MNCs (Multi-National Companies) are large and powerful firms that produce and sell in multiple countries.
Reasons for Globalisation:
- Technological advancement have meant data can be sent around the world instantly. This allows for very fast communication.
- Faster and cheaper transport has allowed for goods to be transported without much cost which has allowed goods to be produced and sold in multiple countries.
- Government regulation such as privatisation, lowering barriers to entry and simplification of the legal and money system has allowed for international trade be become easier.
- Tourism- the rise of tourism has increased demand for companies to sell in multiple countries.
- FDI (foreign direct investment) and development aid has allowed businesses to grow and stretch out globally with the help of these investments.
- MNCs - can take advantage of larger markets which lead to economies of scale and are also able to cut costs by sourcing for material globally.
- Developed countries may suffer from deindustrialisation where factories move to other countries. However, FDI increase meaning firms can grow. They also benefit from lower prices, greater choice and increase in the quantity of labour.
- Developing countries may benefit from increased FDI and development aid which means more spending on infrastructure. However, they are often prevented from producing high value items due to barriers of entry so are forced to remain producing commodities which have prices that fluctuate greatly. E.g. oil
- The development gap widens as developed countries move to produce high value items while less developed countries are stuck producing primary resources.
- Increased consumption from globalisation leads to an increase in production of goods which puts stress on the environment to provide the resources needed for these goods.
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