- Following the Brexit vote, the value of the pound fell sharply against other major currencies like the dollar and euro. The pound dropped over 1% against these currencies, falling to a three-year and six-and-a-half-year low respectively. - While the falling pound hurt the UK currency, it boosted the FTSE 100 as export-focused companies benefited from the relatively cheaper cost of British goods. However, uncertainties over future trade deals and economic growth after Brexit negatively impacted the pound. - The document discusses how the Brexit-induced slump in the British pound affected currency and stock markets in the UK and issues of global competitiveness for British companies going forward.

1. EUROPEAN SHARES TURN IN
MIXED PERFORMANCE
 With a timetable for Brexit now unveiled, the
pound dropped sharply but UK shares went in the
opposite direction.
 The UK currency is currently down 1% against
the dollar and down a similar amount against the
euro to a three year low, while the Bank of
England’s trade-weighted sterling index is down
more than 1% to a six and a half year low.
 Uncertainties over the status of trade deals and
economic growth once Brexit has happened has
hit the pound, but conversely the FTSE 100 was
flying, lifted by exporters benefitting from weaker
sterling.
The
Guardian,
3rd October
2016

2. 4.2.5 GLOBAL COMPETITIVENESS
THEME 4
GLOBAL
BUSINESS
Following the Brexit vote the value of the pound fell
drastically.
How might this affect the global competitiveness of
the UK?
Write a paragraph to explain cause and effect. Start
your paragraph with a definition of global
competitiveness.

3. 4.2.5 GLOBAL COMPETITIVENESS
 In this topic you will learn about
 The impact of movements in exchange rates
 Competitive advantage through:
 cost competitiveness
 differentiation
 Skill shortages and their impact on international
competitiveness

4. Price
$ per £
Quantity
S2
Q2
D1
Q1
S1
D2
$1.50
$1.60
$1.40
Imagine an exchange rate
is in equilibrium at D1S1
with £1 able to buy
$1.50.
If there was an
appreciation in the
exchange rate , this
would increase the D for
£s and there would be a
shift to D2. This would
mean that £1 is now able
to buy $1.60.
A depreciation in the
exchange rate might
mean that £1 is now able
to buy $1.40.
THE IMPACT OF MOVEMENTS IN
EXCHANGE RATES

5.  If the exchange rate appreciates…..
 However, a stronger pound will….
Businesses will struggle to budget as they do not know their
exact costs.

6. WHICH BUSINESSES MAY BE IMPACTED
MORE BY AN EXCHANGE RATE SLUMP?
John Lewis warns
over sterling slump.
What is the problem when we
look at Global businesses? Is
the exchange rate change
good/bad for all subsidiaries?

7.  Changes in exchange rates can eliminate profits for a
business or increase returns dependent on which
way they move
 For example, in June 2016 the £ hit a 31 year low
against the $ after the UK voted to leave the EU. As a
result, when US businesses convert their UK profits
into dollars there will be a significant loss as each £
buys less $
 In the same way, British businesses that operate
heavily in the US market, such as Burberry and Top
Shop, should see a significant increase in profit as
they turn $s into £s
THE IMPACT OF MOVEMENTS IN
EXCHANGE RATES
How exchange rate
fluctuations affect
companies.

8. QUANTITATIVE SKILL
 Select any two currencies
 What is the exchange rate today? What was the
exchange rate last year or at any other point in
time
 Use this information to prove the last 2 bullet
point on the previous slide – assume a starting
profit of 100 000 in each instance

9. Why does operating globally mean firms have more
chance of being the lowest cost producer?
COMPETITIVE ADVANTAGE THROUGH
COST COMPETITIVENESS
Recap Porter’s
Strategic Matrix.

10. Economies of scale
COMPETITIVE ADVANTAGE THROUGH
COST COMPETITIVENESS
Define economies of
scale.
To what extent do you
think international
business expansion is
likely to also lead to
diseconomies of
scale?

11. What enables global businesses do differentiate themselves?
COMPETITIVE ADVANTAGE THROUGH
DIFFERENTIATION

12. ACTIVITY
With reference to both Porter’s Strategic
Matrix and Five forces explain how a
business can achieve global competiveness.

13. SKILLS SHORTAGES AND THEIR IMPACT ON
INTERNATIONAL COMPETITIVENESS
How have machines
replaced low skilled
jobs?

14. ACTIVITY
 Watch the video “Global competiveness report
2015-2016”
 Draw a spider diagram to show the factors
influencing global competiveness

15. 4.2.5 GLOBAL COMPETITIVENESS
 In this topic you have learnt about
 The impact of movements in exchange rates
 Competitive advantage through:
 cost competitiveness
 differentiation
 Skill shortages and their impact on international
competitiveness