Globalisation

Globalisation is the widening of companies around the world

Four significant developments have helped this scaling up:

The appearance of large transnational corporations (TNCs) with diverse business interests literally spread across the globe.

The growth of regional economic or trading blocs, such as the European Union (EU) and the North American Free Trade Agreement (NAFTA). By encouraging free trade between member countries, the barrier effects of national boundaries are broken down.

The development of modern transport networks (air, land and sea) capable of moving people and commodities quickly and relatively cheaply. Due mainly to the aircraft, physical distances worldwide are much less important. We live in a ‘shrinking world’.

Advances in information technology and communication technology and communication technology mean that important data and decisions can be whizzed around the globe in a matter of seconds. A TNC with its headquarters in London or another major city can closely monitor markets trends around the world. It can easily be checked on what is happening in its branch offices and factories scattered around the world.

The outcome of these developments is today’s global economy. The workings of the global economy involve five different forms of flow

Trade- through the export or import of raw materials, food, finished goods or services

Aid- either as a donor or a received nation. Much aid is an economic nature

Foreign investment- through investment, TNC’s are able to exploit economic opportunities around the world, it might be oil in west Africa or sugar in Brazil

Labour- virtual to the workings of the global economy. Economic migration is commonplace these days as people move in search for work and a better life. TNC’s are on the look-out for cheap labour

Information- fast transfer of data and decisions are crucial to the workings of the global economy.