Globalisation is a controversial concept which means different things to different people. However, generally speaking it describes the way that production, distribution, sales, finance and investment take place without regard to national boundaries. There are a number of forces which determine the spread of globalisation. These include improvements in transport and communications, production of larger amounts of goods, the increasing similarities of consumer tastes, and government policies.
Reduced transport costs encourages speed of globalisation
In the past, the time and money necessary to export goods to other countries often meant that it simply was not economically viable. The recent decline in the cost of transport has enabled many companies to expand beyond their national boundaries to the world market. This means that it is often cheaper to produce goods in one country and ship them to another, rather than for reach country to produce goods for a domestic market.
Better communications to coordinate global business
Another development facilitating globalisation is progress in communications technology. The invention of the Internet and mobile phones as well as the availability of lower rates for international phone calls have made it much easier to coordinate and manage organisations, particularly multinational organisations. With this development, communication and thus also trade have become substantially faster, cheaper and easier.
Bigger is better in the global business world
Another of the forces driving globalisation in many industries is economies of scale. What this means is that it is usually cheaper to manufacture goods in large factories than in smaller plants. The minimum size of an economically viable plant is therefore getting larger and larger. This offers advantages for larger enterprises, which are able to produce goods and provide services more cheaply and drive smaller, less efficient competitors out of business.
Some products have popular appeal around the world
Another necessary condition for globalisation is the increasing similarities in consumer tastes. Successful advertising campaigns and the dominance of American culture have helped to make consumer demand more uniform. Certain brand names and products have become popular all over the world. Because the market differences have now diminished, it becomes easier for a producer to cater to the needs of markets.
Protection policies no longer encouraged
Government policy is yet another factor in the spread of globalisation. Many barriers to trade and investment have been removed, making it easier to import and export goods and services globally.
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