4.2.5 - Global competitiveness

Question 1

What are exchange rates

Answer 1

Exchange rates are defined as the value of one currency in terms of another

Question 2

What is appreciation of a currency and exports

Answer 2

• 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

Question 3

What is appreciation of a currency and imports

Answer 3

• As the pound appreciates – gets stronger – against other currencies then imports to the UK will be cheaper
• This will be good news for all those who like a bottle of French wine with their Nandos, or who like a nice French cheese with some biscuits
• Businesses that sell imports will have lower costs, and therefore may enjoy higher profits

Question 4

What is Depreciation and exports

Answer 4

• 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

Question 5

What is competitive advantage

Answer 5

• 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.

Question 6

What is depreciation and imports

Answer 6

• If a business imports while there is depreciation it will make those imports dearer
• If the imports are raw materials to make other products in the UK then these products will cost more to make and be more expensive for the consumer which may affect demand, sales revenue and profit

Question 7

What are the 2 ways of achieving competitive advantage

Answer 7

1) Low cost leadership
2) Differentiation

Question 8

What is low cost leadership

Answer 8

• 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

Question 9

What is differentiation

Answer 9

• 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. Kotler suggested;
• Performance
• Style – TGI restaurants
• Design
• Consistency
• Durability
• Reliability – Eveready battery bunny
• Reparability

-With a uniqueness the business can charge a premium price to its market segment

Question 10

What is a skill shortage and there impact on international competitiveness

Answer 10

• 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