Edexcel A2 Business

4.1.3 Factors contributing to

increased globalisation

Revisionstation
 Theme 4 Retrieval Challenge Matrix
1 point 2 points 3 points
Give an example of an import Describe the term Name all the BRICS
‘employment patterns’

Give an example of an export Compare the usefulness of Name all the MINT countries
GDP per capita and health as
two indicators of growth

What does HDI stand for? Describe the term ‘economy’ Explain the link between
specialisation and competitive
advantage
You will need worksheet 4.1.3 for this lesson
From Edexcel

a) Reduction of international trade barriers/trade liberalisation

b) Political change
c) Reduced cost of transport and communication
d) Increased significance of global (transnational) companies
e) Increased investment flows (FDI)
f) Migration (within and between economies)
g) Growth of the global labour force
h) Structural change
Starter
• Which one of these factors has not influenced globalisation?

1. Communication systems
2. Fishing
3. Television
4. Internet
5. Smartphones
Definition: Globalisation
• Globalisation is the process by which the world is becoming
increasingly interconnected as a result of massively increased trade
and cultural exchange.
• The biggest companies are no longer national firms but multinational
corporations (MNCs) with subsidiaries in many countries.
• Global markets are international markets created by firms exporting,
importing or offshoring. (Edexcel)
Factors contributing to increased
globalisation introduction
• If globalisation is the interconnection of countries, then the factors
that have lead to an increase in this connectivity are:
a) Reduction of international trade barriers/trade liberalisation
b) Political change
c) Reduced cost of transport and communication
d) Increased significance of global (transnational) companies
e) Increased investment flows (FDI)
f) Migration (within and between economies)
g) Growth of the global labour force
h) Structural change
Reduction of international trade barriers/trade
liberalisation
Definition: Trade liberalisation
Trade liberalisation is the process by which
international trade is made easier through relaxation of
tariffs and barriers. This is the opposite of
protectionism.
Trade liberalisation a quick history lesson
• In 1947 General Agreement on
Tariffs and Trade (GATT) was
created
• The world felt the benefits of
many rounds of multilateral trade China and India experienced rapid growth
liberalisation through GATT

• It raised living standards around

the world as it allowed developing
nations to export their goods to
more industrialised ones, without
having to pay huge tariffs
Benefits of GATT
• GATT meant new jobs for
unskilled workers
Garment industry in India was very successful
• Countries enjoyed trade benefits
of between $250 and $680
billion dollars income a year *
• Labour intensive production
manufacturers in developing
nations, enjoyed comparative
advantage because of low labour
costs
World trade organisation (WTO)
• WTO was created by GATT in 1994 and
exists to reduce barriers to trade and
to ensure that countries keep to the
agreements they have made
• The organisation also deals with
complaints between members,
organising negotiations and, if
necessary, making judgements against
a country
• It encourages trade liberalisation by
operating a system of trade rules and
by providing a forum for the
negotiation of trade disputes
Trade liberalisation – why tariffs are imposed
• Governments want to protect their
domestic businesses so they use;
tariffs, quotas and legal regulations to
slow the rate of imports coming into a
country
• They might want to stop imports
which will food the market with
cheaper foreign versions
• Tariffs also generate important
sources of income for poorer countries
• Liberalisation is the easing or dropping
of tariffs and quotas
Benefits of trade liberalisation
• Trade liberalisation is the process India, Vietnam and Uganda have opened their
of taking down the barriers to economy in recent years
trade between nations,
removing quotas and tariffs
• Consumers ultimately benefit
because liberalised trade can
help to lower prices and broaden
the range of quality goods and
services available – because they
are now allowed to buy
imported goods
Benefits to business of trade liberalisation
• Companies can benefit because
liberalised trade diversifies risks and Since GATT Uganda has been able to
channels resources to where export their coffee all over the world
returns on investment are the
highest
• Trade openness also means;
competition, investment and
increases in productivity
• The main industries in Uganda that
have benefitted: Sugar ,
beverages, tobacco , cotton textiles,
cement and steel production
Drawbacks of trade liberalisation
• Competition can intensify between
businesses, between nations and profit
margins can end up being squeezed
• Employment that has been created by
lower trade barriers, may only be
temporary or menial
• Increased trade can mean pollution or
over-cultivation of land to keep up
with new demand
• Developing nations can become
economically dependent on
industrialised ones
Political change
How political change has led to increased globalisation of markets

• Politics used to be only carried out by

individual governments who wanted to
protect the interests of their country
• Politics now happens on a global scale with
regular meetings between heads of state,
at summits (meetings), where power is
devolved to governments in trading blocs
such as the EU and organisations such as
the World Trade Organisation (WTO)
• This has led to less protectionist policies
and more open trade between nations.
• What might these protectionist policies
be?
Research: The WTO
• The World Trade Organisation
(WTO) is the only global
international organisation dealing
with the rules of trade between
nations.
• At its heart is the WTO agreements,
negotiated and signed by the bulk
of the world’s trading nations and
ratified in their parliaments.
• Find out the impact on businesses
of the work of the WTO HERE
Who are the G7 countries?
• The Group of 7 (G7) is a group
consisting of Canada, France, Germany,
Italy, Japan, the United Kingdom and the
United States.
• These countries are the seven major
advanced economies as reported by
the International Monetary Fund: the
G7 countries represent more than 64%
of the net global wealth ($263 trillion).
• A very high net national wealth and a
very high Human Development
Index (HDI) are the main requirements
to be a member of this group. What is a ‘summit’?
Reduced cost of transport and
communication
Globalisation caused by – reduced cost of
transport
• Developments in transport, for example jet
aircraft and container ships, have reduced the
cost of transport per unit, so products are
affordable for customers in foreign nations
making trade between nations more realistic
• The physical distance between countries is
unchanged, but cheaper transport and
communications increase connectivity and
reduce the time taken for goods to arrive, so
shrink the world in trade terms
Globalisation caused by – the reduced cost of
communication
• Communication and trade via the
Internet has meant an explosion
in globalisation and has been a
huge catalyst for change
• Messages can be sent instantly
and for free via
telecommunications systems
such as e-mail or Skype
• Far away countries are no longer
isolated from the global How do Satellites help to reduce the cost of
communication?
marketplace
Increased significance of global
companies
Globalisation caused by – increased
significance of MNCs
• Globalisation has been caused
by some large companies setting
up or buying existing businesses
in other countries
• These businesses that operate in
other countries are called MNCs
and are from the developed
countries (G7)
• E.g. Starbucks, Coca-Cola
Starbucks in Egypt
 Revenue of the big 4*
Task - match the revenue to the company
• Revenue $365 billion

• Revenue $37.4 billion

• Revenue $37.27 billion

• Revenue $21 billion

GDP of poorer nations

How do
these GDP
figures
compare
with the
revenue
figures of
Increased investment flows
Definition: FDI flows
• FDI stands for Foreign Direct Investment. A FDI flow is the movement
of investment across borders. The FDI may be in the form of buying a
foreign company, buying shares in a foreign company or investing in a
foreign company.
Globalisation caused by - FDI
• Businesses located outside of important
market trading blocs will invest in a
business or set up production inside the
trading bloc to get around tariffs, e.g.
Honda, Nissan and Toyota
manufacturing in the UK
• This has led to globalisation, more
companies in more countries
• FDI can give a country more consumer
income, jobs, GDP growth, skills
transfer, and the local businesses will
also benefit from having customers with
money to spend
Migration
Definition: Migration
• Human migration is the movement of people from one place to
another with the intention of settling permanently in a new location.
Globalisation caused by - migration
• Migration can be within a country
(from one town to another) or
between countries
• Migration is the movement of
people from one place to another
with intentions of settling
permanently in the new location
• Migration provides a welcome
source of able-bodied workers for
businesses
Growth of the global labour force
Globalisation caused by – Global labour force
• A global labour force is an
international pool of workers,
emerging since globalisation and
includes those who are:
A. Migrant workers
B. Working in export
C. Employed by MNCs
D. Employed by offshoring
companies
• The global labour force is around
3 billion workers worldwide
Structural change
What is structural change?
• Structural change is an economic
condition that occurs when an industry
changes the way it operates
• As a country develops it moves away
from primary sector business and
employment (agriculture) to
manufacturing as it becomes
industrialised
• It can further develop into a knowledge
economy – such as the UK – which
specialises in tertiary businesses such
as; banking, IT services and insurance
Globalisation caused by – structural change
• The countries that are able to
pull themselves out of poverty
are those that move away from
primary sector business
(agriculture)
• The economy grows as there is
more productivity in the
secondary sector –
manufacturing increases and net
incomes rise
Plenary Quiz
• Define these terms

Structural change
FDI
Migration Summit
WTO
Gatt Globalisation
Sample Edexcel A2 questions
Case study for question 1
 Sample question 1

Knowledge Application Analysis Evaluation

2 2 3 3
Answer sample question 1
 Peer / self marking grid for 10 mark
Mark
question
1-2 marks Limited knowledge and some recall of business theory, answer may not be in context
What went well: You used business terms correctly
Even better if: You had discussed the business context given in the case study
3-4 marks Comments are in context, and chains of reason are present but very basic. Unbalanced
argument, only discusses one side.
What went well: You were able to give chains of reason in context in your answer
Even better if: You had given both sides of the argument
5-6 marks Chains of reason are complete and argument shows both sides. Answer is in context, an
attempt at a assessment using numerical data given in the case study.
What went well: Your analysis was shown in your chains of reason
Even better if: You had reached a supported judgement
7-10 marks Accurate understanding and knowledge. Logical chains of reason, balanced argument, in
context leading to a supported judgement
What went well: You had logical chains of reason showing cause and effect which led to a
supported judgement
Even better if: You had used more numerical data from the case study to support your
arguments
Case study for question 2
 Sample question 2

[12]

Knowledge Application Analysis Evaluation

3 3 3 3
Answer sample question 2
e.g. impact on economy such as consumer choice/prices, jobs, Brazilian
businesses and government taxes
e.g. 2000 jobs created, income generation leading to economic growth.
e.g. Technology and skills transfer from ZTE may lead to improved
domestic businesses and economic growth in Brazil.
e.g. damaging effect on domestic producers, competition and possible
loss of production for domestic rivals, loss of control over key industrial
sectors.
e.g. employment created may be only temporary or of menial variety,
profits repatriated, limited technology and skills transfer.
May depend if the FDI is short or long term and how extensive it is
 Peer / self marking grid for 12 mark
Mark
question
1-2 marks Limited knowledge and some recall of business theory, answer may not be in context
What went well: You used business terms correctly
Even better if: You had discussed the business context given in the case study
3-4 marks Comments are in context, and chains of reason are present but very basic. Unbalanced
argument, only discusses one side.
What went well: You were able to give chains of reason in context in your answer
Even better if: You had given both sides of the argument
5-8 marks Chains of reason are complete and argument shows both sides. Answer is in context, an
attempt at a assessment using numerical data given in the case study.
What went well: Your analysis was shown in your chains of reason
Even better if: You had reached a supported judgement
9-12marks Accurate understanding and knowledge. Logical chains of reason, balanced argument, in
context leading to a supported judgement
What went well: You had logical chains of reason showing cause and effect which led to a
supported judgement
Even better if: You had used more numerical data from the case study to support your
arguments
Case study
for
question 3
 Sample question 3

Knowledge Application Analysis Evaluation

2 2 2 2
Answer sample question 3
Peer / self marking grid for 8 mark
question
Mark
1-2 marks Limited knowledge and some recall of business theory, answer may not be in context
What went well: You used business terms correctly
Even better if: You had discussed the business situation in the case study
3-5 marks Comments are in context, and chains of reason are present but very basic. Unbalanced
argument, only discusses one side.
What went well: You were able to give chains of reason in context in your answer
Even better if: You had given both sides of the argument
6-8 marks Chains of reason are complete and argument shows both sides. Answer is in context and
uses numerical data to support where appropriate.
What went well: You gave a balanced argument in your answer
Even better if: You had used more numerical data to support your arguments
Key terms
Liberalisation; The removal or reduction of restrictions or barriers on the free
exchange of goods between nations. This includes the removal or reduction of both
tariff (duties and surcharges) and non-tariff obstacles (like licensing rules, quotas
and other requirements).
Transnational; A multinational company that works across national boundaries,
another name for a MNC or multi-national corporation
Migration; Human migration is the movement by people from one place to another
with the intention of settling temporarily or permanently in the new location.
Structural change; refers to a long-term shift in the fundamental structure of an
economy, which is often linked to growth and economic development. For example
a primary sector nation (farming, fishing etc.) moves into becoming a secondary
sector nation through manufacturing.