The advantages of globalisation
The advantages of
globalisation
Globalisation brings a number of potential benefits
to international producers and national economies, including:
-
Providing an incentive for countries to
specialise and benefit from the application of the principle of
comparative advantage.
-
Access to larger markets means that firms
may experience higher demand for their products, as well as benefit from
economies of scale, which leads to a reduction in average production
costs.
-
Globalisation enables worldwide access to
sources of cheap raw materials, and this enables firms to be
cost competitive
in their own markets and in overseas markets.
Seeking out the cheapest materials from around the world is called
global sourcing. Because of cost reductions and increased
revenue, globalisation can generate increased profits for
shareholders.
-
Avoidance of
regulation by locating production
in countries with less strict regulatory regimes, such as those in
many
Less
Developed Countries (LCDs).
-
Globalisation has led to increased flows
of inward investment between countries,
which has created benefits for recipient countries. These benefits
include the
sharing of knowledge and technology between countries.
-
In the long term, increased trade is
likely to lead to the creation of more employment in all countries
that are involved.
