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Globalisation

Business: Cambridge International GCSE (2027 Exams), topic 6.3.1

Globalisation - Benefits

Globalisation is the process where people, businesses, governments and markets around the world become more connected. Technological advances and free trade movements have increased globalisation a lot in the last 50 years. Some benefits of globalisation are:

Single global market

Single global market

  • The emergence of a single global market has meant that UK companies are no longer competing with just other companies in the UK, but also companies all over the world.
  • They can access more consumers and have more growth opportunities, but also face more competition.
Reduce costs

Reduce costs

  • UK businesses can import cheaply from other countries where rent or labour costs may be lower. This may enable the businesses to cut costs and increase profits.

Globalisation - Drawbacks

There are some drawbacks to globalisation for UK businesses:

Increased competition

Increased competition

  • A global market has created higher levels of competition. More competition usually has a negative effect on profits.
  • If a business charges a higher price, then customers may just buy competitors’ products instead.
  • If foreign competitors are better at producing high quality goods then UK businesses could suffer from a fall in demand and sales.
  • This has happened to the UK car industry in the last 30 years. Manufacturers from Japan (Toyota), Germany (BMW) and the USA (Ford) have all competed with UK car manufacturers like Rover.
High UK wages

High UK wages

  • Many foreign companies have taken advantage of the fact that there are higher wages in the UK. This has meant that other companies can produce goods and provide services of a similar quality to UK goods and services for a much cheaper price.
  • This means that UK companies are less able to compete on price. While this is good for consumers, it isn't good for the profits of UK businesses.
Ethical issues

Ethical issues

  • There are ethical issues involving the working conditions in developing countries.
  • Some UK businesses outsource labour to many developing countries in places like sweatshops.
Fluctuating global economy

Fluctuating global economy

  • UK businesses become more dependent on the state of the economy in foreign countries. If there is a recession in other countries, this may affect the sales of UK businesses.
Tariffs and import quotas

Tariffs and import quotas

  • Tariffs are taxes on imported goods.
  • Import quotas are limits on how many goods can be imported.
  • Governments may use tariffs and quotas to:
  • Protect local businesses from foreign competition.
  • Encourage people to buy local products.
  • Create jobs and boost the economy.
  • Raise money (in the case of tariffs).
  • Reduce how much a country depends on imports.

Test yourself on Globalisation

  • What are some benefits of globalisation?

  • How has globalisation impacted UK businesses and companies?

  • Which of the following is not a consequence of a single global market?

  • What are some drawbacks of globalisation for UK businesses?

  • If there is a recession in another European country, UK businesses will likely see a negative impact on their profits. This is due to which drawback of globalisation?

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