Economic sciences /10. Economy of enterprise
A.K. Nurtaeva, Master of Economics
Zhetysu State University named after I.
Zhansugurov, Kazakhstan
Management of enterprises competitiveness
Competition is
important in the life of society. It stimulates the activity of independent
units. Through it producers seem to control each other. Their struggle for the
consumer leads to lower prices, reduction of production costs, improve product
quality, enhancing scientific and technological progress. At the same time,
competition sharpens the contradictions of economic interests, extremely
enhances economic differentiation in society, causes the growth of overhead,
encourages the creation of monopolies. Without administrative intervention of
state structures, competition can become a destructive force for the economy.
To curb it and hold at the level of the normal state of the economy stimulator
in their laws defines the «rules of the game» of rivals. In these laws are
fixed the rights and obligations of producers and consumers of products, are
set out the principles and actions guarantee of the competition participants.
Actual issues are
improving competition in the Kazakhstan market; improve of the competitiveness
of Kazakhstan goods, struggle with
monopoly.
The concept and essence of competition and
competitiveness
Etymologically,
the word competition comes from the Latin concurrentia, means a collision,
competition.
Market
competition is called the struggle for limited consumer demand waged between
firms available to them on the parts (segments) of the market. Competition is a
rivalry between the participants of the market economy for better conditions of
production, purchase and sale of goods.
Methods of enterprises competitiveness analysis
Analysis of
competitors' activities is carried out: to identify existing and potential
competing products; determine the current and potential competitors - producers
of these goods: the development of forecasts of probable tactics and strategies
of competitors. As a result of analysis of competitors’ activity, the firm gets
an opportunity to understand why competitors are so and not otherwise, and to
develop its own strategy.
«The intensity of
competition in any market depends on several factors, the most important of
which are the three components: nature of the distribution of market shares;
market growth; the profitability of the market».
Scheme competitor
analysis consists of five sequential blocks.
I. Block future
goals involves answering the following questions.
Is the goal of
competitor winning the largest share of the market, i.e., market leadership, or
firm-competitor sees itself only as a slave by another leader? Does a
competitor seek for excellence in specific areas of technology (e.g., high
efficiency of goods sold, the low level of environmental pollution, rapid
installation), and how is it benefiting from its advantages? What is the
attitude of competitor to income, sales volume, profitability and gain market
share? Is he ready to sacrifice one goal to raise the profile of others?
Thus, the block
«future goals» allows us to understand the strategic direction of a competitor,
and, hence, his possible actions with long-term sales.
II. Block current
strategy and tactics contains answers to the following questions.
What is the main
competitor strategy? Is it a «unique project sales»? How does a competitor
balance the victory of the business and entering into the existing structure of
the client? What type of action perspective does he prefer? How does a
competitor use managing of the sales process? What is the methodology to reduce
(increase) the price of the goods? How does it balance the supply of goods and
markdowns? In which extent can the success group manage the process of price
flexibility? If the client asked to describe the advantages and disadvantages
of their product, what would they (competitors) say?
Thus, the block
of current strategies and tactics allows you to deal with methodological
techniques of competitors in planning the sale of own goods.
III. The block
opportunities includes answers to the following questions.
What are the
strengths and weaknesses of competitors in the management of the client? How
strict are requirements of the client to the specifications of goods in
relation to a competitor? Where is the competitor vulnerable? What is the level
of desires and sources of competing firms needed to win in this project?
Consequently, the
block opportunities of a competitor gives you a description of the strengths
and weaknesses of competing firms and identify those vulnerabilities that can
serve as a basis for winning of your company.
IV. Block
achievements contains following questions.
What factors are
considered by a competitor as the key success factors for the future? How does
the organizational structure of the competitor and the decision making process
contribute to the impact on the customer? How is the winning approach to the
sales process modified by a competitor?
As you can see,
the block of achievements of the competitor specifies tactical and strategic
techniques of competitive firm in relation to the process of selling this
product.
V. Block
competitor profile is summarized and contains mainly the following questions.
What is the
division of responsibilities between the head office, regional representative
and leader of the group succeed? What unique advantages emphasize competitor at
the presentation to the buyer? In what areas is competitor vulnerable? The price? The perfection of the product?
Technical advice? The delivery time?
A key result of
compilation of the block competitor profile is to predict the actions of
competitors and prepare for them.
The main stages
of the evaluation of competitiveness are the followings:
1) Analysis of
economic activity of the enterprise (in key areas). During the analysis there
is assessment of the adequacy of the resources of the enterprise to work on the
selected segment of the market and the efficiency of their use.
2) Comparison of
the position of the enterprise and business competitors. This requires data
collection and study of the performance of competitors. Of great importance is
the definition of such market needs, which cannot be fully satisfied with the competitors,
as well as studying the best practices of competing firms.
3) Evaluation of
the strengths and weaknesses of your organization in the competition, i.e.,
proper assessment of the competitive status of the company.
4) Justification
of ways to improve the competitiveness of the enterprise. "
Investigation of
competing firms tends to be produced in the industry in general or on specific
market segments.
Let's examine
each element of the chain research.
Identification of
existing and potential competitors
Identification of
existing and potential competitors is usually made on the basis of one of two
approaches: the first relates to needs assessment, satisfied in the market by
the main competing firms; the second focuses on the group of competitors in accordance
with their applicable types of market strategy.
Approach in terms
of consumer demand is aimed at competing firms grouped according to the type of
needs that meets their products.
To identify the
most important competitors and their role on the market, companies use methods
of associative consumer survey, identifying with which useful qualities and
conditions of consumer buyer associates a particular product well-known on the
market of competitor.
The basis of the
identification of competitors on the basis of groups of type strategy is to
group them according to the key aspects of their orientation in the production
and sales activities.
These aspects
include: strategy for expansion in the market; strategy of pricing policy;
strategy in the field of technology and others.
In identifying
the major competitors in accordance with the types of strategies, we should
take into account the mobility of competitors' strategies and conduct a
comprehensive study of the prospects for the evolution of strategies of
competitors.
Such studies
allow the identification of the most dangerous competitors, which often
include: firms, prone to market expansion, which operate in a geographically
complex markets; firms, following a strategy of diversification of production
and working in this and related industries; large firms-buyers of products of
the company; major suppliers of materials, raw materials and equipment for the
company; small firms, which as a result of the absorption of a large company
become strong competitors in the market.
If there are
differences in the implemented strategies, the level of competition is
relatively reduced. All these factors put the competing firms in certain
operating conditions; have a significant impact on the competitive strategies of
firms. The taken measures will depend on the conditions of competition
prevailing in the market, and, therefore, the response of competitors on the
measures undertaken by firms to achieve their own competitive advantage. Thus,
during the development of enterprises of their own competitive strategies, it
is important to take into account the possible reaction of the environment on
these stocks. With regard to industrial markets, there are two types of
possible reaction by instrument response and two types - by its nature.
By reaction
instrument are price and non-price methods. By type of reaction can be
conditionally separated positive and negative reactions elasticity of response
depending on the response of the opposite rival firm's shares or equivalent.
Studies show that mainly is dominated positive elasticity. Thus, the company's
competitiveness involves complex economic characteristics that define its
position in the industry market. The most complete should be recognized the
concept of «competitiveness» as defined in the European forum on governance:
«Competitiveness is a real or potential capacity and capabilities of the
company to design, produce and market in the conditions in which it must
operate, products and services for its price and non-price characteristics of
the complex more attractive to buyers than competitors' products in order to
maximize profits».
The content of activities on enterprise
competitiveness management
In order to
remain profitable, the organization must confront the uncertainty of the
situation. Under uncertainty is meant that often have to make decisions without
sufficient information on the environmental factors, and decision makers, it is
difficult to predict the external changes. The uncertainty of the situation
increases the likelihood of failure of risk the organization's strategy and
difficult to calculate the costs associated with alternative strategies.
Organizations are
trying to get an idea of uncertain conditions through analysis, trying to bring
the situation to numerous factors model that will be understandable and will
allow to act. The following sections describe how the uncertainty of the
external environment is classified and analyzed the possible response
organization with which you can minimize the negative impact of these
conditions.
The situation
faced by the organization is not the same, so it corresponds to the various
levels of uncertainty, which can be classified based on the analysis of two
characteristics: 1) The degree of simplicity or complexity of the situation; 2)
Degree of stability or instability (dynamic) events.
Any organization
is located and operated in the environment. Every action of any and all
organizations is possible only in the case if the environment allows its
implementation. The internal environment of the organization is the source of
its vitality. It contains the potential that enables an organization to
function, and, therefore, exist and survive in a certain period of time.
However, the internal environment can also be a source of problems and even
death in organization if it does not provide the desired operation of the
organization.
The external
environment is the source, the supply organization with the resources necessary
to maintain its internal capacity at the proper level.
«The evaluation
of the strengths and weaknesses of the organization, its external opportunities
and threats are usually called SWOT-analysis (S - strength, W - weakness, O -
opportunities, T - threats). Based on this analysis, you can quickly assess the
strategic position of the organization, to build a matrix «SWOT»[1].
Applying the
method of SWOT, it is possible to establish the link between the strength and
the weakness inherent in the organization, and external threats and
opportunities. SWOT methodology is first to identify the strengths and
weaknesses, as well as threats and opportunities, and then to establish chains
of connections between them, which can then be used to formulate the
organization's strategy.
The strengths of
the organization include:
- Skills or
experience;
- Qualified
personnel;
- Valuable
tangible assets (modern production facilities or equipment, the ownership of
valuable natural resources, convenient location of the property);
- A significant
share of the market;
- Valuable
intangible assets (attractive brand image, good reputation of the organization,
customer loyalty, motivated and energetic workforce);
- Competitive
capabilities (extensive network controllers imposed relationships with key
suppliers, the flexibility of the organizational structure, business experience
through the Internet);
- Valuable
organizational resources (advanced technology, patents on key products, a
stable customer base, strong financial position, an advanced system of supply
management of material resources, software, e-commerce, distribution and
exchange of information with suppliers and key customers, computerized
production control system products, software for doing business over the
Internet).
Weaknesses of
organization may be due to lack of skills, experience, intellectual capital,
intangible assets, or organizational resources, etc.
The weaknesses of
the organization are:
- Outdated
production capacity;
- Precarious
financial situation;
- Weak
management, low intellectual capacity than its competitors;
- Low
profitability;
- Insufficient
range;
- Poor image, a
bad reputation;
- Low level of
capacity utilization;
- Lagging behind
its competitors in the use of e-commerce;
- Weak influx of
new customers due to the weak competitiveness of the goods.
The external
organization opportunities include:
- Maintenance of
new groups of consumers or the development of new geographic markets or product
segments;
- Vertical
integration (forward and backward);
- Reduction of
trade barriers in attractive foreign markets;
- New
opportunities of gaining market share of competitors;
- The possibility
of rapid growth due to a sharp increase in demand in one or more segments of
the market;
- The acquisition
of competing or have advanced knowledge and technology organizations;
- The possibility
of extending the brand organization to new geographical markets.
The external
threats to the organization are:
- The threat of
entry of new competitors;
- Growth in sales
of substitute products;
- Increasing
competition between the existing market organizations, leading to lower
profits;
- Slowdown in the
market;
- Technological
change or innovation, leading to a drop in demand for old products;
- Reducing demand
for goods organization due to changes in the needs and tastes of buyers;
- Unfavorable
demographic changes, causing a reduction in demand for the products of the
organization.
Opportunities:
-
Access to new markets or market
segments;
-
Expansion of the production line;
-
Increasing diversity in related
products;
-
Add related products;
-
Vertical integration;
-
The ability to go to the group with
the best strategy;
-
Complacency among competing firms;
-
Acceleration of market growth.
«Evaluation of
competitive opportunities and resources of the organization is held in the form
of drawing up a kind of strategic balance, where the strengths and resource
potential of the organization are recognized as competitive assets and
weaknesses and lack of resources - both competitive liabilities. Competitive
assets of the organization should significantly exceed the competitive
liabilities, equity assets and liabilities taken in the balance sheet are
unacceptable»[2].
Organization as
one of the basic functions of management can not only create a workable
framework organization, but also to ensure the internal conditions of effective
functioning and development of the socio-economic system, as well as lay the
foundation for a high adaptive capacity of the organization as a whole.
The problem of
competitiveness of products and the organization is in the innovation economy
universal. The solution to this problem is an important factor in economic and
social development and one of the main conditions for economic prosperity for
any country and for each consumer.
Competitiveness
of products and companies producing or selling goods, relate to each other as
part of the whole. The possibility of the company to compete in a certain
industry market directly depends on the competitiveness of the goods and a set
of functionalities to achieve the result.
Thus, to ensure
the competitiveness, the organization must constantly work on improving
quality, costs for securing and selling prices, achieving the benefits of these
indicators before the main competitors and assessing their performance from the
perspective of the consumer, as its critical opinion. Rejection of the customer
in favor of a competitor indicates low competitiveness.
Literature:
1. Tomson A.,
Striklend D.Strategic Management: Concepts and Cases. - 12 edition. – M., 2007
2. Chertykina N. Control system by a competitiveness: levels, parameters and competitive
edges // Creative economy. - ¹3 (63). – 2012. – P.15-20