Global competitiveness

Global competitiveness

1. Introduction

   • Internationally competitive business succeed because they sell products that offer consumers better value for money than their foreign rivals
   • Many markets products quality and brand images are more important than price
   • Some very competitive firms sell their products at price premium eg BMW
   • Global competitive firms are able to stop imports from penetrating their domestic market

2. The impact of movement in exchange rate on competitiveness

   • The exchange rate measure the quantity of foreign currency that can be bought with one unit of another currency
   • Movement in exchange rate can affect both the price of imported and exported goods
   • High exchange rate
     • exporters lose price competitiveness when their currency appreciates in value
     • they like it to fall not rise
     • Impact of high exchange rate is to make it harder for Uk manufacturers to trade profitably
     • This can threaten jobs
   • Face competition from imports
     • UK base firms that import raw material will benefit from a stronger currency because it will reduce the sterling cost of buying these imports
     • Strong pound is unlikely to reduce the operating cost of a typical Scottish distally
     • Producers will lose some of their price competitiveness because unlike the producers of imported whiskey
     • A stronger currency will not enable them to lower their prices
   • Impact of low exchange rates
     • A weak pound makes their exports seem cheaper to foreign consumers s
     • It will cost Tesco more in pounds to buy imported stock
     • Demand for product in uk will probably be diverted away from imports towards domestically produced alternatives
     • Depreciation of the pound helps UK manufacturers who export

3. Competitive Advantage

   • Raising Productivity
     • Cost leader is a business that operates with the lowest average cost in its industry
     • Product for the lowest possible costs
     • low costs is to maximise labour productivity
     • One group of workers working harder and faster than another
     • Planning and organisation of the work place
     • Productive business, the organisation and planning is helped by discussion with and ideas from the workforce
     • Reduce waste
       • The planes do more journeys per day increasing the company's capital productivity
     • Higher wages higher productivity
     • Cutting wages to improve competitiveness lowers living standards
     • Fall in demands caused by lower wages will also make life harder for most firms by reducing the demand for goods and services
     • Better for a country to create its cost competitiveness in German by raiding productivity
   • Outsourcing
     • Firms outsources when they get another firm to do activates
     • Reduce costs
     • Cleaners are hired specialist
     • India have lower wages then the uk
       • Lower operating costs, creating a cost based competitive advantages
   • Offshoring
     • Offshores factories or offices are closed down and moved to another location

4. Competitive advantage through product differentiation

   • Consumers will only purchase a product if they like
   • Business with high wage economies cannot compete with price
   • Use product differentiation to create non price competitiveness
   • Product differentiation is the extent to which consumer believe product is unique
   • Clever marketing and branding

5. Skill shortage and their impact on international competitiveness

   • Skill shortage exist when firms are unable to recruit extra workers with the necessary skills
   • stop the economy from growing
   • Consequence of poor decision making an short termism thinking by both private sector and government
   • Skill shortage if they fail to invest sufficiently in training skill