4.2.5 - Global Competitiveness Flashcards
What is global competitiveness?
Ability of a business to perform better than its rivals across markets in different countries
What is currency appreciation and example?
When the value of a currency increases against another currency (get more for your currency)
£1 = $1.60 increases to
£1 = $1.80
Advantages of appreciation
- If businesses import raw materials from abroad they will be cheaper
(reduces costs and potentially increases profit margins)
Disadvantages of appreciation
- Exporting will be more expensive for international customers
(may reduces sales as demand shifts to domestic)
What is currency depreciation and example?
Value of the currency decreases against another
£1 = $1.60 decreases to
£1 = $1.20
Advantages of depreciation
- If business exports abroad they become more competitive as they are cheaper to purchase
- Less competition from foreign firms as imports more expensive
Disadvantages of depreciation
- Importing raw materials from abroad is more expensive
What is cost leadership?
When a business becomes lowest cost producer in the industry
How can cost leadership be achieved?
- Outsourcing
- Offshoring
- Increasing productivity of workforce
Price within cost leadership
- Reduce prices
- Keep prices to increase profit margins
What is differentation?
When the business makes the characteristics of their product/services different to competitiors
Ways to achieve differentation?
- Strong brand
- Better design
- Better quality
- Customer service
What is the impact of skill shortages?
- Affect ability to gain competitive advantage
- Productivity issues
- Increase in unit costs due to wasted products etc from poor quality
- Less likely to achieve product differentiation
