Explain globalisation, its causes, the role of multinational companies, and the benefits and drawbacks of globalisation for consumers, workers, firms and economies.

What this dot point is asking

Globalisation is the big-picture topic that closes the course. CCEA expects you to explain what globalisation means, its main causes, the role of multinational companies (MNCs), and the benefits and drawbacks of globalisation for consumers, workers, firms and whole economies. You should be able to evaluate globalisation and the impact of MNCs. This completes Section 5, The international economy, and draws together trade, exchange rates and the wider world economy.

What globalisation is

Globalisation is the process by which the world's economies are becoming more connected and interdependent, as trade, investment, production and ideas flow across national borders. Goods are now made from parts sourced worldwide, firms sell in many countries, and money and workers move more freely. As a result, what happens in one economy increasingly affects others.

The causes of globalisation

Several developments have driven globalisation, and CCEA expects you to know the main ones.

• Improved transport. Cheaper and faster shipping, especially containerisation, and air freight make it economic to move goods around the world.
• Better communications and technology. The internet, mobile phones and improved IT let firms coordinate production, trade and finance across countries instantly.
• The removal of trade barriers. Trade liberalisation, with lower tariffs and quotas and the growth of trade agreements, has made it easier to trade between countries.
• The growth of multinational companies. Large firms set up production and sales operations in many countries, spreading trade and investment worldwide.

Together these have made worldwide trade and production far easier and cheaper than in the past.

Multinational companies

A multinational company (MNC) is a firm that owns or controls production or operations in more than one country, such as a global car maker, technology firm or fast-food chain. MNCs are central to globalisation: they locate factories where costs are low, sell in markets worldwide, and move goods, money and technology between countries.

For a host country, especially a developing one, an MNC can bring jobs, investment, new technology and skills, higher output and exports, and extra tax revenue. But there are concerns: MNCs may pay low wages or impose poor conditions, send profits back to their home country rather than reinvesting locally, damage the environment, and out-compete smaller domestic firms.

The benefits and drawbacks of globalisation

For consumers, globalisation means lower prices and greater choice, as goods are made wherever it is cheapest and many more products are available. For firms, it means access to larger markets and cheaper inputs. For developing economies, it can bring jobs, investment and growth.

But there are drawbacks. Workers in higher-cost countries can lose jobs as production moves abroad (a cause of structural unemployment). Globalisation can lead to low wages and poor conditions in some countries, environmental damage from more production and transport, and greater interdependence, so a crisis in one country spreads quickly to others. This is why globalisation is debated and why governments and international bodies try to manage its effects.

Why this matters

Globalisation ties the whole international economy section together and connects it back to trade, exchange rates, competition and unemployment. It is a major evaluation topic, where you are expected to weigh the gains for consumers and developing economies against the costs to workers and the environment, and to judge the impact of multinational companies. Examiners reward candidates who can explain the causes clearly and give a balanced, judgement-led evaluation rather than a one-sided view.