International Competitiveness - Edexcel Unit 4

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Harry Bindloss
INTERNATIONAL COMPETITIVENESS
International Competitiveness: Means your exports are attractive to foreigners. You will
then have more exports then imports. The ability for a nation to sell its goods or services to
domestic and international markets.
UK exports in world markets depends on:
Price (most important)
Price of other goods ­ Substitutes, complements
Consumer incomes
Consumer preferences
Measures of international competitiveness
Relative unit labour costs ­ relative to other competing nations, low costs lead to
exports being cheaper and therefore demand for them will increase.
Composite indices ­ Global competitive index ­ Takes a range of factors weighs and
ranks them. E.g. Education, infrastructure, health.
Relative productivity measures ­ Relative productivity measures, relative to
productivity per worker per hour worked compared to other nations. Therefore more
produced which will lead to lower unit costs and lower prices.
Other national factors ­ Level of education, leadership, openness to trade. Only
relevant to that country, therefore difficult to form any kind of comparison.
Real Exchange ­ ((Nominal rate) x (ratio of UK to foreign prices)) Number of units of
foreign currency that can be obtained for a £. Accurately compare UK prices to
foreign prices.
An appraisal of UK international competitiveness
One way of exploring the performance of the British Economy in international trade is to
look at import penetration ratios and export sales ratios
The import penetration ratio measures the percentage of imports of a product in relation to
home demand for that product. You want this figure to be low.
The export sales ratio measures the percentage of exports of a product to the total
manufactures sales for that product. You want this figure to be high.

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Harry Bindloss
HOWEVER ­
It could just be that domestic demand is low therefore the only solution is to sell
abroad.
If there was a boom the consumers have more disposable income and this means
that demand increases.
If you are importing components and then exporting the final product then these will
both cancel each other out.
International competitiveness has a relationship to openness to international trade. If
countries are more competitive then you will be more open to international trade.…read more

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