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Competitive factors that determine dynamics of the market

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Competitive factors that determine dynamics of the market

Doct. econ.sci. Aimen Anuarbek Talhauli

Taraz State University named after M.Kh.Dulati , Taraz (Kazakhstan)

 

Competition accomplishes several priorities in a market system. It helps to organize economic activity and to answer such fundamental questions as what, how much and how to produce, how to allocate goods and services. Competition produces prices that affect behavior of buyers and sellers and allocation of resources. Further, competition is a mechanism to direct activities of companies pursuing profits in the public interest. Finally, competitive activity is an important factor causing changes in the markets: it stimulates economic organization of production and development of new technologies, products and marketing strategies.

The course of market reforms requires proper accounting and strategic use of real opportunities for competition. However, related issues remain unresolved, and apparently will ever be complex and not always theoretically transparent. As in the past, "one of the most difficult and poorly understood aspects of the concept of comprehensive systems is related to competition, as a part of the environment of the organization” [1]. This study confirms that the existing interpretation and definition of competition vary over a fairly wide range.

The most common definition of competition is given by the well-known researcher M. Porter: "Competitive strategy must be based on a comprehensive understanding of the industry structure and the process of its change. In all sectors of the economy - whether it acts only on the domestic market or on an external - the essence of competition is expressed by five forces:

1. threat of new competitors;

2. threat of substitute products;

3. ability of suppliers of components to bargain;

4. ability of buyers to bargain;

5. rivalry between existing competitors.

The value of each of the five changes varies from industry to industry and determines the profitability of industries [2].

In other studies, the notion of competition is determined from other positions. So, R. Makonel and L. Brue believe that the mandatory conditions of competition are: "the presence in the market of a large number of buyers and sellers of any particular product or resource" and "freedom for both buyers and sellers to act on those or other markets, or leave them”.

In the second revised edition of Dictionary of the market economy states: "The competition is contest between the speakers on the market, enterprises, aiming to provide the best opportunity of marketing their products to meet the diverse needs of customers. There are always the tough competition producers in the world market. A substantial increase of competitiveness of domestic goods requires for successful performance in foreign markets. When you import the same use of foreign seller’s competition allows reaching more favorable terms of purchase ".

Different definitions of competition usually complement each other. At the same time, each of them, taken separately, can not be considered sufficient. This is reflected in the fact that, in characterizing some very important signs of competition, they overlook general theoretical aspect of the problem - the essence of its inherent economic relations.

Results of the analysis provide a basis to assert that the competition has the following defining characteristics:

1. manifested in the reproduction of product’s technical and economic parameters at all stages of its design, manufacture, and after sales services and consumption (operation);

2. is the backbone component of market relations, defining the totality of the inherent elements (production costs, the formation of prices, adaptability of enterprises and organizations to market needs, the needs for goods and services, etc.);

3. is the foundation of market-based farming, of the basis of the formation and manifestation of competitiveness, of economic law, which expresses the objective categories of competition (consistency) between the market subjects, influences to the nature and form of the relationship between them, defines problems of federal and regional levels.

"Competition is an incentive for growth and development; competitor's enthusiasm to update, search, selection and promotion to the target; knowledge of competitors, the ability to select partners, the thirst for success" [3].    

Translated from Latin “to compete” meanscollision, clash". In fact, competition is a struggle.

Price competition is a battle between manufacturers to receive additional profits by reducing production costs and consequently lower prices for the products of the same quality. Types of price competition - price controls, price leadership, setting of share of influence on the market, the agreement, include the secret, etc. Types of non-price competition - raising the technical level and quality of goods, ensuring its market innovation, advertising, after-sales service (service), etc.

Infrastructure changes encourage firms to apply the relevant competitive mechanisms. Capture of the domestic market of Kazakhstan by foreign corporations leads to a loss of competitive advantages of kazakhstani industry. A domestic product, such as electronic equipment, was ousted from the market because of the massive supply of equipment by foreign firms. This has led to chronic shortages of working capital of enterprises and organizations of the kazakhstan electronic industry, and most importantly, to almost-complete dismantlement of works on research and development, without which the creation of a competitive technology impossible. At the same time, foreign corporations, mastering the kazakhstan market, began to receive additional funds and opportunities to improve the efficiency of their production. It should be noted that various factors contribute to different kinds of competition.

Competition begins at the stage of development of new products that will be delivered on old or new market. Direct competition occurs in the case of competitive relations without intermediaries. Competition can be caused by both natural factors (oil at shallow depths, the iron content in ore, etc.) and geographical actors (the costs of transporting goods, etc.).

Functional competition arises from the fact that different goods and services can meet the same requirement in different ways (for example, the necessary transport can be carried by road or rail). Species competition arises in cases where the goods that must meet to same needs, different from each other by their properties, which affect to the extent of such satisfaction. Subject competition manifests itself in the case when companies offer customers virtually identical goods (cars of same class). Subjective competition occurs between firms, chosen field of their activity provides them stable position in the market.

Unfair competition is aimed at discrimination against competitors by spreading false rumors about them, forging products, misappropriation of competitor’s trademark, its trade name or mark, the distortion in advertising information about the real properties of products, unauthorized use or disclosure of another's confidential scientific, technical, manufacturing, marketing or other information, delivery patent "impure" products (they can be arrested and fined).

From the above we can conclude that the competition - a competition between actors (competitors) who are interested in achieving the same goal. Economic sense of competition is competition between entrepreneurs for getting the highest profit.

The main factors of competitiveness are: domestic macro-economic potential, level of management from the perspective of innovation; profitability and responsibility; scientific and technical potential; the degree of participation in the international division of labor, trade and investment flows; quality and efficiency of the financial system; the infrastructure; the state and qualifications of human resources; socio-economic and political situation.

We give some definition of "competitiveness."

"The competitiveness of the goods - is the ability of products to be more attractive to the consumer (buyer) in comparison with other products similar type of destination due to better match its quality and cost performance requirements of the market and consumer's evaluation" [3].

«The characteristic of the goods reflecting its difference from the goods-competitor on a degree of conformity of certain public demand, on the one hand, and with another,-on expenses for satisfaction of this demand refers to as competitiveness» [3].

 «Competitiveness - capacity to carry out the activity in conditions of market attitudes and to receive thus profit, sufficient for scientific and technical perfection of manufacture, stimulation of workers (their work) at a high qualitative level » [3].

 It is necessary to note especially, that in the economic literature, about volume number and in foreign, competitiveness is interpreted differently depending on character of object to which this concept concerns. Signs and factors of competitiveness dynamic on levels of management hierarchy are specific: enterprise - branch - region - national economy.

The concept of competitiveness is studied most full and structured at a level of the enterprise which activity is carried out in conditions of the open market. The concept of competitiveness gives in to perception more difficultly at a macrolevel, that’s why it reflects positions of national economy and its capacity to strengthen of them - to step up economic growth, to raise an occupation level of the population and to increase actual incomes of citizens.

 Despite of already continuing for a long time discussions about concept « national competitiveness » its uniform definition is not found yet. Important factor is that quality of production and efficiency of its manufacture were investigated basically at the prereform conditions in our country. A variety of competitive fields requires formation of methodology research of competitiveness in all areas of its display, in various economic and tax modes.

At a level of micro-economics competitiveness of production (services) is defined by a parity of its quality and the price, conditions of delivery, forms of payment, a type of transportation and other factors. Revealing of stable interrelations between made expenses and quality of production, as well as parity between other parameters of compared objects activity is a challenge of their competitiveness analysis. Using of parametrical investigative techniques approaches to an assessment of competitiveness on mesolevel (a level of branch). There are used such parameters as labor productivity, research intensity and a capital intensity of manufacture, a technological level of production, a level import substitution, degree of the international cooperation communications etc.  

From the above we can conclude: as a lever and a means of competition, competitiveness - a category of social development is manifested in the rivalry between objects to achieve specific goals.

As for competitiveness, it is techno-economic category, estimated by a set of technical and economic indicators, factors and conditions.

The technical indicators, factors and conditions include the quality of products, including its reliability, ergonomics, environmental friendliness, safety, also design and the conditions before and after sale services.

Economic indicators, factors and conditions are as follows: rating (prestige) of the product in domestic and foreign competition on the basis of good information and advertising, novelty, demand, production costs, profitability, price, leasing, efficient of capital using, payment terms and delivery, the efficiency of innovation and investment processes, selection factors of the market and technology marketing to promote products on the market, the value of exports, the level of customs duties, income etc.

The main factors of competitiveness are: personnel and their qualifications, the quality of labor, effective organizational and economic production management, quality management systems of innovation processes and product manufacturing, advanced manufacturing and equipment technology, maintain quality (maintenance services, service), technology acquisition and processing, standardization and certification of products, mortgage lending, investment, use of information and marketing system for forecasting market conditions, risk management, value analysis.

 

Reference

 

1. Ronald H. Coase, The institutional structure of production / / The nature of the firm, trans. from English - M.: Delo, 2001, p.342

2. Trubilin A. Market of agro production / / Agriculture economics of Russia, 2002, ¹ 10, p.29
3. Porter M., International Competition. - M., 1993. - p. 38-182

 

Resume

The article deals with various definitions of competition, key factors of ensure the competitiveness of products. Also on the basis of the study identified the defining characteristics of competition and competitive factors that determine dynamics of the market.

Different definitions of competition usually complement each other. At the same time, each of them, taken separately, can not be considered sufficient. This is reflected in the fact that, in characterizing some very important signs of competition, they overlook general theoretical aspect of the problem - the essence of its inherent economic relations.

Results of the analysis provide a basis to assert that the competition has the following defining characteristics:

1. manifested in the reproduction of product’s technical and economic parameters at all stages of its design, manufacture, and after sales services and consumption (operation);

2. is the backbone component of market relations, defining the totality of the inherent elements (production costs, the formation of prices, adaptability of enterprises and organizations to market needs, the needs for goods and services, etc.);

3. is the foundation of market-based farming, of the basis of the formation and manifestation of competitiveness, of economic law, which expresses the objective categories of competition (consistency) between the market subjects, influences to the nature and form of the relationship between them, defines problems of federal and regional levels.