International Competitiveness

A country’s “international competitiveness” refers to its ability to sell its goods and services in domestic and international market at a price and quality that is attractive in those markets. The UK fell from 9th to 12th place in The Global Competitiveness Index between 2007 and 2008. The factors causing the decrease can be divided into price and non-price factors. In order to improve the international competitiveness the firm can raise productivity and the government can imply a variety of supply-side policies.

Competitiveness is determined by a variety of factors but one of the most important is a country’s real exchange rate, which is nominal exchange rate adjusted for changes in price levels
The quality of products will increase by the investment of new technology and therefore increase the demand of products. In addition, investing new technology can also improve the efficiency of productivity and reduce the costs of labour, therefore the price of products will be decreased and then lead to the increase in the international competitiveness.

Furthermore, firms can also do some research and development which will result in improved designs or new products. It is beneficial for firms to research and develop new designs and products which are special and different from any other products of the same type. As a result, more consumers will be attracted to this product and then the products will compete well in the market. The reputation of the company will also be improved.

Government can try to improve international competitiveness through a variety of supply-side policies. One of them is privatisation, privatisation is the key to generate investment and improve competitiveness. Private market factors can more efficiently deliver many goods and services than governments due to free market competition. Over time this tends to lead to lower prices, improved quality, more choices, less corruption, less red tape and quicker delivery.

The increase in the international competitiveness can also be achieved by using government expenditure to improve