Q&A - What is globalisation?

Globalisation is a process where an increased proportion of economic, social and cultural activity is carried out across national borders. The process of globalisation has significant economic, business and social implications.

Let’s look at two more definitions of globalisation: First, from the OCED

“The geographic dispersion of industrial and service activities, for example research and development, sourcing of inputs, production and distribution, and the cross-border networking of companies, for example through joint ventures and the sharing of assets”

And here from the International Monetary Fund:

“The process through which an increasingly free flow of ideas, people, goods, services and capital leads to the integration of economies and societies”

Globalisation is perhaps best thought of as a process that results in some significant changes for markets and businesses to address: for example

• An expansion of trade in goods and services between countries
• An increase in transfers of financial capital across national boundaries including foreign direct investment (FDI) by multi-national companies and the investments by sovereign wealth funds
• The internationalisation of products and services and the development of global brands
• Shifts in production and consumption – e.g. the expansion of outsourcing and offshoring of production and support services
• Increased levels of labour migration
• The entry of countries into the global trading system including China and the former countries of the Soviet bloc

A key result of globalisation is the increasing inter-dependence of economies. For example:

• Most of the world’s countries are dependent on each other for their macroeconomic health
• Many of the newly industrialising countries are winning a growing share of world trade and their economies are growing faster than in richer developed nations
• All countries have been affected by the credit crunch and decline in world trade, but many emerging market countries have slowed down rather than fall into a full-blown recession