Competitiveness of goods, firms, industries, countries
The concept of competitiveness is quite broad. In the economic sphere, competitiveness is usually understood as the possession of properties that create advantages for the subject of economic competition, which create an opportunity to successfully conduct such a competition and win in it. Competitiveness not only passively reflects the needs and preferences of the market, but also involves the active activity of competitive participants aimed at gaining, retaining and strengthening market positions [17 p.8]. In the context of fundamental shifts in world trade, increased globalization of the economy, the conditions of competition change significantly. Competitiveness in the world market is determined by many factors. Four levels of competitiveness can be distinguished: competitiveness of goods, companies, industries, countries (national competitiveness).
Competitiveness of goods and services is a key factor in the quality of life. According to the UNESCO Commission on Population and Quality of Life, the concept of “quality of life” includes the following: health; education; rational (adequate) nutrition; stable, environmentally friendly environment; security; health care; participation in the life of society, creation of necessary services for the development of society; justice and equality for men and women. The fulfillment of the first seven conditions directly depends on the competitiveness of goods and services [8 p.8].
Competitiveness of goods – the ability of goods to meet the requirements of a competitive market, the needs of buyers in comparison with other similar goods. Competitiveness is determined, on the one hand, by the quality of goods, its technical level, consumer properties and, on the other hand, by the prices set by the sellers of goods. In addition, competitiveness is influenced by: fashion, pre-sale and after-sales service, advertising, manufacturer image, market situation, fluctuations in demand [22 p.60].
Product competitiveness is the ability of products to meet the requirements of a given market in the period under review.
The integrated indicator of product quality is the ratio of the total beneficial effect of the use of products for their intended purpose (Pe) to the total costs of creating (Zp) and operating products (Ze) (VNII standardization in the 70s, and then standardized):
I = Pe / Zp + Ze
The level of product competitiveness is a quantitative relative characteristic of the ability of products to meet the requirements of a particular market in comparison with the products of competitors (A.N. Litvinenko and A.M. Tatyanchenko):
K=Io/Ia
where: K is the level of competitiveness;
Io – integral indicator of the evaluated products;
Ia is an integral indicator of an analogue product.
If K>1, then the evaluated products are superior to the products of the competitor [8 p.13].
Competitiveness criteria are qualitative and (or) quantitative characteristics of products, which serve as the basis for assessing its competitiveness:
single criterion of competitiveness – refers to one of the simple characteristics that determine competitiveness (sale price, degree of automation of the device, etc.); complex – refers to a set of characteristics that determine competitiveness (its diverse –
ti – group and generalizing criteria); group criterion of competitiveness is a complex criterion that refers to a group of characteristics that determine the competitiveness of goods from one side or another, the level of quality, image, level of novelty, price of consumption, information content of the goods); The generalized criterion of competitiveness is a complex criterion of competitiveness, according to which a decision is made on the results of assessing the competitiveness of products (the level of competitiveness of products, the rating of goods, etc.).
The factor of competitiveness is the immediate cause, the presence of which is necessary and sufficient to change one or more criteria of competitiveness [8 pp.13-14].
Competitiveness factors:
technical (strength, safety, aesthetic characteristics, safety, functionality); technical and economic (reliability, material intensity, energy intensity, ease of installation) organizational and commercial (price, payment terms, delivery time, Incoterms, efficiency of marketing and advertising, level of pre-sale and after-sales service, certification of goods); business reputation of the manufacturer.
Thus, the competitiveness of a product is determined mainly by its quality and price. The central place in maintaining competitiveness belongs to the improvement of production and the increase in the technical level of products. But the real possibility of selling products depends on the organization of all the activities of the company – from the preparation of production to the after-sales service of the goods, which M. Porter called the value chain of the company. It is about ensuring the supply of raw materials, the direct production of products, their marketing and after-sales operations. High-quality performance of these works is an important condition for maintaining the competitive advantages of the company and its goods sold.
Competitiveness of the company is the ability of the company to survive, sustainable economic growth in rapidly developing market conditions. The competitiveness of the firm depends on the speed, flexibility of the firm’s response to changing market demand, as well as on the state and level of development of its material and technical base [22 p.60].
Several levels of firm competitiveness can be distinguished. The management of enterprises that are at the first level of competitiveness sees its role in producing good products that compare favorably with those of competitors. Additional efforts, say, marketing, in production or in management are considered unnecessary.
Such an approach can bring success to an enterprise if it finds a market niche, an unmet demand that protects it from immediate competition. However, later the company can “outgrow” this niche and enter into competition in other market segments, or this niche can turn into a growing market, thereby becoming attractive to other manufacturers. In both cases, the ability to produce products is no longer enough: it is necessary to take care of obtaining and developing competitive advantages.
Enterprises of the second level of competitiveness strive to meet the standards set by their main competitors.
For enterprises of the third level of competitiveness, it is characteristic that success in competition becomes for them not so much a function of production as a function of management in the broadest sense.
The production systems of enterprises that are at the fourth level of competitiveness become as if “supported from the outside”, success in competition and efficiency of functioning are determined not so much by internal factors, including managerial ones, as by external factors. Such enterprises do not seek to copy the experience of other firms in the industry, but simply want to surpass the most stringent of the standards existing here. They are ready to challenge rivals in any aspect of the competition. Their main differences are flexibility, dynamism and the desire for continuous improvement of management parameters [17 pp.12-13].
Factors affecting the competitiveness of a firm can be divided into two groups: macroeconomic and microeconomic [6 pp.124-126].
Macroeconomic factors cover the nature of state regulation of the economy, the state of the competitive environment in the national market as a whole, as well as in the markets of certain industries, the exchange rate of currencies, discount policy, the tax burden, the degree of stability of the social sphere, etc.
Microeconomic factors include fixed assets, labor, technological capabilities, governance, and communications and infrastructure [17 p.13].
The nature of the company’s strategy is determined by the specifics of the products. The sale of some goods is more focused on the domestic market, while others on the world market. In the second case, it is important for the company to determine the ratio of production of goods at home (“home”) and abroad. The choice of a strategy focused on export and foreign investment is associated both with the nature of the products and with the policy in the countries – potential buyers of goods. Placing part of the production abroad requires well-established coordination of the company’s activities.
The competitiveness of the industry is determined by the presence of specific advantages that allow it to create, produce (with costs not higher than world costs) products (services) of high quality that meet the requirements of buyers regarding the consumer value of goods, their market novelty and cost (price), to supply them to the world market within the time frame dictated by the market situation [22 p.60].
The competitiveness of the industry is largely determined by the tradition of developing the production of relevant goods in the country and the accumulation of technologies that ensure high quality and low prices (for example, watch production in Switzerland). But in the conditions of rapid scientific and technological progress, the position of the industry of a given country in the world and in a particular area can change rapidly [9 p.163]. The competitiveness of the industry and the country’s economy are determined by conditions that significantly affect the competitiveness of the company in this industry and its products. At present, it is not the availability of factors of production that is of increasing importance, but their use. For the competitiveness of the industry, personnel training, its own scientific and technical base are essential. Although technology improvements are initially carried out within individual companies, the transfer of knowledge and experience in the industry is more intensive than between countries. Competition in the industry stimulates technological progress. For the competitiveness of the industry, the nature of the demand for its products is important in terms of not only its magnitude, but also its orientation to individual market segments, which leads to the specialization of the industry, which is reflected in its role on a global scale.
Loss of competitiveness can be caused by a number of factors, among which the main ones include:
the rise in the cost of labor, not compensated by an increase in the quality of its training and a corresponding increase in labor productivity; insufficient development of the scientific and technical base of the industry; depletion of the natural resources on the basis of which the industry developed; a radical decrease in demand for the products of the industry in connection with fundamental changes in the structure of production; the emergence of new producers, the competitive advantages of which this country can not resist
[9 p.164].
The competitive advantages of the industry largely depend on the state of related and related industries in the country. If they are competitive on a global scale, then the level of the main industry rises. The development of the main and related industries is stimulated by their cooperation, joint development of new products.
Competitiveness of the national economy means the ability of the country as a geopolitical entity to ensure independent political development and maintain stable positions in economic rivalry with other countries. A competitive national economy is able to produce and sell goods and services in the domestic and foreign markets that correspond in volume and structure to the payment demand of business entities and individual individuals, which ensures economic growth and an increase in the level and quality of life [17 p.8].
The concept of “competitiveness of states” was introduced into scientific circulation by Professor of Harvard Business School M. Porter in the monograph “Competitive Advantages of Nations” published in 1990. Porter’s system of four indicators covers the competitive environment of domestic firms and includes: (1) factor conditions; 2) conditions of domestic demand; 3) related and supporting industries; 4) the structure and strategy of firms, intra-industry competition. Accordingly, the presence and effective use of a particular parameter predetermines the success of the country in international competition.
At the same time, the basis of the competitiveness of an individual state is the effective use of labor and capital, productivity. Labor productivity – ultimately, reflected in such a macroeconomic indicator as national income per capita
[17 p.8-9].
The indicator of competitiveness of national economies was first developed by a well-known international organization – the World Economic Forum in 1986 The annual report on the competitiveness of countries is prepared under the auspices of the World Economic Forum by the International Institute for Management and Development (Lausanne). In recent years, the United States, Singapore and Finland have occupied the first places in the competitiveness rating, and Indonesia, Venezuela and Russia have closed the list.
To calculate the competitiveness rating, 290 indicators are analyzed, of which 41 are used as introductory information about the country and do not determine in the final rating. The remaining 249 criteria, which are reflected in the final rating, are grouped into 8 aggregated factors: 1) internal economic potential; 2) foreign economic relations; 3) state regulation; 4) credit and financial system; (5) infrastructure; 6) control system; 7) scientific and technical potential; 8) labor resources.
Over the years of competitiveness research, its “golden rules” have been developed, following which the country will maintain or increase its competitiveness. They are formulated in the following order:
Stable and predictable legislation; Flexible structure of the economy; Investments in traditional and innovative infrastructure; Stimulation of private savings and domestic investment; Increasing the aggressiveness of exports along with attracting foreign direct investment; Improving the quality, efficiency and transparency of management and administration; Interdependence of wages, labor productivity and taxes; Reducing the gap between minimum and maximum earnings in the country and strengthening the middle class; Large investments in education, especially secondary education, as well as in continuous professional development of workers; The balance of the advantages of economic globalization and national characteristics and preferences [5 pp.18–19].
The well-known English business magazine “Euromoney”, following its long tradition, twice a year determines the competitiveness rating, determined it for a large number of countries as of March and September. In this case, the competitiveness of the country is interpreted as an economic opportunity to pay for the borrowed funds received (calculated for about 180 countries). The maximum final score for the country is 100 points. The integral indicator consists of 9 components:
political risk; economic prospects; external debt ratio; debt due to default or debt restructuring; credit rating, or solvency rating on credit debts; access to banking resources; access to short-term financial resources, access to the capital market; access to forfeiting services [23 p.13-18].
National competitiveness in its development goes through a number of stages: on the basis of factors available in the country (natural resources, including land resources and climatic conditions, the number of labor force), on the basis of investment (development of an industry that has already been developed in other countries, the formation of infrastructure), on the basis of innovations (the creation of fundamentally new products and industries) and on the basis of wealth, when competitiveness is maintained at the expense of the previously created, and the country loses the ability to improve production, develop innovations
[9 p.202].
For a long time in economic science, labor, land (natural factor) and capital were considered “classical” factors of production. Obviously, the presence of a corresponding factor in a country plus its effective use predetermine the country’s place in the system of international division of labor for a certain period of time. World experience shows that almost all countries, realizing their competitiveness in world markets, rely on the factors of production available to them, and, above all, natural factors. However, even the richest natural resources tend to be depleted. And the range of export industries in these conditions is small.
Progressive strengthening of the competitiveness of the national economy implies economic growth based on the formation of new industries and attracting investment. For example, Japan, having begun massive exports in the mid-1960s, produced goods (engineering products) that required the appropriate factors of production, which it did not have and still does not have (in whole or in part).
Further development of national competitiveness is accompanied by an increase in spending on research and development. Thus, the powerful development of the four Asian dragons was closely linked to the assimilation of technologies coming from more developed countries, as well as to their own efforts to develop, adapt, modify and gradually introduce the relevant know-how [17 pp.10-11].
The saturation of the world market with high-tech products is estimated at about 2.3 trillion. Usd. per year. The volume of exports of high-tech products of the United States is 700 billion dollars. per year, Germany – $ 530 billion, Japan – $ 400 billion, Russia – $ 6.9 billion. [24 p.5].
The state plays an important role in ensuring the stable position of the national economy and its economic entities in world markets. In fact, the entire economic policy of the state is aimed at increasing national competitiveness. The state stimulates the investment process in the country; improves the tax system; finances not only fundamental, but also applied research; supports and enhances national competitiveness through exchange rate regulation; carries out import substitution and export promotion [17 p.11].