Globalisation & International Trade

Globalisation has transformed the business landscape. Businesses now operate in a global marketplace, trading with customers and suppliers around the world. This lesson explores the causes and effects of globalisation and the key concepts of international trade.

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What Is Globalisation?

Globalisation is the process by which the world's economies, businesses, and people become increasingly interconnected and interdependent.

Term	Definition
Globalisation	The increasing interconnection of the world's economies and cultures
Imports	Goods and services bought from other countries
Exports	Goods and services sold to other countries
Free trade	Trade between countries with few or no restrictions (tariffs, quotas)
Tariff	A tax imposed on imported goods to make them more expensive
Quota	A limit on the quantity of a product that can be imported
Trade barrier	Any restriction on international trade (tariffs, quotas, regulations)
Multinational corporation (MNC)	A business that operates in more than one country

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Causes of Globalisation

graph TD
    A[Causes of Globalisation] --> B[Improvements in transport]
    A --> C[Advances in communication technology]
    A --> D[Reduction in trade barriers]
    A --> E[Growth of multinational corporations]
    A --> F[Increased mobility of labour and capital]
    B --> G[Cheaper, faster shipping and air freight]
    C --> H[Internet, email, video conferencing]
    D --> I[Free trade agreements, WTO]
    E --> J[Companies operating in many countries]
    F --> K[Workers and money move more freely]

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The Impact of Globalisation on UK Businesses

Opportunities

Opportunity	Explanation
Access to global markets	UK businesses can sell to customers around the world
Cheaper imports	Raw materials and components can be sourced from cheaper overseas suppliers
Economies of scale	Selling to a larger market allows businesses to reduce unit costs
Access to global talent	Businesses can recruit skilled workers from other countries
New ideas and innovation	Exposure to global markets drives innovation

Threats

Threat	Explanation
Increased competition	UK businesses face competition from foreign companies with lower costs
Pressure to reduce costs	Global competition may force businesses to cut costs, potentially affecting quality or working conditions
Exchange rate risk	Currency fluctuations affect the cost of imports and the value of exports
Cultural differences	Different markets may require different products, marketing, and approaches
Supply chain vulnerability	Global supply chains can be disrupted by events like pandemics, wars, or natural disasters

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International Trade: Imports and Exports

Why Do Countries Trade?

Reason	Explanation
Specialisation	Countries produce goods they are best at making and trade for others
Access to resources	Some countries have resources others lack (e.g. oil, rare minerals)
Lower costs	Goods can be produced more cheaply in some countries
Greater choice	Trade gives consumers access to a wider variety of goods and services
Economic growth	Trade increases economic output and creates jobs

Trade Barriers

Barrier	Description	Purpose
Tariffs	Taxes on imported goods	Make imports more expensive to protect domestic businesses
Quotas	Limits on the quantity of goods that can be imported	Restrict the volume of imports
Subsidies	Government payments to domestic businesses to reduce their costs	Help domestic businesses compete with imports
Standards and regulations	Requiring imports to meet specific safety, quality, or environmental standards	Protect consumers and the environment

Example: Brexit and Trade

The UK's departure from the EU (Brexit) introduced new trade barriers between the UK and EU countries. UK businesses now face customs checks, tariffs on some goods, and additional paperwork when trading with the EU — increasing costs and complexity.

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Multinational Corporations (MNCs)

An MNC is a business that operates in more than one country.

Advantages of MNCs for Host Countries

• Create jobs and reduce unemployment.
• Pay taxes that fund public services.
• Bring investment, technology, and skills.
• Improve infrastructure.

Disadvantages of MNCs for Host Countries

• May exploit cheap labour and weak regulations.
• Profits may be sent back to the home country (profit repatriation).
• Local businesses may struggle to compete.
• Environmental damage may occur.

Exam Tip: Globalisation questions often require evaluation. Consider both the opportunities and threats, and think about who benefits and who loses. Always use specific examples to support your answer.

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Summary

• Globalisation is the increasing interconnection of the world's economies.
• It is driven by improvements in transport, technology, reduced trade barriers, and MNCs.
• Globalisation creates opportunities (new markets, cheaper imports, economies of scale) and threats (increased competition, exchange rate risk, supply chain vulnerability).
• International trade involves imports and exports, and is affected by tariffs, quotas, and regulations.
• MNCs bring investment and jobs to host countries but may also exploit resources and labour.

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UK Case Study: Jaguar Land Rover — Indian Ownership, British Manufacturing, Global Markets

Jaguar Land Rover (JLR) is a textbook illustration of globalisation. In 2008, the Indian multinational Tata Motors acquired Jaguar and Land Rover from the American carmaker Ford for around $2.3 billion. At the time, both brands were loss-making and struggling. Tata saw potential that Ford had missed: premium British brands that could be sold into rapidly growing markets in China, India, and the Middle East.

The acquisition is globalisation in action on several levels:

Ownership flowed across borders. An Indian company bought iconic British brands from an American company. Profits now flow to Tata's shareholders in India, though the UK still benefits from tax revenue and employment.

Production remained in the UK. JLR's main plants are at Solihull, Halewood (Merseyside), and Castle Bromwich. It employs around 33,000 people in the UK and supports thousands more through its supply chain. This is a classic MNC strategy — keeping skilled, high-value manufacturing in advanced economies while accessing global finance and markets.