a2 external influences international competitiveness and economic growth
TRANSCRIPT
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A2 External Influences
International Competitiveness and economic growth
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Objectives
By the end of the lesson all students should understand:
• International competitiveness and economic growth
• How productivity relates to international competitiveness
• International competitiveness and the UK
• How the UK may continue economic growth into the future
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A2 External Influences
International Competitiveness
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A2 International Competitiveness
• Tasks: (all tasks must be completed in the lesson)
1. Read the information sheet provided and highlight
2. Answer the following questions:
• What is the world trade organisation and what is its purpose?
• How might a fall in exchange rates influence a firms international competitiveness?
• How might a low inflation rate in the UK compared with other countries influence a UK firms international competitiveness?
3. Complete the Clarks case study on Page 366-367 – photocopy provided in lesson
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Answers• What is the world trade organisation and what is its
purpose?
• A group of over 100 countries that are committed to the encouragement of free and fair international trade through the elimination of barriers.
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Answers• How might a fall in exchange rates influence a
firms international competitiveness?
• A strong pound e.g. £1=$2 means exports in the US from the UK are cheaper and more competitive. Imports from US to the UK are more expensive and less competitive.
• And vice versa for a weak pound e.g. £1=$1.2
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£1 = $2
£1 = $1.5
A Rise in Exchange Rates
UK US
$75
$75Average TV price in the US market
£50
$100
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£1 = $1
£1 = $1.5
A Fall in Exchange Rates
UK US
$75
$75Average TV price in the US market
£50
$50
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Answers• How might a low inflation rate in the UK compared
with other countries influence a UK firms international competitiveness?
• If UK prices are rising slower than in other countries because of low inflation exports will be cheaper and more competitive.
• High inflation in UK compared with other countries = faster rising prices of exports, therefore less competitive
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A2 External Influences
Economic growth
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Economic Growth
• An increase in the level of economic activity or real gross domestic product (GDP)
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Effects of economic growth on business
• Growth provides ideal conditions for firms.
• Firms can expand and take advantage of new opportunities.
• Incomes rise.
• Less risk of new venture failure.
• Provides security for firms.
• Businesses have more confidence in business planning.
Activity: Read the information sheet
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ActivityWhat is the impact of economic growth on the following
areas complete the table at the bottom of the worksheet:
• Sales• Profit• Investment• Employment• Business expansion plans• Businesses strategy for new products• Businesses ability to reposition themselves in the market• The environment
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Answers
• Sales – incomes = demand/sales for elastic goods e.g. non-food, DVDs etc. Inferior goods may see a fall in sales.
• Profits - as sales , may allow price increase
• Investment – Firms invest in expansion as demand rises
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Answers
• Employment – production = more jobs, or existing workers work harder. Labour market may ‘tighten’ and there may be insufficient skilled workers available.
• Business Expansion – More easily achieved without taking rivals market share, may result in diseconomies of scale such as communication and organisation structure problems.
• Businesses new products – consumer buying more so more opportunities to introduce newer products and extend product ranges.
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Answers
• Businesses ability to reposition themselves in the market – During economic prosperity easier to try new opportunities.
• The environment – negative externalities may occur e.g. congestion, pollution. Therefore regulation is needed.
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Professor Michael Porter Video Questions
Answer the following questions based on the video about Michael Porter’s analysis of productivity, international competitiveness, economic growth and the UK: (Write down your answers)
• What is productivity?
• What is the productivity gap?
• Why is the UK less internationally competitive than its rivals?
• How can the UK improve its international competitiveness?
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Video Answers
• Productivity – the efficiency of firms at converting their inputs into outputs
• Productivity gap – difference between the UK’s lower rate of productivity when compared with foreign rivals such as the US
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Answers
Reasons for lower international competitiveness:
• Lower productivity
• Less investment in training and capital investment (technology)
• Lower skilled middle management
• Low investment in research and development and less innovation
• Strong £ making exports more expensive abroad and foreign imports cheaper
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AnswersWays to improve international
competitiveness and continue economic growth:
• Investment in:• Training• Technology• Research and development to encourage
innovation
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Training
Modern equipment and technology
Productivity Gap
Produces 6 units per hour
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Produces 2 units per hour
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Motivation
Management style