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Chapter 5

Globalisation

5.1 Definition

‘the growing economic interdependence of countries worldwide through
increasing volume and variety of cross-border transactions in goods
and services, free international capital flows, and more rapid and
widespread diffusion of technology’.(IMF)

 Make the distinction between

– Internationalisation - increasing spread of economic activities

– Globalisation – involves greater integration and convergence

5.2 Factors driving globalisation

 Improved communications E.G. The internet and mobile telephony.
ICT allows longer supply chains

 Political realignments E.g. Political change in China

 Growth of global industries E.g. McDonalds and Coca Cola
and firms

 Cost differentials E.g. off-shoring to save costs

 Trade liberalisation E.g. removal of trade barriers (WTO)

 Liberalisation of international E.g. developing countries have much
capital markets greater access to capital for funding growth

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