4.2.5 - Global Competitiveness

Question 1

Definition of global competitiveness

Answer 1

Global competitiveness is the ability of a business to perform better than its rivals across markets in different countries

Question 2

Factors that influence cost competitiveness

Answer 2

• Exchange rates
• Productivity and labour skills
• Outsourcing
• Offshoring and re-shoring

Question 3

How can currency appreciation improve a business’ cost competitiveness?

Answer 3

If a business imports materials from abroad, they will now be cheaper

Question 4

How can currency appreciation worsen a business’ cost competitiveness?

Answer 4

If a business exports to foreign customers, goods will be more expensive for those international consumers

Question 5

How can currency depreciation improve a business’ cost competitiveness?

Answer 5

• If a business exports abroad they become more competitive
• There may be less competition from foreign firms, as imports are now more expensive

Question 6

How can currency depreciation worsen a business’ cost competitiveness?

Answer 6

If a business imports raw materials from abroad, they are now more expensive

Question 7

How can competitive advantage influence global competitiveness?

Answer 7

Global competitiveness increases when a firm has a competitive advantage.
Two factors that provide a competitive advantage include cost competitiveness and differentiation

Question 8

What is cost competitiveness?

Answer 8

Cost competitiveness is when a business becomes one of the lowest cost producers in its industry

Question 9

How can cost competitiveness be achieved?

Answer 9

• Increasing productivity of a workforce
• Using machinery and technology efficiently
• Outsourcing
• Offshoring

Question 10

What is differentiation?

Answer 10

Differentiation occurs when a business makes the characteristics of its products/services different from those of its competitors

Question 11

Methods of differentiation

Answer 11

• Strong branding
• Better design
• Better quality
• Better customer service

Question 12

What are the impacts of skill shortages?

Answer 12

• Will affect its ability to gain a competitive advantage
• Cost leadership would be difficult to achieve, as if workers lack skills it may lower productivity
• Product differentiation is less likely to occur is workers lack the skills to produce highly differentiated products

Question 13

How can a business fix a skills shortage?

Answer 13

A business can use outsourcing and offshoring to access the skills needed for its business