Enterprise competitiveness: analysis and ways of its increase

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Ministry of education and sciense of the Republic of Kazakhstan

University of internaional business

Undergraduate School

Department of Social and Economic Sciences

Course work

Enterprise competitiveness: analysis and ways of its increase

Written by: Sansyzbai D.M.

Scientific Advisor:

PhD, Professor of UIB

I.V. Onyusheva

Introduction

At the present stage of development of small and medium businesses in Kazakhstan, we have a question: “How do we need to increase current competitiveness of the company?” The relevance of the topic has been chosen due to the significance of this issue. Competitive part characterizes the absolute efficiency of enterprise management in all areas of its activity: industrial, commercial, procurement, finance and investment. They form the basis of economic development of the company and strengthen its competitive relations with all participants in commercial activities in the current market.

In this diploma work we have "BLAHBLAHBLAH Company" and we are going to increase competitiveness of this company on market.

Towards this goal it seems appropriate to achieve the following objectives:

Analyze the current competitive position

Find ways to increase the competitiveness of the company

Introduce the ways of increase to the CEO

Increase current competitive position

During the work the method of the strategic, factorial, financial and comparative analysis were used.

1. The concept of competition as a key economic category

The main feature of the market economy is the freedom of choice: the manufacturer is free to choose the products, the consumer - in the acquisition of goods, the employee - in the choice of place of work, etc. But freedom of choice does not ensure economic success automatically. It is conquered in a competitive struggle.

Competition. Competition between the participants in a market economy for better conditions of production, purchase and sale of goods.

Competing along with the price, supply and demand is an essential element of the market, its key categories. It is carried out in all the phases of the production cycle:

* During the period when there is a preparation for production, i.e., purchased material and material and human resources;

* In the process of production and the establishment of relations with project and financial institutions;

* In the process of production and marketing of competitive products;

* In the period of formation of investment, depreciation and other funds.

Competition - a very hard thing. It has a number of negative features:

* Wasteful with respect to non-reproducible resources (forests, wildlife reserves seas and oceans);

* Does not ensure the development of production of goods and shared services (public transport, roads, etc...);

* Does not create conditions for the development of basic science, the public education system;

* Does not contain mechanisms that prevent the emergence of social injustice and stratification of society into rich and poor.

The positive quality of the competition concerns that it:

* Promotes flexible reactions and to adapt quickly to changing manufacturers of production conditions;

* Provides for freedom of choice and action of consumers and producers;

* Facilitates the introduction of new technology, the development of improved methods of organization and management;

* Directs manufacturers to meet the diverse needs, to improve the quality of goods and services.

The competition is sometimes unfair.

Unfair competition - a competition practices related to the violation of accepted standards on the market and the rights of the competition.

Unfair competition is the following:

* Selling at dumping prices;

* Establishing control over economic activities of a competitor to end its activities;

* Firm market abuse because of its dominant position (e.g., excessive overpricing);

* Discrimination against competitors: the dissemination of false information, illegal use of a trade mark competitor, its brand names, the use of incorrect comparisons, discrediting competitors' products, and so on.

For example, under market conditions, the banking system is a key element, not only to supply the economy with additional cash resources, but also performs as analytic functions, and direct market regulation functions. Progressive development of the Kazakhstani banking system is currently one of the most important conditions for accelerating economic growth, improving the competitiveness of the Republic of Kazakhstan economy into the world economic system.

The problem of competitive rivalry in the market a lot of attention paid to the works of the classics of political economy: A. Smith, A. Cournot, Edgeworth F., J. Robinson, E. Chamberlin, FA Hayek, A. Marshall and others. The main issues of controversy these economists have become the concept and nature of competition, its driving forces and impact on market pricing processes. Their followers R. Bertrand, O. Herfindahl, M. Rozenblyud E. Lind, and others, developed the theory of competition, offering alternative models of its assessment and the use of market power. The concept of "competition", as a fundamental category in the classical and neoclassical economics, and so widely used in today's environment, draws closer and systematic attention of many modern economists, and interpreted them differently. The literature on the problems of competition, there are three approaches to its definition. The first describes the competition as competitiveness in the market. The second approach, characteristic of classical economic theory, considering the competition as an element of the market mechanism, which allows you to balance supply and demand. Third -based on the modern understanding of the theory of the market and competition as regards the criterion that determines the type of industry market. The most common definition of competition results in the work Svetunkov SG [5]:

- The competitiveness of economic entities in the absence of a monopoly;

- Controversial, Competitive and relationships between two or more economic entities of economic activity, manifested in the form of commitment of each of them bypass the other to achieve a common goal, to get a better result, push the opponent;

- Competition between participants in a market economy for better conditions of production, purchase and sale of goods;

- Competition in the market between the producers of goods and services for market share, maximize profits or achieving other specific purposes.

As shown by theoretical studies, we should not completely rely on the comparative characteristics of all subjects of the market and determine the competitive struggle as the pursuit of all that is "more" (a better result, higher profits, better conditions of production of goods or services) and focuses on the consumer, namely the cost of consumer goods or services. According Yudanova A. Y., market competition is called a battle for a limited amount of effective consumer demand, leading organizations available to them on the market segments. On the content side, as the author notes, this definition includes a number of important for the understanding of things: firstly, it is a competitive market, i.e. direct interaction of the organizations in the market, and the definition applies only to the struggle by the Organization, promoting its services to the market. Secondly, competition is conducted for a limited amount of effective demand, because if the demand is satisfied with the services of one organization, all the rest is automatically deprived of the opportunity to provide their services. Third, market competition is developing only on the available market segments. Zavyalov P.S. said: "Competition - an integral part of the market environment, the developed market is inconceivable without competition. Hence the urgent need to study the competition, its level and intensity, knowledge power and market opportunities of the strongest competitors, competitive outlook for selected markets "[3].

The problem of competition focuses on the Romanov A.N., considering that the competition - this is the cheapest method of economic control, which has no equal. This kind of control is a society of minimal costs, it not only creates the conditions to ensure the goods and the desired quality of services, and at the right time, but also is an important dynamic force that is constantly pushing the manufacturer to reduce production costs and lower prices, the increase in production and sales, the struggle for the buyer, to improve product quality [7].

"Competition is the subject of the management of its competitive advantages in order to achieve victory, or other purposes in the fight against competitors for meeting the objective or subjective requirements under the law or in vivo. Competition is now the driving force behind the development of the subjects and objects of management, society, market economy countries".

For the first time the competition theory was generalized famous economist Adam Smith in his "Inquiry into the Nature and Causes of the Wealth of nations". The novelty of the competition theory of Adam Smith is that he was the first time:

1. Formulated the concept of competition as a competition, raise prices (at supply reduction), and reducing prices when an excess of proposals;

2. Formulated the main principle of competition - the principle of the "invisible hand", according to which "pulling" the strings of the puppets - entrepreneurs, "hand" makes them act in accordance with a certain "ideal" plan of development of the economy, ruthlessly displace company engaged in the production of unnecessary market products;

3. The developed theory is very thin and flexible mechanism of competition that objectively balance the sectoral rate of return;

4. Determine the basic conditions for the creation of effective competition;

5. The developed model efforts and the development of competition, proved that in the conditions of market relations possible maximum satisfaction of the needs of consumers and the best use of society's resources on the scale of society as a whole.

Competition can take place in various forms all depends the number of external conditions on which it is advisable to stay on.

We can distinguish the following main trends and characteristics of building a developed competitive and retain competitive advantages of the environment in these countries:

1. Established legal system of a democratic state;

2. The limited natural resources (exception - USA);

3. Established management system (management) at all levels of hierarchy;

4. A significant proportion of virtual information and management technologies based on the Internet (particularly in the US);

5. Significant proportion of high-waste production technologies (especially in Japan and the US);

6. The commitment to finding and keeping focused competitive advantage of firms in a narrow sector of the global economy;

7. The development of the international standardization and integration;

8. High reliability technology (especially German and Japanese);

9. A stable financial system;

10. The high efficiency of resource use;

11. The considerable cost of advertising in the relative equality of the quality of competing products;

12. The high quality of goods and services;

13. The growth rate of government spending on science, education and human development;

14. The high life expectancy;

15. The highest position in the global hierarchy of competitiveness as a result of sound economic policy.

Types of competition.

Currently, there are four main types of competition:

- Perfect competition;

- Monopolistic competition;

- Competition in the oligopoly;

- Pure monopoly.

Let us consider the above-mentioned types of competition.

pure competition The market consists of a sufficiently large number of vendors competing. Each of them offers standard, uniform products to many customers. Volumes of production and supply on the part of individual producers make up a small proportion of total output, so a company cannot have a noticeable effect on the market price, should not "agree with the price," take it as certain predetermined parameter.

Members of a competitive market have absolutely equal access to information, that is, all sellers have an idea of ??price, technology, potential profits and so on. In turn, buyers are aware of the prices and their changes. There is also the freedom of entry and exit in the market: any company, if desired, may begin production of the goods or freely leave the relevant market.

Fluctuations in the market price can be quite intense. However, the difference in price - is not the result of natural activity of sellers, and the process of the interaction of supply and demand in this market.

In practice, at all times - pure competition - a phenomenon quite rare. However, there is still a number of sectoral markets that are relatively largely have precisely this structure (the market of agricultural products, the markets of some services). These markets include a large number of independent vendors offering a standardized product, the price of which is determined by supply and demand.

"In conditions of perfect competition to maximize profits in the short term a competitive firm can be investigated, using the principle of comparing the gross income with total costs or the principle of comparing the gross income with total costs or the principle of comparing marginal revenue with marginal cost. The firm will maximize profit by producing this volume of production at which the gross income exceeds the gross costs of the greatest magnitude. The losses will be minimized by the production, in which the excess of total costs over gross income is minimal and less than the total fixed costs. "1

Is a purely competitive industry sector with constant or increasing costs of the final position of long-term equilibrium for each firm will have the same basic characteristics? As shown in Figure 1, the price (and marginal revenue) is established at a level where it is equal to the minimum average cost. In perfect competition, the marginal cost curve intersects the average cost curve at its minimum and, therefore, is equal to average cost. In the equilibrium position as shown in Figure 1, all located in the equality MR (P) = AC = MC. This equation says that although competitive firm can generate economic gains and losses in the short term, it will just cover their costs by producing in accordance with rule MR (P) = MC in the long term. Thus, in the long run the competitive price will tend to catch up with the minimum average cost of production. This is so because the economic profit of the company forced to enter into a competitive industry as long as those profits will not be negated by the competition. On the contrary, the losses will cause a massive outflow of companies from the industry as long as the price of the product again will not cover the costs per unit of output.

2. Cost Leadership

Cost leadership is the first competitive advantage businesses often attempt to gain. Cost leadership as an advantage occurs when a business is able to offer the same quality product as its competitors, but at a lower price. Cost leadership can occur when a company finds ways to produce goods at a lower cost through the perfection of production methods or by the utilization of resources in a more efficient manner than competitors. Other factors, such as proprietary technology, can also factor into this type of advantage. Cost leadership may be classified as an offensive strategy, whereby businesses attempt to drive competitors out of the market by consistently using price strategies designed to win over consumers.

Differentiation. Differentiation is a second strategy that businesses often use to set themselves apart from competitors. In a differentiation strategy, low cost is only one of many possible factors that may set aside a business from others. Business that differentiate themselves typically look for one or more marketable attributes that they have that can set them apart from their competitors. They then find the segment of the market that finds those attributes important and market to them. The process can also work in the other direction with businesses conducting research to determine which things consumers find most important and then developing a niche market for those products or characteristics [].

Defensive Strategies. Another way for a business to gain a competitive advantage is to utilize a defensive strategy. The advantage gained by this type of strategy is that it allows the business to further distance itself from its competition by, in some sense, maintaining a competitive advantage it has gained. Therefore, this strategy is closely related to differentiation and cost leadership because it is a method used by businesses to keep those advantages in place once they have been attained. Whereas the other two strategies are more offensive in nature, this strategy becomes an actual advantage as it becomes increasingly difficult for so-called competitors to offer any real opposition to the business [].

Alliances. Competitive advantages can also be gained by businesses that seek strategic alliances with other businesses in related industries or within the same industry. Businesses have to be careful not to cross the line between alliances and collusion, though. Collusion occurs when businesses within the same industry work together to artificially control prices. Strategic alliances, on the other hand, are more along the lines of joint ventures that businesses use to pool resources and gain themselves exposure at the expense of other competitors not in the alliance [].

3. The impact of competition on the market

The overall impact of competition in the market development.

"Competition is the driving force of the market, it is its main mechanism and leads to better use of skills and knowledge. Most of the benefits of human progress is achieved through competition, through competition. Competition requires rational behavior as a condition for staying on the market. Competition stimulates rationality "1.

Competition cannot work with people deprived of their entrepreneurial spirit. Moreover, the competition - it is a special method of education of minds, the great inventors and entrepreneurs. Supporters of tradition should not impose on others their aversion to innovation. Damage tolerates conservatives resisting the new. Competition enhances efficiency, changing habits, calls for more care that is completely useless in unbeatable conditions.

Economists are of the views that exposure to certain limitations and exceptions, a purely competitive economy will lead to the most efficient use of scarce resources of society. Thus, the competitive prices the economy tends to distribute the limited amount of resources available to the community, so as to maximize the satisfaction of needs. Indeed, the efficient use of limited resources requires two conditions: the efficiency of resource allocation and productive efficiency. In order to achieve the efficiency of resource allocation resources should be allocated between firms and sectors so as to obtain a certain range of products, which is most essential to society (consumers). Allocative efficiency is achieved when it is impossible to change the structure of the total volume of production so as to obtain a net benefit to society. In turn, production efficiency requires that each item included in the composition of the optimal production, produced the least expensive way.

It is obvious that these two conditions are fully met under the conditions of pure competition. Each company will strive to achieve production efficiency, since, using a minimum of resources and minimally expensive technology, the firm will be the minimum cost, which, respectively, affect the price of these products. As a result, the firm can produce and sell more goods and to maximize profits.

If we speak about the efficiency of resource allocation, it is worth noting that in terms of pure competition Steering profit motive entrepreneurs will produce each product exactly to the point in which price and marginal costs are equalized. This means that resources are allocated in a competitive environment effectively. At the same time, economists recognize four possible factors impeding the efficient allocation of resources in a competitive economy:

1. The absence of reasons for which the competitive market system will lead to the optimal distribution of income;

2. allocating resources, competitive model does not allow for side costs and benefits or the production of public goods;

3. industry with pure competition may interfere with the use of the best known manufacturing techniques and to foster the slow pace of technological progress;

4. The system does not provide a competitive or a wide range of product selection, nor the conditions for the development of new products.

4. The negative effect of imperfect competition in the market

busines competitiveness commercial investment

Perfect competition plays a leading role in the creation of economic incentives, the interest of citizens and legal entities in the development of industrial relations; security guarantees for the political, social, environmental, defense and other areas; development program and forecasting documents, long-term and short-term action strategy with orientation on the relevant priorities; the introduction of the necessary limitations of economic activity and to enforce them. From perfect competition is needed to ensure the development of the infrastructure sectors of the economy, the suppression of negative manifestations of the market mechanism, the implementation of care for the younger generation, maintaining the education and culture of the society, subsidizing environmental organizations. If you go to the imperfect competition, then soon monopoly through price increases effective demand will drive the market to a critical level.

Considering the problem of the negative impact of imperfect competition in the market, we note that imperfect competition leads to the establishment of a specific range of products, fixed prices (by agreement), and so on. Moreover, imperfect competition is not conducive to improving the efficiency of resource use. Imperfect competition gradually leads to monopoly, and often to a state monopoly, the negative impact of which is encouraged in such negative terms, such as:

- A single nation-wide addiction;

- Centralized planning system;

- Small system management;

- A centralized distribution of all resources;

- Regulated communication on sectoral basis;

- The establishment of a centralized system of fixed prices;

- The unity of the range of products in foreign trade;

Effectively develop foreign trade under imperfect competition is practically impossible, since the cost of production in the conditions of imperfect competition is higher than in a competitive environment. The price of the product firms operating in conditions of imperfect competition is higher because the company did not seek to minimize their costs, its product will still be implemented, as there is no alternative.

Practice shows that the market is developing much faster than the competition. Companies are forced to carry out research and development, to improve and update their equipment to keep up with the times. This is for the reason that if a company stops in place and will not introduce new technology to upgrade their equipment, there is another firm that conducted the modernization and renewal will be able to offer the market a cheaper or better product. In the conditions of imperfect competition, this is impossible. The company is constantly improving its technology not as an additional cost, which can be avoided. Thus, imperfect competition inhibits the development of the market.

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