External environment theory

External environment illustration

Globalisation

Globalisation is a result of the world becoming increasinglyinterconnected due to the hugely increased trade and cultural exchange. The biggest companies are no longer just simply national firms, but multinational corporations with subsidiaries in many different countries, making business and industry aglobal enterprise.

Globalisation isn’t a direct result of the last few decades, instead it has been happening for hundreds of years, although over the last fifty years, in particular, it has sped up substantially. Many of the effects of globalisation are more obvious than others, including: increased international trade; companies functioning on a global scale in many countries; a greater dependence on the global economy; freer movement of capital, goods and services and the international recognition of companies such as McDonalds and Starbucks inless economically developed countries (LEDCs).

There’s a lot to be said for globalisation, and indeed it’s probably helping to create more wealth in many developing countries; increased awareness of global issues and bringing foreign currency to local communities, but it is not helping to close the gap and wealth distribution between the world’s poorest and richest countries.