Globalisation is a term we often use. But what is behind it?
Globalisation is the growing integration of the world’s economy. This means that national economies are becoming integrated into one global economy. There is interdependency between national markets, so changes in one part of the world affect all the other parts. This also means, that there are interrelationships between related businesses throughout the world, so businesses do not think “locally” any more, they base their decisions on expected changes in the world economy.
Globalisation is definitely not a new phenomenon. It has always existed since the world economy started to take shape. So we can say it started with the discovery of the continents. But the carriers of globalisation are not the sovereign nation-states but the trans-national enterprises. There are some aspects of globalisation:
- The growing importance of international trade: between 1980 and 1990 the volume of international trade has almost doubled.
- The rise of multinational business: There are lashings of multinational companies which we can see all around the world. The products they sell are similar in all countries. Examples: Coca-Cola, Ford, IKEA.
- The emergence of businesses which think globally about their strategy
There are some factors which contribute to the growth of globalisation:
- Technological change: there is a huge development in the information technology. The Internet and mobile communication provides fast flow of information, which helps businesses in the growing competition.
- Decreasing transport costs: the development of technology allows vehicles, machines etc. To operate more economically.
- Deregulation of business: many companies were privatised, and many of them started to operate in foreign countries, meaning competition for domestic businesses.
- Liberalisation of trade: protectionism and tariffs etc. are abolished between many countries
Globalisation has many effects on businesses. Below are some you should know about:
- Growing competition, hypercompetition: many businesses have entered the global market. Hipercompetition is the term we use to describe competition in the new global economy.
- Deregulation brought competition to many businesses which did not face competition before
- Economies of scale: businesses, who entered the global market are able to enjoy the benefits of larger scale of operations. So they can reduce unit output costs through spreading fix costs over a larger volume of output.
Beside globalisation it is necessary to mention regionalism, which might be interpreted as a side-effect of globalisation. Regionalism is not a new phenomenon either. But nowadays regionalism is different from the regionalism of the late 50’s and 60’s:
- The world economy nowadays is more liberalised than in the 50’s and 60’s was. Building up a regional customs union is not the aim any more.
- The current regional groupings are made up of countries of different level of development an economic potential. The countries which are not so developed hope to boost their economy through regional co-operation with a more developed country.
- And the USA is more likely to co-operate with neighbour countries
These were the most important things about globalisation. It might be useful to think over the effects of globalisation on you, your environment or on your country ect. These are questions you’ll might have to face on the exams..
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