Lesson 40 - International competitiveness

Question 1

Give six factors which influence competitiveness?

Answer 1

• Price relative to competitors
• Productivity - output per worker
• Unit costs
• State of technology
• Investment in capital equipment
• Technology

Question 2

Define the term international competitiveness?

Answer 2

The degree to which a country can compete in international markets, while simultaneously maintaining and expanding the real incomes of its citizens.

Question 3

What is price competition?

Answer 3

How cheaply a country can produce a good or service.

Question 4

What is non price competition?

Answer 4

Product quality, innovation, design, reliability and performance.

Question 5

What are the two measures of international competitiveness?

Answer 5

Relative export prices
Productivity

Question 6

What is relative export prices?

Answer 6

This is the ratio of one country’s export prices relative to another country’s, it is expressed as an index. The lower the relative export price, the more competitive the country is.

Question 7

Define the term productivity?

Answer 7

Productivity is a measure of output per input. The most common measure would be labour productivity. The unit labour cost is how much labour costs per unit of output.

Question 8

Give two factors which influence the export prices of a country?

Answer 8

The rate of inflation
The exchange rate

Question 9

Describe the ideal exchange rates and rate of inflation in order to be internationally competitive?

Answer 9

Exchange rates need to devalue over time
The rate of inflation needs to be lower than other countries.

Question 10

What do unit labour costs measure?

Answer 10

Unit Labour Costs measure the labour costs per unit of output. It compares the average output per hour to the wages paid.

Question 11

Give four issues that will impact a country’s competitiveness?

Answer 11

• Infrastructure
• Government efficiency
• Business efficiency
• Economic performance

Question 12

Price competitiveness can be improved by reducing unit labour costs. Give three ways in which unit labour costs can be reduced in the long term?

Answer 12

• Reducing wage costs
• Improving productivity
• Reducing other costs such as health, safety and environmental costs

Question 13

How can a country’s non price competitiveness be improved in the long term?

Answer 13

Technical factors such as product quality, design, reliability and performance, choice, after-sales services, marketing and branding can be improved.