4.2.5 Global competitiveness Flashcards
exchange rate
price of 1 currency expressed in terms of another currency
appreciation
if pound appreciates (gets stronger) against other currencies then UK exports to other countries will be more expensive/dearer
depreciation
if pound depreciates (gets weaker) then UK exports will be cheaper
if weak pound = increased exports = revenue overseas, imports = expensive buy less
exports> imports
5 government objectives
- high growth
- low stable inflation
- low unemployment
- strong and stable exchange rates
- balance of payments surplus exports > imports
SPICED
strong pound imports cheap exports dear
WPIDEC
Weak pound imports dear exports cheap
6 ways exchange rates affect businesses
- prices change (elasticity or substitutes)
- profits -> to domestic country (repatriating)
- cost of raw materials (imports)
- profit margins change
- barriers to entry fluctuate
- converting cash receipts from customers overseas
winners of a weaker exchange rate
businesses exporting into international market (recession currencies depreciate)
businesses earning substantial profits in overseas currencies
losers of weaker exchange rates
businesses importing (costs/affect competitiveness) overseas trying to compete in domestic market = price less competitive
6 ways that extent to which a business is impacted by exchange rate changes depends on:
- vol of imports and export
- no. countries generating income (repatriating)
- no of available substitutes (PED)
- value = branding +ve = little effect
- YED = necessity = – proportion of income that something is in budget large quantity
- domestic business = strong comp overseas
2 main ways a MNC can secure a competitive adv:
- minimise costs (EOS) (cost leadership)
- vcpu = sppu = competitive - differentiation
- stand out/unique/USP/added value
- consumer opinions of you = premium = profitability
types of markets
1. monopoly 2 duopoly few. digopoly monopolistic = many firms = degree of loyalty many. perfect competition
Porter’s Generic Strategies/ Porter’s Strategic Matrix (source of competitive advantage)
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
leadership
broad (mass)
focus
narrow (niche)
cost leadership
common and viable
large target market = allow to compete and decrease costs and price
differentiation leadership
common
stand out
cost focus
not viable
not high enough sales volume for low costs
no EOS
differentiation focus
niche marketing
issues surrounding being “stuck in the middle” of Porter’s strategies
trade off
guaranteed low profit (losing proposition)
recipe for strategic mediocrity and low performance = unable to achieve any due to inherent contradictions
7 ways to achieve differentiation?
- quality/USP
- branding (recognition)
- distribution(across major channels)
- promotion (advertise/sponsor)
- customer service
- ethical stance (CSR)
- R&D -> product development
skills shortage
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
skills shortage definition & examples
when there is a lack of workers with the right qualifications in the industry
-HGV drivers, NHS workers, Bricklayers
7 ways businesses can overcome skills shortages?
- raise wages/fringe benefits
- training
- offshore = supply of labour
- joint ventures, global merger (horizontal integration = collaborate with other firms)
- capital intensive where possible
- headhunt
- outsource to specialist providers
8 ways governments can overcome skills shortages ??
- invest training (tax/ incentives)
- migration policy (suitable skills)
- raise wages in public sector (inward migration)
- pension schemes
- make professions inclusive (promotion)
- national curriculum changes
- invest in vocational education
- offer more/better apprenticeships
how does skill shortages impact global competitiveness
increased costs(associated) = increased prices = decrease competitors/competitive dependent on PED, stance, diff leadership
Global competitiveness
Ability of a business to succeed against domestic rivals and foreign comp in international markets
