4.2.5 Global Competitiveness

Question 1

What are two ways in which MNC’s can benefit in terms of being large companies?

Answer 1

economies of scale

finding the best quality resources at the right prices

Question 2

How does depreciation affect an MNC?

Answer 2

will make exports cheaper and so exporters can benefit

Question 3

How does appreciation affect an MNC?

Answer 3

will make exports more expensive and will impact competitiveness

Question 4

What 3 things does the changes of exchange rates on a business impact?

Answer 4

price elasticity of demand
economic growth of other countries
significance of fluctuation rate

Question 5

Why do firms have fixed contracts for fluctuating exchange rates?

Answer 5

means that temporary changes in exchange rates have less impact on firm

Question 6

Define economic risk?

Answer 6

as a risk that future cash flows will change due to unexpected exchange rate fluctuations

Question 7

What are the 2 types of competitive advantage that play a part in many international firms?

Answer 7

Cost competitiveness and differentiation

Question 8

Define cost competitiveness?

Answer 8

able to achieve scale of economies which gives them advantage over rivals allowing them to deliver same product but at a lower cost

Question 9

Define differentiation?

Answer 9

firm selects certain attributes of it’s products and tries to match with specific customers