Factors Contributing to Increased Globalisation (Edexcel A Level Business)

• Increased international trade allows businesses to increase their market size
  • This leads to increased output and countries can benefit from economies of scale
     
• Freer trade helps businesses to 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

Political change

• 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 exports

Reduced cost of transport and communication

• Economies of scale due to innovation in containerisation on large ships has reduced business costs
  
• Technological advancements due to the internet/mobile technology have improved made it easier for buyers and sellers to connect with one another 

Increased significance of transnational companies

• A transnational company is a business that operates in more than one country
• They will have their headquarters in one country but have other branches in other countries
  • E.g. Nike has its headquarters in Oregon, United States. As of 2022, they have 1046 retail stores throughout the world
• With increasing numbers of transnational companies operating globally, there is an increased pressure by countries to engage in free trade

Increased investment flows (FDI)

• 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 (within and between economies) 

• 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%

Growth of the global labour force

• 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 in work 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

Structural change

• This occurs when a country, industry or market changes which sector of industry they operate in
  • E.g. the UK has shifted from the manufacturing sector to the tertiary sector over the last 50 years
  • Offshoring is common practice and speeds up the process of globalisation