Explain what is meant by the term globalisation. Identify and analyse the key drivers of the process of globalisation over the last twenty years.
During the mid 1990’s the International Monetary Fund has defined globalisation as: ‘The growing interdependence of countries world-wide through the increasing volume and variety of cross-border transactions in goods and services and of international capital flows, and also through the more rapid and widespread diffusion of technology’ (Turner, 2006). Over the years, this interdependence of countries worldwide has increased dramatically. An indication of this has been the increase in the number of domestic and foreign strategic alliances by six times during the period 1989-1999 (Nam-Hoon Kang, Organisation for Economic Co-operation and Development, 2001). This change clearly indicates how companies from all over the world interact with each other and form partnerships in response to the phenomenon of globalization. The main drivers that have helped globalization to expand and deepen over the past years have been technological revolutions such as the widespread use of Internet and the ease of trans-boundary travelling, the creation of international institutions that encourage free trade by removing trade barriers, the establishment of multinational corporations which seek to increase their profits by taking advantage of what globalisation has to offer (Economics for business 5th edition John Sloman p. 498) and last but not least the change of governments’ policies towards deregulation and privatisation (Development in Practice Taylor & Francis p.524). This study aims to outline and examine these key drivers that made it possible for globalisation to evolve. The study will also focus on the magnitude of the drivers with relation to globalisation.
“Globalisation is both a result and a force of modernisation and capitalist expansion, entailing the integration of all economic activity (local, national, and regional) into a 'global' market place: that is, a market place that transcends geopolitical borders and is not subject to regulation by nation states.” (Development in Practice Taylor & Francis p.524)
Technological revolutions are viewed by many as one of the key drivers of globalisation. (Bradley 1993, Dicken 1992). Firstly, the reduction in transportation costs and the ability to communicate freely and easily due to the advances in technology have caused tourism to rapidly grow over the years (Tourism in the age of globalisation Salah Wahab, Chris Cooper p.320). Most importantly, not only individual people as passengers were benefited by the lower transportation costs. In the last half of the twentieth century, the price of transporting products worldwide has fallen dramatically due drops in the cost of air travel, the containerization and increasing ship size (Chrystal, 2007, p. 11). Containers have the ability to move non-fragile goods at the cost of 1% of retail value to any place. In the past years, when the transportation of goods was done through shipping before containers were invented, the cost involved used to be around 10%-20% of retail value.(by BCRA) The striking difference in cost indicates the new potential for transfer of goods at increased quantities at a faster and cheaper rate from one place to another. In addition to this, the rapid grow of communications, especially through Internet has added significant strengths to globalization (Economics of globalisation By Partha Gangopadhyay, Manas Chatterji).The Internet has provided a powerful and cheap tool for sharing of information on goods and services through the form of advertising. This helped firms to boost their sales since they can target a bigger range of potential customers at a very low cost. The trends clearly show a constant increase of Europeans e-commerce sales from 2006 to 2011, reflecting a similar increase in the corporations that are investing in the e-business...
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