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Discuss how the changing nature of the international economy affects Irish exporters. - Leaving Cert Business - Question A - 2011
Question A
Discuss how the changing nature of the international economy affects Irish exporters.
Worked Solution & Example Answer:Discuss how the changing nature of the international economy affects Irish exporters. - Leaving Cert Business - Question A - 2011
Step 1
Changes in technology
Answer
The advancements in technology have significantly improved communication for Irish exporters. Innovations such as instant messaging, video conferencing, and email have made it easier for exporters to maintain relationships with international clients and manage logistics efficiently. This connectivity allows for quicker responses to market demands and smoother transaction processes, ultimately enhancing competitiveness.
Step 2
The opening of new emerging markets
Answer
Emerging markets, particularly in countries like China, present vast opportunities for Irish exporters. Their rapid economic growth provides access to a growing consumer base. Engaging with these markets can lead to increased sales and diversification of export destinations. Moreover, membership in the World Trade Organization (WTO) aids Irish exporters by reducing trade barriers such as tariffs and quotas, facilitating smoother market entry.
Step 3
The growth in Globalisation
Answer
Globalisation has intensified competition among exporters. Irish firms must continually enhance their product quality and price competitiveness. This involves investing in research and development (R&D) to establish a unique selling proposition (USP) that distinguishes them in the international market. The broader global market also exposes exporters to fluctuating demands and preferences, necessitating adaptability.
Step 4
Availability of credit for Irish exporters
Answer
The changing international economy can affect the availability of credit for Irish exporters. Financial institutions may become more cautious, making it more difficult for businesses to secure financing. As a result, exporters could be forced to look for alternative funding sources, which may be less favorable or more expensive.
Step 5
Currency/Exchange rate fluctuations
Answer
Fluctuations in exchange rates can impact the competitiveness of Irish exports. When the euro strengthens against major currencies, it can make Irish products more expensive in international markets. Conversely, a weaker euro can boost competitiveness but also lead to increased import costs. Exporters must navigate these fluctuations to maintain profitability.
Step 6
Pressure on Ireland's low corporation tax rate
Answer
Ireland's corporation tax rate of 12.5% is a significant attraction for foreign investments. However, international scrutiny and potential reforms could impact this advantage. If changes occur, exporters may need to reassess their pricing strategies and operational frameworks to maintain profitability in the face of increased tax burdens.
Step 7
Competition from new EU countries
Answer
The rise of Eastern European countries, such as the Czech Republic and Hungary, introduces new challenges for Irish exporters. These nations often provide cheaper labor and lower operation costs, allowing them to offer competitive pricing. Consequently, Irish firms may need to enhance their value propositions, focusing on quality and unique product features to retain their market share.