Business Exchange Rates

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Exchange Rates

If the Chinese exchange rate of Yuan changes from £1=10 to £1=5. How will export sales to China be affected? - How significant price is as a determinant of demand for AS Plc's cars amongst the Chinese people - how price affects demand  - The extent as to which AS Plc's cars are regarded as 'exclusive' in China - The avaliablity and price of other sports cars in China - Demand is likely to increase as it costs less Yuan to buy the car in China, and as a result more cars will be exported and sold, increasing revenue and profits for AS Plc.

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Ways in which the UK's membership to the EU may be

- It may be easier and cheaper for AS Plc to export cars to customers in other countries - Due to the removal of border controls which has cut costs of exporting goods and increased the speed at which goods are exported. - It may be easier for AS Plc to obtain supplies from other EU countries such as the tyres from Italy, leather seats from spain, radiators from Germany and disc brakes from Poland  - Easier growth and expansion due to the larger potential customer base and fewer restrictions - Greater economies of scale as a result of greater growth and expansion. - Increased competitiveness on world markets and/or greater profits (see above point) - It is easier for AS Plc to obtain skilled engineers from overseas. This would solve the current UK labour skills shortage regarding engineers who can work with new 'state of the art technology' AS Plc plans to use in the new factory to produce more fuel efficient engines.

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How can a business become more competitive?


- To become more competitive, AT will need to offer customers something that they will value over and above what rivals give. 

- If AT can off lower prices than rivals can for similar tyres, this will improve their competitiveness in world markets but the ability to lower prices will depend on costs of the business. 

- Lower prices will reduce profit margins and it may not be possible if AT already operates on low margins. 

- Improved quality of raw materials

- Create a USP eg only sourcing from ethical suppliers

- Improve the way the tyres are made - more mechanics/technology to create economies of scale.

- Advertising campaign, though this could be expensive.

AS Plc should carry out market research.

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Changes in costs

- Total fixed costs remains the same therefore as output increases the costs are spread across a greater number of units, therefore reducing the cost

- As more is produced the business may experience economies of scale such as discounts for buying in bulk - this may reduce variable costs and therefore unit costs

- At an output of x+, the business may be experiencing diseconomies of scale where inefficiencies occur because of the number being produced. 

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