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.
Although there is a tendency to look to government to play a role in maintaining the competitiveness of UK business, in the final analysis it is a matter for individual firms.
Some determinants of International competitiveness
- Price relative to competitors
- Productivity - output per worker
- Unit costs
- State of technology
- Investment in capital equipment
- Technology
- Quality
- Reliability
- Lead time
- Entrepreneurship
- 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 competitiveness
Governments 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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