Competing Internationally (OCR GCSE Business)

How Businesses Compete Internationally

• Globalisation means that UK businesses need to compete effectively with overseas rivals

• British companies can rarely compete on price in overseas markets due to their relatively high wage and operations costs

How UK Businesses Compete with Overseas Rivals

International Branding

• The approach a business takes to international branding can have a significant impact on its chances of success

• Care must be taken to ensure:

  • Branding is sensitive to local customs, languages, and social norms to avoid cultural misunderstandings that could harm their reputation

    • E.g. Pepsi sales suffered in South East Asia when it changed the colour of its vending machines from deep to light blue, as light blue is associated with death and mourning in the region

  • Language used in branding elements is appropriate

    • E.g. KFC's famous slogan, “Finger-lickin’ good,” translates to “Eat your fingers off" in Chinese

  • Brand names are amended where appropriate

    • E.g. In the 1980s, Vauxhall/Opel was forced to rename its small Nova hatchback for Spanish-speaking markets, as its brand name means "doesn't go"

  • Legal standards are met in different countries

    • E.g. the promotion of alcohol in some countries, such as Norway, Turkey and Saudi Arabia, is illegal

  • Prices are adapted to take into account local income levels

    • E.g. In Thailand, Krispy Kreme sells its products for around half of their UK price, where average incomes are around seven times higher

  • Products are adapted to meet local tastes and customs

    • E.g. McDonalds outlets in India replace the signature Big Mac with the Maharaja Mac, made from chicken, as the sale of beef is illegal in most states

Exchange Rates

• The exchange rate is the value of one currency in terms of another

  • E.g. In June 2024, the UK pound was worth 1.28 US dollars

• Changes in the exchange rate can have a significant impact on the competitiveness of British goods compared to those of overseas rivals

• Appreciation occurs when the value of a currency rises

  • E,g. An appreciation from £1 = €1.18 to £1 = €1.25

    • European customers buying goods from UK businesses have to pay more in Euros than they did previously   

    • This appreciation makes exports from the UK relatively more expensive and imports from the Eurozone less expensive

• Depreciation occurs when the value of a currency falls

  • E.g. A depreciation from £1 = €1.18 to £1 = €1.05

    • Europeans customers buying goods from UK suppliers pay less in Euros than they did previously 

    • This depreciation makes exports to Europe relatively more attractive and imports from the Eurozone less attractive

The Impact on Business of Exchange Rate Change