4.2.5 Global competitiveness Flashcards
Exchange rates defined
• Exchange rates are defined as the value of one currency in terms of another
What does SPICED stand for
• Strong
• Pound makes
• Imports
• Cheaper but
• Exports
• Dearer
What does WPIDEC
- Weak
- Pound makes
- Imports
- Dearer but
- Exports
- Cheaper
Why is SPICED good for business?
- SPICED Is good for business that imports, goods and services from overseas as it means products are cheaper because of the exchange rate.
- However, under SPICED businesses that export goods and services may either sell less or have a lower profit margins.
- This is because overseas buyers have to pay more due to this change rate for the exporting business will keep the same price with the lower profit Margin
What does WPIDEC mean for a business?
- Importing goods and services becomes more expensive due to the exchange rate and this extra expensive is often pass on to customers.
- Businesses that exported goods and services may see an increase in sales.
- This is because the change rate either mixed goods and services cheaper for foreign buyers or provide expert with more profit
What does it mean the pound appreciates ?
• If the £pound appreciates, gets stronger against other currencies then UK exports to other countries will be more expensive
• This may mean that the business that exports, out of the UK, has lower sales or may have to reduce their prices in other countries to keep demand levels up
What does it mean if the pound depreciates?
• If the £pound depreciates - gets weaker against other currencies it will make exports to those countries cheaper
• The business can decide to either:
• Keep prices to other countries the same and enjoy the higher profit
• Lower prices to other countries and gain market share and more revenue from extra sales
Competitive advantage defined
A competitive advantage is an advantage over competitors gained by offering consumers greater value, either by means of lower prices or by providing greater benefits and service that justifies higher prices
Two ways to achieve competitive advantage?
1) Low cost leadership
2) Differentiation
Low cost leadership?
• With this strategy a business will seek to produce the same quality products as its competitors at a lower price
• The industries typical of this strategy are standard mass produced items
• Large businesses typically do well as they can benefit from the largest reduction in average costs and EOS
• They may gain cost leadership due to;
• Good resources management
• Efficient production methods
• Waste minimisation
Differentiation?
• With this strategy a business will produce a unique product or give a unique service
• They may be similar products but each will have some attributes which set it aside from the competition.
• With a uniqueness the business can charge a premium price to its market segment
How do Skill shortages have an impact on international competitiveness?
• The lack of ability to find skilled workers can cause a decline in competitive advantage
• Those businesses that follow a differentiation strategy will suffer the most from skills shortages
How do Skills shortages have a competitive advantage?
• Not enough talent coming through to take UK businesses into the digital era to make them competitive on a global scale
• Many careers are developing and very fluid due to the fast changing world of IT, telecoms and the Internet
• Skills shortages of critical jobs will cause UK business to lose their competitive advantage
Barriers to entry
Factors that make it difficult for a company to enter an industry or type of business and compete effectively. These can include incumbents, high capital investment and strong economies of scale, restrictive Government policies and labour unions.
Competitive advantage
The advantage, one company has over another or several others in the provision of a particular product or service.
