Fedorenko O. D., Prof. Dr. Galushko O.S.
National Mining University, Ukraine
Investigation of a relationship between the effectiveness of
enterprise’s business activity and its competitiveness
Business activity of a commercial organization
shows in the dynamics of its development, in the achievement of its objectives,
which reflect the natural and cost parameters, or in the effective use of
economic potential and in expanding of the markets. Levels of business activity
of a particular organization reflect the stages of its life - birth, development,
growth, recession, and crisis; also they indicate the degree of adaptation to
the changing market conditions. The activity of the company in the financial
aspect is primarily manifested in the rate of turnover of its funds, and
reflects the effectiveness of the company’s activities relative to the value of
assets or the relative value of consumption in the production process.
The category of efficiency of business activity at
the enterprise level mostly describes the link between the results from its
operations and the amount invested or spent in the production of resources.
Increasing efficiency can be achieved by using fewer resources to create such a
result or by using the same amount of resources or greater production with
relatively fewer resources to create greater results [1].
The economic potential of the company is usually
characterized by the assets of the company, its sales, net and gross income,
fixed and circulating capital, equity and loan capital, production facilities,
research and development capacities, and so on [2]. Furthermore, establishment
of strategic and tactical objectives requires deep financial analysis of the
company’s performance. Determination of tactical goals requires control of all the
activities company is engaged in.
Business activity is not a standalone parameter in
company’s operations; it is interconnected to a variety of other parameters and
has a large influence on many of them. The links with competitiveness, in
particular, are of a great interest. To discuss this connection,
competitiveness should be defined.
The most generalized definition of competitiveness
can be rephrased as the economic entity's ability for an effective long-term
operation in the relevant environment [3]. The competitiveness is usually
defined with 3 factors: it is based on the competitive advantages of the
company; it defines the company's ability to compete in certain markets; it reflects
the position of the company relative to competitors.
Competitiveness is also largely determined by the
enterprise’s ability, in the circumstances, to design, produce and sell
products, price and non-price characteristics of which, are more attractive. The factors that characterize the internal environment and the ability
of enterprise to adapt to environmental conditions are the most significant
factors to ensure sustainable competitive position of the enterprise, as these
factors have the biggest influence on the on the enterprise.
Business activity is, naturally, a member of this group, due to its
dependence on the actions of the firm. So, we have established that business
activity is a significant part of company’s competitiveness, because it is
component of two of its criteria: business activity itself and the financial
condition. It means, that business activity affects enterprise in two ways:
directly, through the benefits of well-maintained production utilization, and
indirectly, through high financial performance, etc.
Now, we are going to assess the ways business activity can influence the
level of competitiveness of a company and how this could be implemented in a
small company on Ukrainian market. This process of increasing the
competitiveness of a business consists of the following steps: monitoring and
assessing of the competitive environment and the competitive situation in the
industry and the market, diagnosing of the competitiveness of its main rivals,
the competitive positioning of the enterprise [3].
Through the increase in business activity parameters,
it is possible to increase productive competitiveness of an enterprise. To this
a systematic approach to the diversification and planning of an enterprise is
utilized, which aims to:
1. Implement the policy of diversification of production;
2. Ensure the development and the maintenance of the relationship between
the perspective, annual and operational plans of production, sales and profit;
3. Develop strategic programs, increase turnovers;
4. Use business planning for establishing long-term competitive advantage
[4].
The
last, is the improvement of internal financial management. With its help, it is
possible to bring the business activity and therefore the competitiveness of
the enterprise to higher levels. The backbone components of this category are:
1.
Information provision for the management with
consolidated financial statements for stronger internal control and informed
management decisions;
2.
Management of working capital, forming of a portfolio
investment;
3.
Improvement of the approaches to the analysis of the
financial condition;
4.
Improvement of the financial planning and control of
cash flow together with the control flow of financial resources [4].
It
can be clearly seen that business activity and its manipulation is a viable
tool in the management of an enterprise’s competitiveness, if the tools are
chosen in accordance with enterprise’s existing position on the market,
production level and size.
References
1.
Kovalchuk I.V. “Business Economics: teaching manual”. K.: Znannya, 2008.
2.
Ohanyan G.A., V.O. Palamarchuck, A.P. Rumyantsev et al. “Political Economy:
Training: Handbook”. K.: MAUP, 2003.
3.
Shinkarenko V.G. “Management of enterprise’s competitevness”. Kharkov: Publishing
of the HNADU, 2003.
4.
Voronkov, A.E. “Strategic management of the competitive potential of the
enterprise: Diagnosis and organization. A monograph”. - 2nd ed. Lugansk: Volodymyr
Dahl East Ukrainian National University, 2004.