Paper 1- Theme 4.2- Global markets and business expansion Flashcards
(35 cards)
define global competitiveness
the ability of a business to compete in domestic and foreign markets against foreign firms
benefits of global competitiveness
- access specialised, higher quality materials (less distribution costs)
- high competition leads to strive for innovation and efficiency
- diversify risk (reduce dependence on one stream)
- large scale EoS
- global brand —> increases perceives quality —> brand loyalty
define exchange rate
the price of one currency, expressed in terms of another
Weak currency helps….
exporters
product is cheaper for foreign consumers
Strong currency helps….
importers
can buy more products for same amount of money
if pound appreciates
- UK exports are more expensive for other countries
- UK imports are cheaper for UK businesses
Exchange rate acronym to remember how the strength of the current affects cost is imports and exports
SPICED
Strong Pound Imports Cheap Exports Dear
Explain how Exchange rate affects price of imports and exports and profit
exchange rate is value of one country’s currency compared to another
if UK exchange rate gets stronger: imports become cheaper but exports more expensive
- this means any profit made in foreign country’s is worth less in UK
- if the country you locate in gets a stronger exchange rate, your profit brought back to your home country will be worth more
how does the exchange rate affect businesses
- price of raw materials
- how much there product costs overseas
- profit repatriating may lose value
- fluctuating exchange rates can act as barrier to entry
define a commodity rich economy
other countries import from them
e..g Brazil
extent to which exchange rates impact a business depends on
- price elasticity (if inelastic may not be as affected)
- level of competition and substitutes
- reliance on imports or exports
- extent to how much profits are being returned from foreign countries back home (repatriating)
extent to which exchange rates impact a business depends on
- price elasticity (if inelastic may not be as affected)
- level of competition and substitutes
- reliance on imports or exports
- extent to how much profits are being returned from foreign countries back home (repatriating)
what is competitive advantage
a feature of a business that allows them to be more successful in their given market
Porter’s Generic strategies to achieve competitive advantage
cost leadership - lowest unit cost so can charge low prices
product differentiation - making the perception of your brand as unique and superior to other brands
Porter’s 4 generic strategies
Cost leadership - mass market, use cost as source of competitive advantage
Cost focus - niche market, use cost as source of competitive advantage
Differentiation leadership - mass market, use differentiation as source of competitive advantage
Differentiation focus - niche market, use differentiation as source of competitive advantage
why did Porter say you don’t want to be “stuck in the middle”
- less profitable –> confuse customers as to brand position
- conflict of interests
strategies to achieve cost leadership
- outsourcing
- offshoring
- cost minimisation in production
- increasing productivity (capital intensive, culture/motivation)
strategies to achieve product differentiation
- quality control –> improve quality
- heavy marketing or sponsorship or publicity –> brand perception
- wide or unique distribution
- ethical stance
- renowned product development and innovation
- develop USP (function, aesthetics)
- sustained promotion
- customer service (need high moral—> improve motivation)
define a skill shortage
what may cause it
demand for workers with the right qualifications in the industry, doesn’t meet the supply
- lack of spend on training & apprenticeships by business
- government supplying wrong type of education schemes
the impact of skill shortages on international competitiveness of firms
impact on firms with differentiation leadership strategy
- produce less quality products —> as workers less capable pf producing high standard (need workers with very high expertise or craftsmanship)
- firm may have to turn away work as don’t have enough workers of necessary skill to complete it (undermine brand perception
impacts on firms with cost leadership strategy
- if want to attract from competitors, it drives up wages
actions that governments can undertake to overcome skill shortages
- invest in training
- provide more apprenticeships and higher education schemes
- encourage inward migration of skilled workers
- provide incentives (subsidies) for firms to invest in training or education
actions that businesses can undertake to overcome skill shortages
- recruit from overseas, entice with higher wages
- offshore labour
- outsource to specialists
- increase capital intensive production
- increase current productivity
- provide more training than competitors
acronym to remember the factors that affect the suitability of a country as a production location
selling PC (selling pop chalk)
Factors that affect the suitability of a country as a production location
- cost of production
- skills and availability of workforce
- natural resources
- location in trade bloc
- government incentives
- likely return on investment
- infrastructure
- ease of doing business
- political stability
