2.4 - Globalisation (2)

2.4 - Globalisation (2)

1. Keywords

   • Exchange rate - The price of one currency expressed in terms of another e.g. £1 approx. $1.5
   • Quality - The extent to which a consumer is satisfied with a product
   • Exports - Goods and services produced by a business in one country and sold in a different one
   • Price - The amount a business asks a customer to pay for a single product
   • Imports - goods amd services purchased from overseas by consumers and businesses

2. Competing internationally

   • Design
     • Product design include issues such as appearance, durability and features. By constantly updating products UK businesses can keep up with trends and competitors globally
     • If new products design is seen as being better to competitors then the business can charge a higher price or maximise sales by staying as a similar price
   • Quality and price
     • Better quality means it meets consumer needs, satisfied consumer = more likely they are to buy
     • Quality and price work together when consumers are buying products with a lower price and similar quality to competitors , e.g. Aldi has a reputation from low prices and better quality than other supermarkets attracting more customers

3. Changes in exchange rate

   • Rise
     • Exchange rates have a big affect on selling and buying good internationally
       • Exports - Goods and services produced by a business in one country and sold in different one e.g. Building Benetly cars in the UK and selling them in China
       • Imports - Goods and Services purchased from overseas by consumers and businesses e.g. steel from China is purchased by Bentley to make their cars in the UK
     • If the pound rises against other countries imported good become cheaper
   • Fall
     • If it is more expensive to but something abroad,imports to the UK become more expensive
     • Exports will become cheaper

4. Effect of exchange rate on business sales

   • A fall in exchange rate means exports are cheaper and it is cheaper to but abroad, increasing demand and sales
     • Sales may not always increase, decisions to buy aren't always price based they also consider brand names and reliability
   • Rises in exchange rates makes imports cheaper meaning overseas manufactures can sell products cheaper, making it difficult for businesses selling only in UK - sales reduce

5. Effect of exchange rate on businesses profit

   • A fall in exchange rate should increase the profits of UK businesses that export as products will sell for lower price. The price received in pounds is the same for each product but as they are selling greater numbers sales revenue rises, increasing profits.
   • Cost of production per unit may rise as businesses must import raw materials such as steel, starting the increase in profits. A fall in exchange rate will have the opposite effect