasing freedoms in the 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 been increasing for thousands 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
The Four Main Characteristics of Globalisation
Increasing foreign ownership of companies
Greater movement of labour and technology across borders
Free trade in goods and services
Easy flows of capital across countries
Multi National Corporations (MNCs)
A multinational corporation is business that has production facilities in two or more countries e.g. Apple
Globalisation has made it easier for firms to do business on a global scale and the number and size of MNCs continues to increase
There are advantages and disadvantages linked to the economic activity of MNCs, both in their home country as well as in their host country
Advantages of MNCs
Advantage | Impact on Home Country | Impact on Host Country |
|---|---|---|
More Profit | MNCs earn profits from their operations abroad and often send this money back home, helping the home economy | Host countries get some benefit if profits are reinvested locally, but often lose some income |
More Markets | Home country businesses can sell to new customers abroad, growing bigger and stronger | Host countries get more product choices and access to new technologies |
Lower Costs | MNCs can produce goods more cheaply abroad and offer lower prices at home | Host countries may benefit from cheaper production and local job creation |
Risk Reduction | MNCs can survive better if they sell in many countries. If sales fall in one place, they can rely on others | Host countries may experience more stable job markets if MNCs stay even during global downturns |
Disadvantages of MNCs
Disadvantage | Impact on Home Country | Impact on Host Country |
|---|---|---|
Job Loss | Some jobs move abroad where production is cheaper, leading to unemployment at home | Host countries may become too dependent on MNCs for jobs. If an MNC leaves, many people could lose their jobs |
Poor Working Conditions | MNCs may be criticised at home for allowing bad working conditions abroad | Workers in host countries may face low wages and poor conditions |
Unfair Power | MNCs might pressure home governments for favourable rules | In host countries, MNCs might influence politics and gain too much control |
Damage to Environment | MNCs can be blamed for pollution caused in host countries | Host countries might suffer from environmental damage if rules are weak |
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