Global competitiveness Flashcards
Define GLOBAL COMPETITIVENESS
Global competitiveness is a business’ ability to compete in international markets to become a leader in a given industry across the world.
What factors impact global competitiveness?
- Movements in exchange rates
- Cost competitiveness
- Differentiation
- Skill shortages
How does movement of exchange rates affect global competitiveness?
A decrease in the value of a currency will mean it is weaker and worth less.
An increase in the value of a currency will mean it is stronger and worth more.
Businesses that import items will be affected when a county’s currency depreciates, but businesses that export to international markets will benefit.
Vice versa when the currency appreciates.
How does cost competitiveness affect global competitiveness?
Cost competitiveness (having the lowest costs in a market) can lead to competitive advantages as it will allow a business to lower their prices. This can be gained through purchasing, technical or marketing economies of scale. Cost competitiveness can also be gained through offshoring or outsourcing.
How does differentiation affect global competitiveness?
Product differentiation offers a competitive advantage and is achieved when a consumers believe that a brand is unique or in some way superior to others.
Differentiation can be achieved through superior quality (e.g. Dyson), branding (e.g. Lindor) or advertising (e.g. Coco-Cola).
How do skill shortages affect global competitiveness?
Demand for highly-skilled workers is outstripping their supply, and this mostly affects businesses who choose to use differentiation to gain competitive advantages.
Potential solutions: high pay, better training, outsourcing, offshoring, recruiting from abroad.
Define a SKILL SHORTAGE
A skill shortage occurs when businesses are unable to recruit extra workers with the necessary skills, leading to a decline in competitiveness.
Define COST COMPETITIVENESS
Cost competitiveness is the ability of a business to offer a good or service at the lowest cost possible, giving it a competitive advantage.