global competitiveness

Question 1

Define the term exchange rate.

Answer 1

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

Question 2

Explain the impact of appreciation on 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

Explain the impact of appreciation on 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

Explain the impact of depreciation on 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

Explain the impact of depreciation on imports.

Answer 5

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 6

Define the term competitive advantage.

Answer 6

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 7

What are the two ways to achieve competitive advantage?

Answer 7

1) Low cost leadership

2) Differentiation

Question 8

Explain 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

Explain 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 
Design
Consistency
Durability
Reliability 
Reparability

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

Question 10

Explain skill shortages and their 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

Question 11

Explain skill shortages and competitive advantage.

Answer 11

Not enough talent coming through to take UK businesses into the digital era to make them competitive on a global scale

Many careers are developing and very fluid due to the fast changing world of IT, telecoms and the Internet

Skills shortages of critical jobs will cause UK business to lose their competitive advantage