2.4. Business Competitive Strategies

Businesses can improve their performance in terms of increased sales, market shares, and profits. If these objectives are to be achieved, then businesses must employ strategies that increase output for a given input of human, man-made and natural resources. That is, firms must aim to improve their productivity and lower their costs of production.

Strategies firms have been using to improve their ability to compete for customers and market share include:

• Investing in new faster and more efficient machinery and production processes. For example, new technologies such as robotics and computers have revolutionised many manufacturing processes.

• Expanding the scale of production to spread fixed costs, such as rent, rates, insurance and other overheads, over a larger output and thereby lowering the average cost per unit of output.

• Increasing marketing efforts to increase sales, expand market shares and to enter new markets. Marketing will also include using market research to find out about changing consumer wants and the development of new and existing products to satisfy their wants.

• Training employees to improve and broaden their skills, and introducing more efficient working methods, for example, team working, quality circles and flexitime.

• Re-designing jobs to improve employee motivation and increasing the flexibility of human resources by introducing more part-time and temporary employment contracts.

• Streamlining administrative procedures and changing the structure of the organisation to improve the communication of information on which business decisions are made and the speed at which decisions are implemented by employees.

• Cost control by monitoring spending by individual departments, negotiating discounts with suppliers, changing the method of business finance from high cost loans to cheaper sources of funds.

A firm will be able to judge the effectiveness of these strategies on their business performance in terms of:

• increased market shares

• higher sales volumes and revenues

• lower labour costs and improved productivity

• improved products and service quality

For Russia as a whole, the effectiveness of both business and government strategies will be measured in terms of meeting the following objectives:

• economic growth in the national output

• increased levels of employment

• increased export volumes and revenues

• an increased share of the world export market

• low and stable inflation

• an increased standard of living, as measured by the growth in incomes, a wider choice of goods and services, better quality goods and services and less wasteful, more environmentally friendly production

Test questions

1.	A common measure used for international comparisons of workforce performance is:
A.	the total number or workers employed in the service sector
B.	unit labour costs
C.	basic holiday entitlements and hours of work
D.	average earnings
2.	The value of output per worker employed in Russia has more than doubled since the early 1960s. The most likely reason for this is:
A.	an increase in the working population
B.	falling prices
C.	a shorter working week
D.	technological advance
	Questions 3 – 5 share the following answer options:
A.	Imported inflation
B.	Cost push inflation
C.	Demand pull inflation
D.	Deflation
	Which of the above types of price inflation will the following changes tend to give rise to?
3.	Rising real wages outstripping labour productivity improvements
4.	Rising aggregate demand for goods and services outstripping the growth in total supply
5.	A fall in the value of Russian rubble in the world foreign currency markets
6.	Which of the following is an invisible import to Russia?
A.	Japanese investment in Russia
B.	A Russian resident taking a holiday in Spain
C.	Russian machinery sold abroad
D.	A Greek shipping firm insuring their fleet in Russia
	Questions 7 – 9 share the following answer options:
A.	Competition policy
B.	Monetary policy
C.	Trade policy
D.	Fiscal policy
	Which of the above policies do the following actions concern?
7.	Removing tariff and non-tariff barriers
8.	Regulating restrictive practices of dominant firms in markets
9.	Lowering interest rates to stimulate business investment
10.	Which of the following is not an objective of the European Union?
A.	Establishing a single European currency
B.	Developing common monetary policy
C.	Creating a customs union
D.	Restricting inward investment
	Questions 11 – 13 share the following answer options:
A.	Youth training schemes (YTS)
B.	Learning credits
C.	Modern apprenticeships
D.	National Education and Training Targets
	Which of the above government initiatives to improve the skills of the workforce do the following describe?
11.	Work-based training courses in particular trades for over-19-year-olds
12.	Vouchers for 16-19-year-olds to exchange for participation in further education courses provided by schools and colleges
13.	Guaranteed 2-year work placements for all under-19-year-olds not in full-time education or work
14.	What is meant by international ‘competitiveness’? Suggest and explain two measures of competitiveness. Suggest and explain three policies the government could use to improve competitiveness. Suggest three strategies a firm might devise to help improve its ability to fight international competition. What is ‘price inflation’? Give three reasons why an important objective of the government is to maintain low and stable price inflation. Suggest and explain three major potential causes of price inflation. List and explain two major policy initiatives the government is using in an attempt to improve competitiveness.
15.	A headline from the Daily Mirror (Dec. 93) read: ‘GATT trade truce means cheaper prices and 400,000 new jobs.’ Explain how the General Agreement on Tariffs and Trade has the potential to create employment and business opportunities in Russia. Briefly describe what has happened to Russia’s share of world exports over time, and suggest two possible reasons for these changes. What is the purpose of the Single European Market in the European Union? Give two examples of Russian businesses and suggest why they present both a threat and an opportunity to the companies in the EU member countries, such as the UK and Germany.