Cambridge O Level Business Studies · Syllabus 7115 · External Influences on Business Activity
Globalisation
What is Globalisation?
The increasing integration and interdependence of markets, production and economies across countries, so that events and decisions in one economy transmit more rapidly and more strongly to others. It has been driven by cheaper and faster transport, improved communication, digital trade, reduced trade barriers, multinational investment and global supply chains. Globalisation is not the same as international trade, which is far older, nor the same as multinational ownership: a business can be deeply exposed to globalisation through its competitors and suppliers while operating in only one country.
This definition is part of the External Influences on Business Activity chapter in Cambridge O Level Business Studies.
Globalisation in context
Government policy, environmental and ethical expectations, and globalisation are external forces a business cannot control but must trace through to a specific effect on itself. A change in taxation, government spending or interest rates reaches a business's costs, prices, demand and cash flow by a different route each time. A private cost is paid by the business itself; an external cost falls on a third party outside the decision — residents living with pollution, for example. Appreciation of the home currency helps importers and hurts exporters, and depreciation does the reverse, so the direction of any exchange-rate effect depends on naming the currency and the firm's position.
Common mistakes with Globalisation
- “Globalisation means selling abroad.” Fix Exporting is international trade, which is far older than globalisation. Globalisation is the increasing integration and interdependence of markets, production and economies. It is also not the same thing as being a multinational: a firm can be deeply exposed to globalisation without owning a single overseas site.
Questions students ask about Globalisation
Is globalisation the same as a business exporting its products?
No. Exporting is international trade, which is far older than globalisation. Globalisation is the increasing integration and interdependence of markets, production and economies across countries, driven by cheaper transport, better communication, digital trade and global supply chains. A firm can be deeply exposed to globalisation through its competitors and suppliers while trading in only one country and never exporting at all.