Global expansion and uncertainty

Question 1

The impact on businesses of movements in exchange rates

Answer 1

Appreciation and exports- if the local currency appreciates against other currencies then the exports to those countries will be more expensive/ could lead to lower sale levels/ may force them to reduce prices on exports

Appreciation and imports- if the local currency appreciates against other currencies then imports will be cheaper. Businesses that import raw materials, operating in these economies will buy materials at low costs and can enjoy higher profits

Depreciation and exports- if the local currency depreciates against other currencies then the price of exports fall/ this may lead to more demand and higher sales/ they can choose to keep prices the same and enjoy high profits/ or lower prices and gain market share and more revenue from extra sales

Depreciation and imports- if the local currency depreciates against other currencies, then imports will be more expensive/ if these imports are raw materials needed for production the production costs may be high/ this means they will need to charge higher prices/ can lead to less demand and sales/ and less sales revenue and profit

Question 2

Skill shortages and their impact on international competitiveness

Answer 2

The lack of ability to find skilled workers can cause a decline in competitive advantages/ businesses following a differentiation strategy will suffer the most from these skill shortages as they need skilled employees

This can lead to:
Higher wages- shortage of skilled labour means an increase in labour wages due to the restricted supply
Lower quality
Lower productivity 
Loss of business