2.2.1 Globalisation

Definition of globalisation: increased integration and interdependence of economies.

Reasons for globalisation:

• fewer tariffs and quotas
• reduced cost of transport
• reduced cost of communication
• increased significance of multinational corporations (MNCs).

Impacts of globalisation and global companies on individual countries, governments, producers and consumers, workers and the environment:

• rising living standards
• greater choice
• lower prices
• reduced costs of communication
• closing of traditional industries
• environmental impact.

Definition of multinational corporations (MNCs):

• definition of foreign direct investment (FDI)
• reasons for emergence of MNCs/FDI:
  • to benefit from economies of scale
  • to access natural resources/cheap materials
  • lower transport and communication costs
  • to access customers in different regions.
• advantages and disadvantages of MNCs/ FDI:
  • creating jobs
  • investing in infrastructure
  • developing skills
  • developing capital
  • contributing to taxes
  • avoiding paying taxes
  • environmental damage
  • moving profits abroad.