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Why globalisation increased: MNCs, investment, migration and structural change
Edexcel IAL Business · WBS14 Global business
The remaining globalisation factors are about firms and people: multinational corporations, investment flows, migration, the growth of the global labour force and structural change. The section ends by asking what globalisation means for businesses.
MNCs and investment flows
Multinational corporations (MNCs) own or control production or service operations in more than one country. As they grow they spread brands, technology and management methods, build global supply chains and lobby for open markets, which drives further integration.
Increased investment flows (FDI) move capital to where returns are highest, creating factories, offices and infrastructure that link economies together. Capital controls have been relaxed in many countries, making cross-border investment easier.
Migration, the global labour force and structural change
Migration within and between economies: workers move from rural to urban areas within countries (for example in China and India) and between countries, filling skills gaps and sending remittances home. Migrants also create links between countries that encourage trade.
Growth of the global labour force: the opening of China, India and Eastern Europe, plus population growth in Africa and South Asia, added hundreds of millions of workers to the world economy, keeping labour costs low for internationally traded goods.
Structural change: as economies develop, output shifts from the primary sector to manufacturing and then to services. Developed economies have deindustrialised and specialise in services, design and finance, importing more manufactured goods; emerging economies have industrialised and export manufactures. This specialisation increases trade.
Impact on businesses of increased globalisation
Opportunities: bigger markets and more customers; economies of scale; access to cheaper inputs and labour; access to skills and technology; spreading risk across countries; partnerships and acquisitions abroad.
Threats: more competition, including from low-cost rivals in emerging economies; pressure on prices and margins; complex global supply chains that can be disrupted; exchange rate risk; greater scrutiny of ethics and the environment; the need to understand different cultures and laws.
The impact depends on the business: a large MNC with a strong brand may gain most, while a small domestic manufacturer facing import competition may lose.
Worked example
A textile manufacturer in a developed country faces cheaper imports from emerging economies. Explain one way it could respond.
- It cannot compete on cost because its labour costs are higher.
- It could move to higher-value niche products (technical fabrics, premium brands) where quality and design matter more than price.
- Or it could offshore production to lower-cost countries while keeping design at home.
Answer: Differentiate into higher-value products or offshore production to cut costs.
Check yourself
- Which is the best definition of a multinational corporation?
- A business that exports to more than one country
- A business owned by several governments
- A business that imports its raw materials
- A business that owns or controls operations in more than one country
Show answer
A business that owns or controls operations in more than one country. Control of operations abroad, not just sales, makes a business an MNC.
- Explain how the growth of the global labour force affected businesses in developed countries.
Show answer
Hundreds of millions of low-paid workers joined the world economy, so firms could offshore production to cut costs, but manufacturers that stayed at home faced cheaper competition.. A bigger, cheaper global workforce lowers costs for some firms and raises competition for others.
- Structural change in a developed economy usually means
- a shift from services to agriculture
- a rise in the share of jobs in mining
- a fall in the share of services
- a shift of output and jobs from manufacturing to services
Show answer
a shift of output and jobs from manufacturing to services. Developed economies deindustrialise and the tertiary sector grows.
- Which is a likely benefit to a business of migration into its country?
- Easier recruitment to fill skills shortages
- Lower demand for its products
- Higher wage costs because labour supply falls
- Fewer potential employees
Show answer
Easier recruitment to fill skills shortages. Migration increases the supply of labour and skills.
- Explain one threat to a domestic business from increased globalisation.
Show answer
More foreign competitors can enter its home market with lower prices, so it may lose market share and have to cut prices, reducing its profit margins.. Globalisation opens a firm's home market to overseas rivals.
- Which is an opportunity for a business from increased globalisation?
- Economies of scale from selling in many countries
- Greater exposure to exchange rate risk
- Stronger competition at home
- Supply chains that are harder to manage
Show answer
Economies of scale from selling in many countries. A bigger market spreads fixed costs over more output.
- Increased investment flows contribute to globalisation mainly because they
- reduce the number of MNCs
- raise tariffs between countries
- build factories, offices and infrastructure that link economies together
- stop migration between countries
Show answer
build factories, offices and infrastructure that link economies together. FDI creates lasting cross-border production links.
Sources
Last updated 8 November 2026. Spotted a mistake? Tell us.