9: Globalisation 

The concept of Globalisation: Some firms expect to sell their products anywhere in the world. Firms and people are behaving as if there is just one market or one economy in the whole world. Globalisation which is often defined as the growing integration of the world’s economies. Goods and services are traded freely across international borders People are free to live and work in any country they choose which has resulted in an increase in multicultural societies There are high levels of interdependence between nations. The events in one economy are likely to affect other economies Capital can flow freely between different countries There is a free exchange of technology and intellectual property across borders

Reasons for Globalisation:

• Developments in technology have helped globalisation gather pace. Modern computing allows firms to transform complex data instantly to any part of the world and consumers are able to buy products from anywhere
• International transport networks have improved which means people can travel to business meetings more easily and goods can be transported cheaply
• There has been a huge amount of deregulation and privatisation has allowed more competition in many industries as many economies opened up and many government simplified their legal system to make international trade easier
• An increase in tourism has helped globalisation thrive as consumer’s tastes changed from their experience abroad which led them to be more willing to try goods and services from other countries
• Many firms want to sell abroad due to domestic markets becoming saturated. Some markets are dominated by large multinationals, they benefit from having international markets are producing goods anywhere at lower costs

Government and Globalisation: Countries can’t trade if the government keeps international borders closed International trade will be so limited if governments put up trade barriers People cannot be free to live and work in overseas countries unless borders are kept open Firms can develop their businesses overseas if planning permission is denied Opportunities of Globalisation for businesses: Access to larger markets: One of the most important benefits is the access to huge markets. This provides a huge opportunity to increase sales. As well it provides growth opportunities and higher sales revenue and an increase in profit.

Lower costs: If businesses are able to grow by selling more output to larger markets, they may be able to lower their costs. As they can exploit economies of scales. This way businesses will become more competitive which helps them increase sales and raise profit margins.

Access to labour: Free movement of labour. This means that people are free to move around the world and find employment in other countries. As a result the business will have larger labour Globalisation helps boost domestic labour by the help of labour from overseas. As well it means they have more options to recruit from and they are able to recruit high quality workers which improves productivity. A rising labour supply might help prevent wages from rising - lower costs Can recruit highly skilled staff from anywhere in the world

Reduced taxation: They can reduce the amount of tax they pay by locating their head office in a country where business taxes are low

Threats of Globalisation to businesses: Competition: Businesses will face increased competition. As more companies try to sell their products across the world some businesses will have their survival threatened. Often the companies that are able to exploit globalisation are strong, well-resourced and influential

International takeovers: With the free movement of capital, it is possible for a business to take over a business in another country. Some companies feel vulnerable to takeovers due to other predator companies existing and some experience hostile takeover.

Increased risk of external shocks: This means that the events in one economy are likely to affect other economies.