4.2.5 Global competitiveness

Question 1

exchange rate

Answer 1

price of 1 currency expressed in terms of another currency

Question 2

appreciation

Answer 2

if pound appreciates (gets stronger) against other currencies then UK exports to other countries will be more expensive/dearer

Question 3

depreciation

Answer 3

if pound depreciates (gets weaker) then UK exports will be cheaper
if weak pound = increased exports = revenue overseas, imports = expensive buy less
exports> imports

Question 4

5 government objectives

Answer 4

1. high growth
2. low stable inflation
3. low unemployment
4. strong and stable exchange rates
5. balance of payments surplus exports > imports

Question 5

SPICED

Answer 5

strong 
pound 
imports 
cheap 
exports 
dear

Question 6

WPIDEC

Answer 6

Weak 
pound 
imports 
dear 
exports 
cheap

Question 7

6 ways exchange rates affect businesses

Answer 7

1. prices change (elasticity or substitutes)
2. profits -> to domestic country (repatriating)
3. cost of raw materials (imports)
4. profit margins change
5. barriers to entry fluctuate
6. converting cash receipts from customers overseas

Question 7

winners of a weaker exchange rate

Answer 7

businesses exporting into international market (recession currencies depreciate)
businesses earning substantial profits in overseas currencies

Question 8

losers of weaker exchange rates

Answer 8

businesses importing (costs/affect competitiveness) 
overseas trying to compete in domestic market = price less competitive

Question 9

6 ways that extent to which a business is impacted by exchange rate changes depends on:

Answer 9

1. vol of imports and export
2. no. countries generating income (repatriating)
3. no of available substitutes (PED)
4. value = branding +ve = little effect
5. YED = necessity = – proportion of income that something is in budget large quantity
6. domestic business = strong comp overseas

Question 10

2 main ways a MNC can secure a competitive adv:

Answer 10

1. minimise costs (EOS) (cost leadership)
   - vcpu = sppu = competitive
2. differentiation
   - stand out/unique/USP/added value
   - consumer opinions of you = premium = profitability

Question 11

types of markets

Answer 11

1. monopoly 
2 duopoly 
few. digopoly 
monopolistic = many firms = degree of loyalty 
many. perfect competition

Question 12

Porter’s Generic Strategies/ Porter’s Strategic Matrix (source of competitive advantage)

Answer 12

costs:
broad: cost leadership
narrow: cost focus

differentiation:
broad: differentiation leadership
narrow: differentiation focus

curve:
above = focus diff or cost leadership (above line = optimum)
below = stuck in middle

Question 13

leadership

Answer 13

broad (mass)

Question 14

focus

Answer 14

narrow (niche)

Question 15

cost leadership

Answer 15

common and viable

large target market = allow to compete and decrease costs and price

Question 16

differentiation leadership

Answer 16

common

stand out

Question 17

cost focus

Answer 17

not viable
not high enough sales volume for low costs
no EOS

Question 18

differentiation focus

Answer 18

niche marketing

Question 19

issues surrounding being “stuck in the middle” of Porter’s strategies

Answer 19

trade off
guaranteed low profit (losing proposition)
recipe for strategic mediocrity and low performance = unable to achieve any due to inherent contradictions

Question 20

7 ways to achieve differentiation?

Answer 20

1. quality/USP
2. branding (recognition)
3. distribution(across major channels)
4. promotion (advertise/sponsor)
5. customer service
6. ethical stance (CSR)
7. R&D -> product development

Question 21

skills shortage

Answer 21

lack specific “talent” = particular field of employment
volume of workers “ability” is limited
wages increase = increase costs = less profit
prices increase = decrease sales = competition

common reason = off shores (labour cheaper overseas)

affect businesses -> differentiation strategy staff skills = key for differentiation

Question 22

skills shortage definition & examples

Answer 22

when there is a lack of workers with the right qualifications in the industry

-HGV drivers, NHS workers, Bricklayers

Question 23

7 ways businesses can overcome skills shortages?

Answer 23

1. raise wages/fringe benefits
2. training
3. offshore = supply of labour
4. joint ventures, global merger (horizontal integration = collaborate with other firms)
5. capital intensive where possible
6. headhunt
7. outsource to specialist providers

Question 24

8 ways governments can overcome skills shortages ??

Answer 24

1. invest training (tax/ incentives)
2. migration policy (suitable skills)
3. raise wages in public sector (inward migration)
4. pension schemes
5. make professions inclusive (promotion)
6. national curriculum changes
7. invest in vocational education
8. offer more/better apprenticeships

Question 25

how does skill shortages impact global competitiveness

Answer 25

increased costs(associated)  = increased prices = decrease competitors/competitive 
dependent on PED, stance, diff leadership

Question 26

Global competitiveness

Answer 26

Ability of a business to succeed against domestic rivals and foreign comp in international markets