Transcript 4.1.3x10.5 MB

413 Factors Contributing to
Increased Globalisation
A Level Edexcel New Specification
From the specification
a) Reduction of international trade barriers/trade
liberalisation
b) Political change
c) Reduced cost of transport and communication
d) Increased significance of global (transnational)
companies
e) Increased investment flows (FDI)
f) Migration (within and between economies)
g) Growth of the global labour force
h) Structural change
Guidance from
Edexcel
Lesson Objectives
• To be able to discuss factors which contribute
to increased globalisation such as; reduction
of trade barriers, political change, reduced
costs, global companies, FDI, migration, global
labour force and structural change
• To be able to answer sample exam questions
based on the topic area
Starter
• Think you know about globalisation?
• Try this online test here
Drivers for international business
• A business will seek to make profit, increase sales, and
it can do this with no further development costs by
selling existing products to new markets abroad
• Even the BBC sell their programs round the world –
Korea are great fans of Dr Who!
Korea will be the first
international stop for the
Doctor Who World Tour.
REDUCTION OF INTERNATIONAL
TRADE BARRIERS/TRADE
LIBERALISATION
Trade liberalisation
• Definition: Trade liberalisation is the process by which
international trade is made easier through a relaxation of
the rules which govern it
• Governments have long taken an interest in imports to their
countries. They seek to restrict the availability of items seen
as harmful or dangerous
• They might wish to stop imports which will compete with
state monopolies or industries with political influence.
• Placing an import tax (tariff) on products reaching the country
was a significant source of income when governments were
inefficient at taxing their own people, but now not so
necessary
• Embargoes (total bans) or quotas (fixed maximum quantities
of imports) are also used, either for economic or political
reasons
Trade liberalisation
• Trade liberalisation is the process of taking
down the barriers to trade between nations,
removing quotas and tariffs
• Makes markets more competitive
• Creates opportunities for business
• Consumers ultimately benefit because
liberalised trade can help to lower prices and
broaden the range of quality goods and
services available.
• Companies can benefit because liberalised
trade diversifies risks and channels resources
to where returns are highest.
• When accompanied by appropriate domestic
policies, trade openness also facilitates
competition, investment and increases in
productivity
The Organisation for Economic Co-operation and
Development (OECD) organisation of 34 countries formed in 1961
to stimulate economic growth and world trade
If G20 economies reduced trade barriers
by 50%, they could gain:
More jobs: 0.3% to 3.3% rise in jobs for
lower-skilled workers and 0.9 to 3.9% for
higher-skilled workers, depending on the
country.
Higher real wages 1.8% to 8% increase in
real wages for lower-skilled workers and
0.8% to 8.1% for higher-skilled workers,
depending on the country.
Increased exports: All G20 countries
would see a boost in exports if trade
barriers were halved. In the long run,
many G20 countries could see their
exports rise by 20% and in the Eurozone
by more than 10%.
From the OECD
Globalisation
• After WW2 Western economic integration grew in response to
a dynamic new world demand for goods and services
• MNEs have driven globalisation by growing and organising
themselves into transnational networks
• This is in response to intense international competition
driving the need for strategic and collaborative links between
companies
• In a globalising world economy national boundaries are
reduced and barriers to trade are removed (trade
liberalisation) to the benefit of consumers
• Video from WTO here (try not to laugh at pronunciations)
World Trade Organisation
• Encouraged by reduction of trade barriers by WTO (World
Trade Organisation)
• Exists to reduce barriers to trade and to ensure that
countries keep to the agreements they have made
• The organisation also deals with complaints between
members, organising negotiations and, if necessary, making
judgements against a country
• WTO agreements can mean that customs unions and single
markets must sometimes reduce their external barriers to
trade
• It encourages trade liberalisation by operating a system of
trade rules and by providing a forum for the negotiation of
trade disputes
• Watch the video “trade matters to me” on this page here
POLITICAL CHANGE
Political
change
•
How has political change led to globalisation?
• Politics used to be carried out by
individual governments who wanted to
protect the interests of their country.
• Politics now happens on a global scale
with regular meetings between heads of
state, summits, power devolved to
governments in trading blocs such as
the EU and organisations such as the
WTO.
•
What has the impact of political change been on
business?
• This has lead to less protectionist
policies (tariffs quotas etc) and more
open trade between nations. The
planet is now one market.
The picture above shows:
The 35th Ordinary meeting of the
Summit of the Heads of State and
Government of the Southern African
Development Community (SADC) was
held at the Gaborone International
Convention Centre in Gaborone,
Republic of Botswana 2015
The theme this year was the
acceleration of industrialisation in the
region.
Name all the leaders and their country
Who are these two and what are they
discussing?
Which countries and which group?
What group is this?
What is this and where is it?
Last one – what group is this?
REDUCED COST OF TRANSPORT
AND COMMUNICATION
Reduced cost of transport and
communication
•
How has the reduced cost of transport and
communication led to globalisation?
Communications. Television, mobile phone technology
and the internet have allowed information and ideas to
travel quickly.
UK businesses can have a call centre in India
answering calls from UK customers.
Transport has become cheap and quick.
UK citizens can now go on holiday all over the world.
People from other countries can travel to the UK to
seek better paid jobs.
Businesses can ship products and raw materials all over
the world more easily - making products and services
from all over the globe
available to UK customers.
•
What has the impact of the reduced cost of
transport and communication been on business?
Large containers now means that it is possible to
reduce costs so that UK business can produce goods
overseas and still be competitive
INCREASED SIGNIFICANCE OF
GLOBAL (TRANSNATIONAL)
COMPANIES
Increased significance of transitional
companies
• How has the increased significance of transnational companies led to
globalisation?
• Transnational flows of goods and capital have driven globalisation during
recent years. These flows have been made possible by the gradual
lowering of barriers to trade and investment across national borders, thus
allowing for the expansion of the global economy.
• TNCs use cheap labour in LEDCs such as China or Africa to mass produce
goods for a global market. TNCs spread globalisation through heavy global
advertising.
• What has the impact of the increased significance of transnational
companies been on business?
• The lack of minimum wage means this keeps costs low, which gives the
TNC productive efficiency and high profits. They use this to invest in new
technology and product innovation to crush the competition. Domestic
businesses fail to flourish in the same industries; beverages, consumer
electronics, fast food and apparel.
Revenue of the big 4*match the
revenue to the company
• Revenue$182.75 billion
• Revenue $25.3 billion
• Revenue $46.854 billion
• Revenue $28.1057
GDP of poorer nations
How do these
GDP figures
compare with
the revenue
figures of the
TNCs?
INCREASED INVESTMENT FLOWS
(FDI)
FDI increased investment flows
• How has FDI led to globalisation?
• Businesses outside of an important market trading blocs will invest
in a business or set up production inside the trading bloc to get
round tariffs. For example Honda, Nissan and Toyota manufacturing
in the UK. This has lead to globalisation, more companies in more
countries.
• What has the impact of FDI been on business? Can have a
damaging effect on domestic producers, competition and possible
loss of production for domestic rivals, loss of control over key
industrial sectors.
• Positive impact: Can give a country income generation, jobs, GDP
growth, skills transfer, and the local businesses will experience the
multiplier effect etc.
• Video animation here on Africa and FDI here
MIGRATION (WITHIN AND
BETWEEN ECONOMIES)
Migration
• How has migration led to globalisation?
• Many countries maintain extensive legal barriers to prevent
foreigners seeking work or residency from entering their national
borders.
• Immigration policies across the world are becoming stricter as
governments attempt to minimize the economic, cultural, and
security impacts of large movements of people between nations.
• EU there is free movement of people between nations to work
• What has the impact of migration been on business?
• Many TNCs move to LDCs and therefore are moving the jobs to the
migrants rather than the other way round.
• Immigration provides a source of low income workers for the host
nation as well as a pool of young able bodied skilled workers e.g.
nurses
STRUCTURAL CHANGE
Structural Change
• How has structural change led to globalisation?
• Rise of new economic powers has been driven by a shift for LDCs to
secondary sector activities from primary activities such as mining
and agriculture.
• What has the impact of structural change been
on business?
• Manufacturing is often labour intensive which generates jobs
income and demand for the nation
• Examples are Japan in the 1960s went through a period of
industrialisation followed by Taiwan, Singapore and now China.
• Video on the impact of structural change for Turkey a move away
from farming and into manufacturing here
Sample question 1
10 marks – requires a conclusion – assess in this
question means weigh up and give an opinion
about benefits ONLY. Case study on next slide
Knowledge 2
Marks
Analysis 3
Marks
Evaluation 3
Marks
Application 2
Marks
Answer question 1
How to Level question 1
Sample question 2
12 marks
Answer question 2
e.g. impact on economy such as consumer choice/prices, jobs,
Brazilian businesses and government taxes
e.g. 2000 jobs created, income generation leading to
economic growth.
e.g. Technology and skills transfer from ZTE may lead to
improved domestic businesses and economic growth in Brazil.
e.g. damaging effect on domestic producers, competition and
possible loss of production for domestic rivals, loss of control
over key industrial sectors.
e.g. employment created may be only temporary or of menial
variety,
profits repatriated, limited technology and skills transfer.
May depend if the FDI is short or long term and how extensive
it is
Sample question 1
6 marks
3 marks max per reason
Why does the Croatian Govt. offer money for
FDI?
Read case on next slide
Why You Should Choose to Invest in Croatia
Strong Points
Croatia has a number of strong points:
• An advantageous geographical location along the Adriatic Sea;
• A skilled multilingual workforce;
• Good quality infrastructures: Croatia continues to invest heavily in transportation,
telecommunications and energy infrastructures.
Weak Points
Croatia still has to face a number of challenges in order to become competitive:
• the country suffers from certain structural weaknesses amongst which are the
current account imbalance, a significant private foreign debt and a trade deficit
• the country also has an image problem. It is more known for tourism than as and
investment opportunity. Croatia is also suffering from a backlash of years of war;
• the legal and administrative systems are slow and could use some improvement.
Government Measures to Motivate or Restrict FDI
Croatia is open to foreign investment. The government has committed itself to
increasing foreign investment and has taken measures to improve the investment
climate in the country, for example, depending on the type of activity (manufacturing,
technology centres, supporting services), through tax reductions and employment
incentives. Amongst the main measures established by the government, in particular:
• Equal treatment of nationals and foreigners;
• Low company administrative fees;
• Laws protecting intellectual property.
Answer question 3
Revision Video
Glossary
Liberalisation; The removal or reduction of restrictions or barriers on the free
exchange of goods between nations. This includes the removal or reduction
of both tariff (duties and surcharges) and non-tariff obstacles (like licensing
rules, quotas and other requirements).
Transnational; A multinational company that works across national
boundaries
FDI; Foreign Direct Investment is a controlling ownership in a business
enterprise in one country by an organisation or business based in another
country.
Migration; Human migration is the movement by people from one place to
another with the intention of settling temporarily or permanently in the new
location.
Structural change; refers to a long-term shift in the fundamental structure of
an economy, which is often linked to growth and economic development. For
example a primary sector nation (farming, fishing etc.) moves into becoming a
secondary sector nation through manufacturing.