2.5 Flashcards
Exchange rate definition
The measure of the value of one currency compared to another
Imports definition
Goods or services coming into a country from abroad
Exports
goods or services leaving a country and going to another country
What does SPICED stand for
Strong pound import cheaper exports dearer
What does WPIDEC stand for
Weak pound imports dearer exports cheaper
What value does exports prefer
A weaker pound - appear cheaper to foreign customers
What value does imports prefer
A stronger pound - lowers the prices they have to pay
What is bad about a constantly changing exchange rate
it can cause uncertainty
Inflation definition
The sustained rise in the gernal price level over a time period
Deflation definition
The sustained fall in the gernal price level over a time period
Disinflation definition
The decrease in the rate of infaltion
How is inflation measured
The consumer price index CPI
Impacts of inflation on a business
Increase to costs
Uncertainty
Borrowing and lending
Consumer reactions to inflation
International competitiveness
Determinants of competitiveness
The number and relative size of the busienss environment - may have competitors who are small or few businesses that dominate
The extent of barriers to entry
The extent to which products are differentiated - if products are similar makes it more difficult to gain a competitive advantage
The knowledge that buyers and sellers posses
Degree of interrelationship - how much businesses reley on each other
Legal factors
Market size definition
the number of individuals in a certain market who are potential buyers and/or selling if a product or service
Pros and cons of operating in a large market
Pros:
more customers
More brand awareness
Spread the risk
Cons:
More challenging
Large competition
Constantly have to monitor rivals
Pros and cons of operating in a small market
Pros:
Easier to understand
Customers needs can be met
Less complex to run
Cons:
May not be enough sales to make a good profit
May be attractive to new entrants
Rise of large coporations dominating
