Global competitiveness

• Global competitiveness

  the ability of a business to perform better than its rivals across markets in different countries
• Exchange rate fluctuations

  fluctuations in exchange rates can influence the competitiveness of business

  currency appreciation and depreciation have different impacts on a business
• Currency appreciation

  means the value of a currency increases against another currency
• Advantages of appreciation

  if businesses import raw materials and components from abroad they will now be cheaper

  this will help the business to reduce their costs and possibly increase their profit margin
• Disadvantages of appreciation

  if businesses exports goods/services to foreign consumers the goods will be more expensive for international customers

  this may lead to a fall in sales as consumers now shift demand to domestic businesses
• Currency depreciation

  means the value of the currency decreases against another currency
• Advantages of depreciation

  if businesses export goods/services abroad, they become more competitive because their products are cheaper to purchase

  in the domestic market there may be less competition from foreign businesses as imports are now more expensive for domestic consumers to purchase
• Disadvantages of depreciation

  if a business imports raw materials or components from abroad they are now more expensive

  this leads to an increase in cost for a business which could be passed onto consumers in the form of higher prices
• competitive advantage

  business aims to gain competitive advantage and the two main ways are cost leadership and differentiation
• Cost leadership

  when a business becomes the lowest cost producer in their industry

  businesses can utilise this position as a cost leader to reduce their prices or keep their prices the same, which results in an increase in profit margins
• Cost leadership can be achieved through the strategies of

  increasing the productivity of their workforce

  using machinery and technology efficiently

  outsourcing

  offshoring
• Differentiation

  occurs when the business makes the characteristics of their products/services different to those of their competitors
• Methods of differentiation

  developing a strong brand

  better design

  better quality

  customer service
• The impact of skills shortages

  if unable to find labour with required skills it will affect the businesses ability to gain competitive advantage
• cost leadership, skill shortages

  could be difficult to achieve if the workers lack skills because they may not be as productive and then this could increase unit costs due to factors such as waste
• product differentiation, skills shortages

  less likely to occur where workers lack the skills to produce highly differentiated products
• how to overcome the issues

  businesses can use outsourcing and offshoring to access the skills needed for their business