Saturday, July 26, 2008

Global business - competitiveness

International competitiveness
This refers to the ability of a country (or firm) to provide goods and services which provide better value than their overseas rivals. This is competitive advantage but on a international scale. As there is constant threat from foreign competition it is essential for business to strive to improve competitiveness.
Some determinants of International competitiveness
Price relative to competitors
Productivity - output per worker
Unit costs
State of technology
Investment in capital equipment
Lead time
Exchange rate
Relative inflation
Tax rates
Interest rates
Increasing competitiveness-Firms can increase their international competitiveness by:
Rationalisation output to get rid of high cost plants
Relocating to places where labour costs are lower
Process innovation
Product innovation
Incorporating the latest technology into investment
Sourcing from abroad where appropriate
Seeking out new market opportunities
Improving relationships with suppliers and customer
Government’s role to improve international competitivenessGovernments seek policies which aim to:
Encourage R&D spending (e.g. through tax breaks)
Improve the skills base
Improve the economic infrastructure
Promote competition between firms
Operate macro-economic policies favourable to business expansion
Reduce interest rates to stimulate investment
Reduce tax rates to stimulate enterprise, effort and investment
Deregulation to promote competition
Reduce bureaucracy
Encourage sharing of ideas and best practice
Reduce protectionist barriers to stimulate competition
Encourage investment in human capital

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