(PAPER 1) 4.2.5 global competitiveness

Question 1

global competitiveness definition

Answer 1

the extent to which a business or country can compete successfully with its rivals

Question 2

types of companies who would be affected by movements in exchange rate

Answer 2

1. those who rely on export markets
2. those whose domestic market is subject to competition from imports
3. those that need to import large quantities of raw materials/components

Question 3

SPICED WPIDEC

Answer 3

Strong
Pound
Imports
Cheaper
Exports 
Dearer 

Weak
Pound
Imports 
Dearer 
Exports 
Cheaper

Question 4

the effect of appreciation and depreciation of the pound on a business exporting its goods abroad

Answer 4

• appreciation: harder to sell abroad due to increased prices. foreign customers would need to pay more of their currency to buy the product so demand will fall for the exporting business
• depreciation: products would be cheaper in foreign markets because customers need less of their currency to pay for products, increasing sales

Question 5

the effect of appreciation and depreciation of the pound on a UK business with competition from imports

Answer 5

• appreciation: imports become cheaper to UK customers as each pound can buy more another currency making the imported product cheaper
• depreciation: imports will become more expensive as £1 now buys less of the currency so increases purchases of home produced goods as more price competitive

Question 6

the effect of appreciation and depreciation of the pound on a UK business importing materials from abroad

Answer 6

• appreciation: will reduce the cost of prediction because the stronger pound can buy more of another currency making the imported producer cheaper
• depreciation: will cost more to buy from abroad, pushing up costs of production

Question 7

the significance of fluctuations in exchange rate is likely to depend on…?

Answer 7

1. elasticity of demand- some products are less responsive to changes in price as a result of changes of exchange rate
2. fixed contracts which will lessen the risk of currency fluctuations
3. economic growth in other countries- an appreciation of the pound for example might be offset if there is economic growth

Question 8

what is meant by a fixed contract and how does it help exporters

Answer 8

setting the price of raw materials 12?18 months into the future which reduces uncertainty

Question 9

competitive advantage definition

Answer 9

a distinctive strength that a business has and its competitors do not

Question 10

2 sources of competitiveness (porters strategic matrix)

Answer 10

1. cost competitiveness

2. differentiation

Question 11

ways a business can become more cost competitive

Answer 11

1. raise productivity- train or motivate employees
2. offshore- take advantage of lower cost labour
3. outsourcing- use another business to perform a function more efficiently

Question 12

differentiation definition

Answer 12

the extent to which customers believe that a brand is unique or superior to other brands

Question 13

model that links to sustained competitive advantage

Answer 13

Kay’s distinctive capabilities- AIR (architecture, innovation, reputation)

Question 14

skills shortage definition

Answer 14

where potential employees do not posses the skills demanded by employees

Question 15

why would a skills shortage be a concern for..

1. the government
2. a business

Answer 15

1. UK lagging behind international rivals threatening future competitiveness
2. pay and benefits needs to be competitive which increases costs

Question 16

why would a skills shortage damage a businesses international competitiveness

Answer 16

reduces the effectiveness and productivity of workforce thus decreasing competitiveness with other countries