UK Businesses Competing Globally Revision Notes | GCSE AQA Business

1. Why Global Competition Changes Everything for UK Businesses

A small clothing brand in Manchester is no longer competing only with shops on the high street. Thanks to globalisation, it is competing with manufacturers in Bangladesh, online retailers in the USA, and luxury brands from Italy — all at the same time. That shift changes how every UK business must think about price, quality, and strategy.

Globalisation has opened up enormous opportunities: UK businesses can sell to billions of customers worldwide, source cheaper materials from overseas, and access talent from across the globe. But it has also intensified competition, because foreign businesses can now reach UK customers far more easily than ever before.

To compete internationally, UK businesses must make deliberate strategic choices. The two most powerful levers they have are price competitiveness and non-price competitiveness. Understanding both — and knowing which to use when — is exactly what AQA examiners want to see you demonstrate.

2. How UK Businesses Compete Internationally

Price competitiveness means offering goods or services at a lower price than rivals. UK businesses can achieve this by cutting production costs, improving efficiency, or sourcing cheaper inputs from overseas suppliers. A UK furniture manufacturer that sources timber from Eastern Europe at lower cost can pass those savings on to customers and undercut competitors on price.

Non-price competitiveness is where many UK businesses find their strongest advantage. This means competing on factors other than price — such as quality, brand reputation, innovation, customer service, or unique product features. Think of Dyson: its vacuum cleaners are not the cheapest on the market, but their engineering reputation commands premium prices globally.

The right approach depends on the business. A mass-market UK supermarket exporting own-brand goods will focus on price. A specialist UK engineering firm selling precision components to aerospace companies will focus on quality and technical expertise. Examiners reward students who recognise this context-dependency rather than giving a one-size-fits-all answer.

Notice how the table above shows that every competitive method carries a trade-off. This is exactly the kind of evaluative thinking that earns marks in 9-mark and 12-mark questions. You are not just describing what a business does — you are weighing up the consequences.

3. Exchange Rates — The Hidden Force Behind Global Trade

Here is where it gets genuinely interesting. Even if a UK business has the best product at the best price, a shift in the exchange rate can make it suddenly expensive for overseas buyers — or suddenly cheap — without the business changing anything at all. Exchange rates are one of the most powerful external forces acting on UK businesses that trade internationally.

Exchange rates are determined by supply and demand for currencies on the foreign exchange market. When demand for pounds is high — because overseas investors want to buy UK assets or because UK exports are popular — the pound strengthens. When demand falls, the pound weakens. Interest rates, inflation, and political stability all influence this demand.

The key insight for your exam is this: a stronger pound makes UK exports more expensive abroad and imports cheaper into the UK. A weaker pound makes UK exports cheaper abroad and imports more expensive. These two effects have very different consequences depending on whether a business is an exporter or an importer.

This formula looks straightforward, but the exam catches students out when the exchange rate changes. You need to calculate the price before and after the change, then compare the two results to explain the business impact. The step-by-step example below walks you through exactly how to do this.

Worked example: Calculating the Effect of a Rising Pound on Export Prices

A UK engineering firm sells a machine for £20,000. Initially, the exchange rate is £1 = €1.10. The pound then strengthens to £1 = €1.25. Calculate the price of the machine in euros before and after the change, and explain the impact on the business.

1. £20,000 × 1.10 = €22,000 — At £1 = €1.10, a European buyer pays €22,000 for the machine. Multiply the pound price by the exchange rate to convert.
2. £20,000 × 1.25 = €25,000 — At £1 = €1.25, the same machine now costs the European buyer €25,000. The UK firm has not changed its price in pounds — but the machine has become more expensive in euros.
3. €25,000 − €22,000 = €3,000 increase — The machine costs €3,000 more to the European buyer, purely because of the exchange rate movement. The UK firm did nothing differently.
4. The machine is now 13.6% more expensive in euros: (€3,000 ÷ €22,000) × 100 = 13.6% — A 13.6% price increase is significant. European buyers may switch to cheaper German or French competitors. The UK firm could lose export orders unless it absorbs the difference by cutting its pound price — which would reduce its profit margin.

Answer: Before: €22,000. After: €25,000. The stronger pound makes UK exports more expensive for overseas buyers, potentially reducing demand and export revenue for the business.

Notice the final step above — it does not stop at the number. It explains what the number means for the business. That is the difference between a Level 2 and a Level 3 answer in an AQA exam. Always ask yourself: so what does this mean for the business?

4. Winners and Losers — Who Benefits from Exchange Rate Changes?

Exchange rate movements do not affect all businesses equally. Whether a business wins or loses depends on whether it is primarily an exporter (selling abroad) or an importer (buying from abroad). This is a classic AQA evaluation point — the same exchange rate change can be good news for one business and terrible news for another.

The chart above captures the core logic you need for the exam. A weaker pound is a significant advantage for UK exporters — their goods become cheaper in foreign currencies, boosting demand. But it is a serious problem for UK importers, who now pay more pounds for the same overseas goods, pushing up their costs.

Consider a UK supermarket chain that imports a large proportion of its food from Europe and beyond. If the pound falls sharply, the cost of those imports rises in pound terms. The supermarket faces a difficult choice: absorb the extra cost (reducing profit margins) or pass it on to customers through higher prices (risking a loss of sales). Neither option is comfortable.

Now consider a UK whisky distillery that exports 80% of its production to the USA and Asia. A weaker pound means its whisky becomes cheaper in dollars and yen, potentially driving a surge in overseas orders. The distillery's revenue in pounds actually increases even if it sells at the same foreign currency price, because each dollar or yen converts back to more pounds.

Worked example: Evaluating the Impact of a Weaker Pound on a UK Business

Priya runs a UK-based textile business. She exports 60% of her products to the USA and imports raw cotton from India. The pound has recently weakened significantly against both the dollar and the rupee. Analyse the impact of this exchange rate change on Priya's business. [9 marks]

Method: Point-Evidence-Explain-Link (PEEL) with stakeholder and trade-off awareness

1. The weaker pound affects Priya's business in two directions: it benefits her exports to the USA but increases the cost of her imported cotton from India. — Always identify both sides of an exchange rate impact — this signals evaluative thinking from the start.
2. With a weaker pound, Priya's textiles become cheaper in dollar terms for US buyers. For example, if a fabric roll priced at £50 previously cost $65 (at £1 = $1.30) but now costs $57.50 (at £1 = $1.15), US buyers face a lower price. This is likely to increase demand for Priya's products, boosting export revenue. — Use a numerical illustration where possible — it demonstrates application and earns method marks.
3. However, Priya imports raw cotton from India. A weaker pound means she pays more pounds for the same quantity of cotton. If cotton previously cost 10,000 rupees per bale and the rate was £1 = 100 rupees, each bale cost £100. If the rate falls to £1 = 85 rupees, each bale now costs £117.65 — an increase of nearly 18%. This raises Priya's production costs. — The counter-argument must be developed with the same depth as the positive point to access the top mark band.
4. On balance, the net impact depends on the proportion of revenue from exports versus the proportion of costs from imports. Since 60% of Priya's revenue comes from US exports, the boost to export demand is likely to outweigh the rise in import costs — provided she can manage her cash flow during the transition period. — A strong conclusion weighs the two effects against each other and reaches a contextualised judgement, not a generic one.

Answer: A weaker pound creates a mixed picture for Priya. On one hand, her US exports become cheaper in dollar terms, which is likely to increase demand and boost revenue — a significant benefit given that 60% of her sales are overseas. On the other hand, the cost of importing raw cotton from India rises in pound terms, squeezing her profit margins. On balance, the export benefit is likely to dominate given the high proportion of overseas sales, but Priya must monitor her import costs carefully and consider whether to renegotiate supplier contracts or seek alternative domestic sources of raw materials.

5. Real-World Context — UK Businesses in a Global Market

After the Brexit referendum in 2016, the pound fell sharply against both the euro and the dollar. UK exporters — including whisky producers, aerospace manufacturers, and creative industries — saw a short-term boost as their goods became cheaper overseas. Meanwhile, UK supermarkets and manufacturers that relied on imported components faced rising costs, which eventually fed through into higher prices for consumers.

This real-world example illustrates why exchange rates appear so frequently in AQA exam questions. They create genuine winners and losers within the same economy at the same time. A business's response to exchange rate volatility — whether it hedges its currency risk, renegotiates supplier contracts, or adjusts its pricing strategy — is a mark of strategic competence.

Beyond exchange rates, UK businesses competing globally must also consider trade barriers such as tariffs and quotas, cultural differences in consumer preferences, and the logistics of international distribution. These factors interact with exchange rates to shape the overall attractiveness of entering or expanding in a foreign market. For your AQA exam, the specification focuses specifically on exchange rates, so make sure that is your primary analytical tool when answering questions on global competition.

6. Exam Technique — Writing for Top Marks on Global Competition Questions

AQA questions on globalisation and exchange rates tend to fall into two categories: calculation questions (worth 2-4 marks) and analysis or evaluation questions (worth 6-12 marks). The calculation questions reward method and accuracy. The analysis questions reward chains of reasoning and balanced judgement. You need to be confident in both.

For calculation questions, always write the formula first, then substitute the values, then state the answer with appropriate context. Never skip straight to the answer — method marks are available even if your final number is slightly wrong. For exchange rate questions specifically, make sure you are multiplying or dividing in the correct direction: to convert pounds to a foreign currency, multiply by the exchange rate; to convert a foreign currency back to pounds, divide by the exchange rate.

For evaluation questions, the most common mistake is writing a one-sided answer. If a question asks you to evaluate the impact of a rising pound on a UK business, you must consider both the negative effect on exports and the positive effect on import costs. Then you must reach a conclusion that weighs these against each other. The phrase 'on balance' is your signal to the examiner that you are making a judgement, not just listing points.

Worked example: Answering an Exchange Rate Calculation Question

A UK business exports trainers to Japan. Each pair is priced at £80. The exchange rate is currently £1 = ¥180. The pound then weakens to £1 = ¥150. Calculate the yen price of the trainers before and after the change, and state whether this is likely to increase or decrease demand in Japan.

1. Price in foreign currency = Price in £ × Exchange rate — Always state the formula first. This earns a method mark even if arithmetic errors follow.
2. £80 × 180 = ¥14,400 — At £1 = ¥180, Japanese buyers pay ¥14,400 per pair of trainers.
3. £80 × 150 = ¥12,000 — At £1 = ¥150, the same trainers now cost Japanese buyers only ¥12,000. The UK business has not changed its pound price at all.
4. ¥14,400 − ¥12,000 = ¥2,400 decrease — The trainers are ¥2,400 cheaper in Japan purely because of the exchange rate movement.
5. Demand in Japan is likely to increase because the trainers are now cheaper for Japanese consumers. This could boost the UK business's export revenue. — Always interpret the number — what does it mean for the business? This is where analysis marks are earned.

Answer: Before: ¥14,400. After: ¥12,000. The weaker pound makes the trainers cheaper for Japanese buyers, which is likely to increase demand and boost UK export revenue.