Price and non-price competitiveness

Another way in which the government can improve the non price competitiveness and price competitiveness in international markets is to encourage innovation and research. Tax allowances have been made available to businesses spending on innovation and research. However, there has also been a variety of programmes which enable some businesses to gain grants for research and development R & D and to set up knowledge transfer networks and universities. Such measures are likely to be more successful than tax cats since firms are given incentives to research and development through receiving tax concessions and from making connection to universities where they have the opportunity to learn about the latest scientific and technological advancements. 

On the other hand businesses, are able to introduce a variety of measures to improve the competitiveness of the goods and services. These include increasing the level of investment on new technology, on staff training, on ICT, etc . One way by which businesses might improve the competitiveness of their goods or services is by increasing the spending on R & D. By increasing the spending on R & D, businesses will most probably benefit from product and process innovation. If a business manages to create a unique and different product than the rest products in the market, it would be able to compete much more easily since consumers will prefer to buy the most innovated and technological updated products.

For example Steve Job’s firm, Apple spent $758 million on R&D during the first fiscal quarter of 2012. If we take Apple as an example which is one of the most profitable companies, we clearly see that it has benefited from the heavy spending on R & D. It has come up with products such as the iPhone where the sales reached the number of 98,144,000 in the first three quadrants of 2012. 

However, some businesses prefer not to spend on R & D because they do not think about the longer term. Also there are other firms that fail to spend on R & D. For example the procedure of R & D may result in no innovative products or procedures that will improve competitiveness and therefore. 

Another way, by which businesses might improve competitiveness, is by improving productivity. Productivity is the output per worker. There are different ways by which productivity can be improved. For example if the firms increase the wages, workers might be motivated to work harder. Also, training can improve the knowledge and skills of staff. Improved recruitment and selection may have the same effect which will increase productivity in the short term. If the business increases spending on training, workers will be more educated and informed about their job.

This will increase the productivity since they will be able to produce more output at the same working hours and wages. If the productivity is increased, it means that more output will be produced at relatively the same costs. This will allow the firm to get bigger in size, lower the running and operational costs, increase income and gain a greater share of the market. This will increase both price and non-price competitiveness. 

However productivity doesn’t always improve competitiveness. For example if training isn’t done effectively, and workers do not give attention or really care about the job, then they won’t improve their knowledge and skills, training will not improve productivity, and therefore productivity will not improve competitiveness. In addition, productivity might not improve competitiveness because in the case of increasing the wages in relation of the output the worker producers, there are workers that wouldn’t be motivated by an increase in their salary and therefore will not produce a greater output. 

Productivity can be used as a measure to improve competitiveness only if it is used correctly and it can increase both price and non-price competitiveness. It can improve price competitiveness by allowing the businesses to set lower prices and improve non-price competitiveness by expanding as a firm and increasing its popularity.