Globalisation Essay

Globalisation Essay

1. Examine the factors that have lead to the global economy become more integrated in the last 20 years?

It all started 20 years ago when little firms where created and started to produce products. At first they produced as much products as they would be able to sell in the town where they produced it. If the demand for the product is high enough it and current sales produce enough profit, a firm can think of expanding. Expanding means to invest in new machinery or build new factories. So after a firm has increased its supply they can start thinking about exporting it to the next town or even to another country. Imagine 20 years ago transporting goods wasn’t as fast and affordable as it is today. For example food would have to be transported within days and would have to be chilled all the time. Technology wasn’t that powerful and efficient back then. But still a company could export their products with the help of trains, trucks or even planes. Exporting means that you use the resources from your town or country, bring them to the factory, which then produces the product.

The next step to globalisation would be to transport the raw materials into the country where you would like to sell them. In the destination country you would have to build a factory that uses the raw materials to produce the products, which you then can sell on the market. Advantages of this are that it is easier to ship raw materials than finished products that have to be handled with care. Your company could benefit from cheaper labour although this might not always be the case. Because if labour is cheap, real income will be rather low, which will mean that there will be no potential buyers for the product. A company could also benefit from cheaper land or cooperate taxes in the destination country. Import taxes could be less, which means that barriers to entry the market would be lower.

A company always seeks for the most efficient...