Global competition as a type of spatial competition

Table of contents: The Kazakh-American Free University Academic Journal №8 - 2016

Authors:
Seitkali Anuar, Kazakh-American Free University, Kazakhstan
Iskenderova Fatima, Kazakh-American Free University, Kazakhstan

The world economy, if speaking in general, has never been in a big state of stagnation there are constant changes and innovations.

New phenomena in the world economy, which became known as "globalization" naturally led to the emergence of new terms. In particular, it includes the concept of "global competition". Authors of numerous publications consider in what way do subjects of the world market act in the conditions of the global competition, but they do not give definition to this phenomenon. Meanwhile, in order to understand what should be the algorithm of behavior of the certain subject or the country in general in the changed circumstances, it is necessary to have a clear idea about the essence of the phenomenon.

What is behind the term "global competition" - is it the universal all-pervading competition so-called "struggle of all against all", or the competition in the global markets, or maybe the competition of the main subjects of the global market? There is no universally accepted point of view for that question. There is no definite answer to a question of how long or since what time it is possible to use this term, and when the global competition appeared in a full volume.

Is it is possible to claim that it has appeared in connection with the activity of multinational companies? In this case, the most controversial concepts about consequences of the global competition can be reduced to two opposing groups - whether the competition during an era of globalization dies away or becomes fiercer. In other words, there are more questions than answers. In this case, since the phenomenon of global competition is young as well as globalization of the economy itself, it is possible to talk about the tendencies that are present in the moment. Therefore, it is worth finding out definition of the category of "global competition" and its place in system of forms of competition. As global competition is priori linked to certain cross-border economic processes in the global economic space, it should be assumed that the answers to these questions must be sought in the spatial competition theory. The term "spatial competition" contains dichotomy that is the presence of two components - the space and the competition. Each of these must be analyzed from the perspective of the basic postulates of economic theory. At first sight, it might seem that this will not cause difficulties however, there is a problem. The problem is that the factor of space is rarely taken into account in the economic theory.

Competition forms in classical understanding were considered irrespectively spatial aspect, except for the cases when the spatial distribution factors could affect the prices of production factors. In the economic theory the factor of space was not considered as theoretically essential it was believed that it represents an exogenous variable, which is not an integral part of functioning of an economic system.

The emergence in the late 20-ies of XX century of the theory of monopolistic competition, in which there was a concept of spatial differentiation had given an impetus to emergence of researches of spatial aspect of the competition.

It is well known, that the model of the spatial competition considers effect in case of which the space influences pricing, and general balance when firms are dispersed, and the prices of transportation play an essential role in a final price.

It is necessary to know that there are American and European methods of studying of spatial economics in general and the spatial competition in particular. German scientists are known for making the theory foundation for the future researches, they belong to the European method. However, the first scientist who have coined the term of "spatial competition" into the economy was an American economist Harold Hotelling in 1929. He came to the conclusion that in case of monopolistic competition the firm which is in the quasi monopolist's state, creates the market space [1]. The consequence of this conclusion was the emergence of the term "spatial competition", which implies the possible behavior of the subject in the space of the possible market and the impact of space (distance) on the price.

The American method takes J. Clark and F. Fetter's works (1924) as a basis. Modern researches are presented by M. Porter, P. Krugman, and G. Stigler's works. The spatial competition implies competition among producers (sellers of goods), for a share of the market space in the conditions of imperfect competition by influencing the price [2].

The subjects of spatial competition are usually large companies, which divided in the space (at different regional markets). The object of the spatial competition is the market share in the space. Of course, there is a question about the place of spatial competition among traditional forms of competition. This type of the competition, can be considered as the behavioral competition in the conditions of imperfect competition. It should be noted, that it is necessary to distinguish between "the spatial competition" and " the competition on space of the market." The criterion of this division is the ability (or its absence) to create own market space by subjects of the competition. Competition in the market space means that the traditional forms and types of competition occur on an advance created (an existing) market. Because of the spatial competition, the firm can expand (to increase) the field of the activities. As it is known - the competition comes from the outside.

Before emergence of the term "global competition" the concept "territorial competition" was widely used, the essence of which consisted that two or more territories in case of implementation of foreign trade competed, or there was a struggle for the new markets for possession of resources. However, in order to understand feature of the global competition, it is necessary to represent accurately the main characteristics of process of globalization as in a definition "the global competition" the main thing is the term "global". At the same time, it is necessary to emphasize, that the competition should be considered as a process. The competition understood, as process is present until arises any obstacles for an entrance on the market.

Describing the success secrets of global companies, M. Porter emphasizes, that if an international company wants to achieve serious success, it will have to be transformed from multilocal competitor (which allows the separate branches to compete independently in the various local markets) to a global organization that focuses the entire system of production and market positions to struggle against the competition [3]. Thus, M. Porter emphasizes changes as activity of the subject of the global competition and the essence of the subject. However, M. Porter does not give accurate determination of the term of global competition.

Such means of the competition as cost reduction, improvement of quality and expansion of the range of goods and services are becoming a kind of engine of globalization. The American economist J. Garret believes, that the growing competition in world trade is one of three main mechanisms of globalization [1].

M. Delyagin believes, that "the global competition is the competition of an era of globalization, which is conducted in the conditions of domination of global monopolies in the uniting markets both economic and not economic measures, having tough comprehensive character which is leading to inevitable degradation of the weakest participants" [4]. However, this determination describes a nature of the global competition rather than determines its essence.

Some foreign researchers suggest to use the new term for the modern competition - "hyper competition".

In the light of using of basic provisions of the theory of the spatial competition it is possible to give the most general definition to the global competition. Therefore, the global competition is the competition which ignores national boundaries and the subjects of the competition come from the outside finding the objects in a certain country.

Indeed, in modern conditions activities of relatively large corporations include development nonconventional (in the geographical plan) markets for them, or attempts of implementation on the markets, which are already divided by the other companies. On the other hand, it is necessary to be protected from the competitors coming from the outside. Therefore, the company should build the strategy both defensive and offensive.

Paraphrasing words of the English economist D. Marshall about change of a world economic order, it is possible to tell that today the world order which was characterized by domination of the "national capitalism" competing with each other recedes into the past, and the new order which creates transnational capitalism comes to its place" [5].

It is supposed, that the formation of global competition has passed several stages after the development of the phenomenon of globalization. The criterion for these stages should be considered as development of the quantitative characteristics of the phenomenon in its qualitative changes.

It is necessary to differentiate the concepts "global competition" and "competition in the global (world) market". Difference of one from another consists in possibility (impossibility) of creating the market space. Hence, it is possible to clarify the definition of global competition - a competition that ignores national boundaries and makes it possible to create your market space for a particular subject.

It is possible to allocate a number of distinctive features of the competition during a globalization era.

First, the strengthening of a role of the state, which is expressed in support of activities of the national companies in the world markets. Therefore, in Germany there is a special agency, which counteracts the foreign companies, for example Russian. All main European Union countries set import restrictions of a number of goods: agricultural products, steel, textiles, etc.

The authorities of the certain states in the European Union limit access to distribution networks even for each other [6]. The main result of globalization is expansion of the competition from the level of firm to the level of the government. Now the economic capacity of the place depends much more on institutional parameters, which are substantially created under the influence of the government. It is possible to draw a conclusion that the global competition is characterized also as "the institutional competition". If the countries want to attract mobile production factors on the international level, the governments of the countries must enter the institutional competition with the foreign governments.

Secondly, supranational bodies also interfere with the competition. Therefore, the European Parliament prohibits foreign companies to buy up the gas and electric companies in Europe. It is clear, that the background of it - is not to allow the large foreign companies, first of all Russia, neighboring for Kazakhstan, and its "Gazprom" on the European market, though dependence of the countries of Europe, in particular Western in the Russian gas is obvious, also multiple discussions of analysts from the EU concerning the conclusion of the contract on supply of gas between Russian "Gazprom" and the large Chinese company CNPC can serve that confirmation [7]. The competition for gas amounts between China and Europe is increasing, and the People's Republic of China becomes the favorite [8].

In most cases, it is about strategically important industries. It is possible to draw a conclusion that the hidden methods of protectionism both on national, and at the supranational level amplify.

Thirdly, manifestation of the global competition has accurately expressed national aspect. Also, it should be added, that not each country representatives participate in the global competition.[9]

The level of development and the competitive environment varies depending on the industry or market that is connected with a variety of operating conditions, history and stage of development of the industry, price situation, its changes and a set of other significant factors. This requires the development of special measures to promote competition in certain sectors.

As an example, it is possible to take the construction industry, and the cement industry in particular, it is in number of the most fast-growing world industries. On the example of this industry, it is possible to trace how competitors create the market space by market penetration of other countries. To take for example Russia, the largest producer of cement in the world, it takes the fifth place in the world on cement production volumes, yielding to China, India, the USA and Turkey.

In February, 2016 Russia imported from the countries which are not entering into "Customs union", 66,6 thousand tons of cement. Following the results of 2 months (January, February) import of cement to the Russian Federation has constituted 91,9 thousand tons (in 2015 - 155,5 thousand tons, in 2014 - 219,9 thousand tons). In case of stabilization of dollar rate on the current values (68 rub/USD) and a rise in price of the Russian cement, insignificant increase in import is expected.

For the period January - February, 2016, as well as last year, the main countries on export to the Russian Federation were Lithuania (39,29%) and Latvia (19,72%) which have occupied 59% of the market. In 2014, Iran and Turkey were leaders.

Russia exported cement in February 2016, countries which are not members of the Customs Union, 14.0 thousand tons of cement. According to the result of 2 months, the cement exports from Russia amounted 21.2 thousand tons (in 2015 - 22.0 thousand tons, in 2014 - 47.9 thousand tons.).

Within two months the main countries for imports of cement from Russia were Abkhazia (54.30%) and Finland (18.62%), in 2015, Abkhazia had 46%, on the second place there was Azerbaijan with 24%. In 2014, Azerbaijan was the absolute leader with 78% of Russian exports [10].

Exporting country to Russia, MT / year, month

2014

2015

2016

2016

Total

1 (jan)

2 (feb)

Lithuania

178273

294304

5714

30410

36124

Latvia

357481

293251

6488

11646

18134

Iran

653541

249101

1001

4175

5175

Republic of Korea

141528

134067

4777

181

4958

Norway

92508

84300

 

4000

4000

Turkey

582207

106690

353

3529

3882

Germany

44830

63972

1086

2439

3524

Egypt

34491

32670

 

2992

2992

China

282513

74782

1969

1006

2975

Poland

270432

96170

988

1800

2788

Netherlands

12416

16865

399

1238

1637

France

13222

12777

402

1041

1443

Bulgaria

9660

29480

 

726

726

United Kingdom

6592

4616

249

420

669

Greece

4474

2838

528

132

660

Slovakia

4723

3122

278

283

560

Hungary

5028

3928

224

111

335

Slovenia

4012

7103

334

 

334

Ukraine

71252

97348

253

63

316

Austria

5502

3822

52

208

260

Spain

242

762

 

183

183

USA

2318

7648

80

 

80

Estonia

10624

3033

66

 

66

Japan

   

60

 

60

Belgium

1932

1480

51

 

51

Sweden

461878

101903

     

South Africa

340

4000

     

Mongolia

 

10464

     

Azerbaijan

 

186

     

Ireland

772

520

     

Panama

497

       

Italy

914

54

     

Turkmenistan

 

385

     

Denmark

9952

18911

     

Finland

714

113

     

Czech Republic

2226

       

Vietnam

266

       

Thailand

6208

11856

     

Total

3273566

1772520

25353

66581

91934

Exports from Russia (breakdown by importing countries), MT

2014

2015

2016

2016 Total

1

2

Abkhazia

6893

63202

3167

8359

11526

Finland

3930

22463

927

3025

3952

Azerbaijan

263380

32669

2265

470

2735

Turkmenistan

45083

8755

670

871

1541

Uzbekistan

5100

1357

129

888

1017

Ukraine

5046

4193

56

118

174

South Ossetia

4561

3537

 

172

172

Guinea

     

110

110

Korea (DPRK)

1687

207

     

Tajikistan

552

60

     

Tanzania

115

       

Cuba

101

       

Georgia

 

601

     

Mongolia

113

757

     

Kyrgyzstan

1536

512

     

China

 

102

     

Svalbard and Jan Mayen

271

       

Latvia

84

72

     

Moldova

330

       

Total

338782

138486

7214

14012

21226

Exports by Month, cumulative totals, MT

2014

2015

2016

jan

16841

11948

7214

feb

47912

21982

21226

mar

72017

35735

0

apr

102910

49450

0

may

137459

58445

0

jun

160465

66191

0

jul

193607

74314

0

aug

224364

82711

0

sep

261818

93189

0

oct

298888

105516

0

nov

313115

120758

0

dec

338782

138486

0

One of the main features of economic globalization is its cross-border, so the analysis of the "global competition" category must be related to the theory of economic space. Methodology of spatial economy allowed to define the global competition as a competition that ignores national boundaries, i.e., subjects of competition come from the outside, finding the necessary objects in a certain country. Such approach allows to distinguish between global competition and competition in global markets and not to put an equal sign between them. One of characteristic features of the global competition is strengthening of a role of the state in foreign economic activity that in turn requires determination of level of the state intervention.

REFERENCES

1. Hotelling H. Stability in Competition // Economic Journal. - 1929. - Vol. XXXIX. - № 39.

2. Шихалёв С.Л., Зобова Л.Л., Шабашев В.А. Теория пространственной конкуренции как основа определения пространства товарного рынка. - Кемерово: Практика, 2007. - С. 54.

3. Портер М. Конкуренция: пер с англ.: учеб. пособ. - М.: ИД «Вильямс», 2000. - С. 293-294.

4. Делягин М. Россия в глобальной конкуренции. Мировой кризис: общая тория глобализации. - М.: ИНФРА-М, 2003. - С. 273.

5. Реут А., Чайка Ф. Европа строит «железный занавес» для русского капитала // Известия. - 2007. - 12 июля.

6. Отчет по состоянию цементного рынка России [Электронный ресурс]. Реж. доступа: http: // www.rucem.ru/ (дата обращения: 18.04.2016).

7. http://www.theguardian.com/

8. http://www.theguardian.com/

9. Глобализация мирового хозяйства / под ред. М. Осьмовой, А. Бойченко. - М.: ИНФРА-М., 2006. - С. 7.

10. http://gruz.ru/node/3036#



Table of contents: The Kazakh-American Free University Academic Journal №8 - 2016

  
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