Globalisation (Cambridge International IGCSE Economics)
Exam board Cambridge International · IGCSEUpdated 2025-04-28
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6.2.1· Definition of globalisation
Globalisation
- Globalisation is the economic integration of different countries through increasing freedoms in the cross-border movement of people, goods/services, technology and finance
- This integration of global economies has impacted national cultures, spread ideas, speeded up industrialisation in developing nations and led to de-industrialisation in developed nations
- Globalisation has been increasing for thousands of years - it is not a new phenomenon
- Improvements in technology and the speed of global connections have exponentially increased the level of interdependence between nations in the past 50 years
- Consumers now source products globally recognising global brands wherever they travel
The Four Main Characteristics of Globalisation
- Increasing foreign ownership of companies
- Greater movement of labour and technology across borders
- Free trade in goods and services
- Easy flows of capital across countries
Multi National Corporations (MNCs)
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6.2.1· MNCs and the costs and benefits to their host and home countries.
- A multinational corporation is business that has production facilities in two or more countries e.g. Apple
- Globalisation has made it easier for firms to do business on a global scale and the number and size of MNCs continues to increase
- There are advantages and disadvantages linked to the economic activity of MNCs, both in their home country as well as in their host country
Advantages of MNCs
| Advantage | Impact on Home Country | Impact on Host Country |
|---|---|---|
| More Profit | MNCs earn profits from their operations abroad and often send this money back home, helping the home economy | Host countries get some benefit if profits are reinvested locally, but often lose some income |
| More Markets | Home country businesses can sell to new customers abroad, growing bigger and stronger | Host countries get more product choices and access to new technologies |
| Lower Costs | MNCs can produce goods more cheaply abroad and offer lower prices at home | Host countries may benefit from cheaper production and local job creation |
| Risk Reduction | MNCs can survive better if they sell in many countries. If sales fall in one place, they can rely on others | Host countries may experience more stable job markets if MNCs stay even during global downturns |
Disadvantages of MNCs
| Disadvantage | Impact on Home Country | Impact on Host Country |
|---|---|---|
| Job Loss | Some jobs move abroad where production is cheaper, leading to unemployment at home | Host countries may become too dependent on MNCs for jobs. If an MNC leaves, many people could lose their jobs |
| Poor Working Conditions | MNCs may be criticised at home for allowing bad working conditions abroad | Workers in host countries may face low wages and poor conditions |
| Unfair Power | MNCs might pressure home governments for favourable rules | In host countries, MNCs might influence politics and gain too much control |
| Damage to Environment | MNCs can be blamed for pollution caused in host countries | Host countries might suffer from environmental damage if rules are weak |
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