Edexcel- Global competitiveness 4.2 Flashcards
Exchange rate
Value of one currency in terms of another currency.
Global competitiveness
Ability of business to perform better than rivals across markets in different countries.
Currency appreciation
value of currency increases against another currency.
Advantages of currency appreciation
Importing raw materials abroad is cheaper.
Reduce costs and increase profit margin.
Disadvantages of currency appreciation
Goods will be more expensive for international customers.
Shift to domestic businesses reduce sales.
Currency depreciation
Value of currency decreases against another currency.
Currency depreciation advantages
If businesses export goods/services abroad they become more competitive as their products are cheaper.
In domestic markets, less competition from foreign firms .
Currency depreciation disadvantages
If business imports raw materials from abroad they are more expensive.
Increased costs for business which is likely to increase prices for customers.
What does competitive advantage lead to?
Global competitiveness increasing.
What is competitive advantage created by?
Cost leadership
Differentiation
Cost leadership
When business becomes the lowest cost producer.
How is cost leadership achieved?
Increasing productivity
Using machinery
Outsourcing
What happens as a result of cost leadership?
Businesses can reduce prices or keep them the same and increase profit margins.
Differentiation
Businesses make characteristics of products different to competitors.
What is differentiation achieved by?
Developing a strong brand
better quality
better customer service
Why is cost leadership difficult to achieve when there is a skill shortage?
Lack skills and not as productive.
What can cost leadership do if there is a skill shortage?
Increase unit costs due to waste.
Why is differentiation difficult to achieve when there is a skill shortage?
Lack skills and expertise to produce products.
What can be used to access skills?
Offshoring
Outsourcing
