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Simple explanation of Globalisation
Globalisation is the process by which there is greater international interdependence between countries.
Greater international interdependence
Greater international interdependence (a result of globalisation) leads to:
- An increase in outsourcing
- Large sums of money being transferred from one country to another (due to regular imports and exports)
Factors that contribute to globalisation
- Improvements in transport, such as ships and planes: Goods can be traded competitively worldwide
- Improvements in ICT: Payments can be sent between countries immediately.
- Rising living standards: Increasing consumer demand for a wider range of worldwide goods because consumers have more disposable income to spend (disposable income is income remaining after tax, available to spend or save).
- Decline in protectionism: Countries encouraged to trade so there are fewer barriers to trading. International trade organisations help achieve this, the main organisations are the World Trade Organisation (WTO) and the International Monetary Fund (IMF).
- Economies of scale: Companies mass-produce and sell to a larger market.