Managing competitive advantages as factor in ensuring the competitiveness of enterprises in the market of Ust-Kamenogorsk

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

Authors:
Kunin Alexey, Kazakh-American Free University, Kazakhstan
Iskenderova Fatima, Kazakh-American Free University, Kazakhstan

In modern economic conditions, when economic growth of the national economy gave way to a sharp drop, an important role plays a factor painstaking and careful management of the enterprise in any industry. This event is an important tool in a changing competitive market conjecture. Given the unstable economic situation in the country and the tough competitive conditions for doing business is urgent measures to control the competitive advantages of enterprises. The fact of management of competitive advantages implies the existence of a highly advanced business management system.

Availability of competitive advantages in the economic downturn and competition allow exist to enterprises in competitive activity. In itself, competitive advantages gives company a certain position in the market, provides an opportunity to overcome the competition in the market, resulting in higher levels of attractiveness to buyers.

Due to professional and skilled management of the enterprise, competitive advantages tend to potential growth, develop businesses, and increase profits.

Process of managing competitive advantages is determined by its capacity, and at the same time - global. Capacity process determines by its structure, process stages. It is driven by global processes of the analysis, as the external environment and internal environment of the enterprise.

To manage the competitive advantage, it is necessary to analyze the state of the external and internal environment of the enterprise. American scientist - economist Michael Porter was put forward stages of analysis of the competitive environment of enterprises. The composition of these steps included:

- Structural analysis;

- Finding a firm position on a global scale;

- Definition of company strategies;

- Determination of the value chain of the company;

- Analysis of factors holds competitive advantages of the company;

- Analysis of the determinants of the competitive advantages of the country;

- Development, validation and harmonization of measures to improve the competitiveness of the country, industries, individual firms;

- Audit and motivation to achieve the planned results [1].

To determine the factors of competitive enterprises and thus the competitive advantages of enterprises requires a structural analysis of the industry.

The composition of the structural analysis, Michael Porter has included:

- Analysis of «Porter Five Forces»;

- «PEST» analysis;

- «SWOT» analysis;

According to the analysis of Porter five forces highlights the main threats to the enterprise, which are ranked according to the degree of danger for him.

Results «PEST» analyzes show the main factors that are important for enterprises, thereby affecting them.

«SWOT» analysis is essential for businesses, since it demonstrates the strengths and weaknesses, opportunities and threats for them. With a combined analysis of all models, the overall result obtained by enterprises. The result consists of the strongest factors of competitiveness, weak factors, that means weaknesses of the companies that need to develop.

To assess the competitiveness of the strongest factors deemed appropriate to use the method of «polygon of competitiveness». This method compares the competitive factors between several companies. By using the method of expert estimations, the relevant points are set for each factor, each enterprise. Therefore, the factors with the highest number of points are similar as competitive advantages for companies.

According to the results of the first phase of analysis there emphasize core competitive advantages of the enterprise. To analyze the competitive advantages of the company management considered direct action related to the management of the enterprises. According to the analysis, it is the second phase of the competitive advantages management process of enterprises. The final stage of the management process is focused on control phase [2].

According to the Michael Porter’s stages of the analysis of the competitive environment, market research was made on the sale of construction materials and in particular the study of enterprise «Megastroy Oskemen» LLP.

In the construction materials market of the town of Ust-Kamenogorsk competitive environment of enterprise develops around such competitors as: «StroyMart», «Comfort», «Beakris Mercury», «TNP».

1. Analysis of competitive environment by the Porter model.

Analysis and evaluation of the threat from substitute products:

Construction materials market in Ust-Kamenogorsk has a wide range of goods. For the most part, all the competing companies sell similar products, so there is the probability of finding a substitute product. Consequently, we find that the level from the substitute products is high.

Analysis and assessment of the level of intra-industry competition was held in the parameters: number of players, market growth rate, level of differentiation of the product on the market, restrictions on price increases.

According to the analysis revealed that the number of existing players in the region is about 3-10 enterprises. Due to the current economic situation as a whole in the world and in the country in particular, the rate of growth of the market of construction materials in 2014, gradually decreased. However, since the end of 2015 there was a tendency to slow growth.

The level of product differentiation in the market is great. However, it is worth noting that there are distinctive features of the goods. The increase in prices is a natural measure to maintain profits and reducing labor costs. In general, the level of intra-industry competition is average.

Analysis and assessment of threats to the market entry of new players was determined by identifying the height of barriers to entry. An economy of scale at the initial stage of implementation of the activity is a significant factor for new businesses, as it implies additional costs for the implementation of an increase in scale.

In the market of construction materials of Ust-Kamenogorsk, there are 4 major players, which divided about 50% of market share. Among these companies are: «Stroy Mart», «Comfort», «TNP», «Megastroy». The entire range of products presented in listed companies has more than 70 000 names of the goods that mean a high level of product diversity.

Investments and costs are quite large to enter to the niche of construction materials, and return, respectively, is fairly take long period of time.

Access to the distribution channels of the goods, of course, requires some investment. As example, it would be preparation of infrastructure for the sale of construction goods. Regarding the government's policy, it is conditioned by the laws and regulations of the Republic of Kazakhstan (constitution, labor code, customs legislation, tax regulations, etc.).

Existing players are adapted to regulate the pricing policy if it is necessary. The emergence of new enterprises, as an option, can lead to an additional regulation of pricing policy. However, it is worth noting that the major market players, under certain economic conditions will not be able to reduce prices due to high labor costs.

In general terms, the threat of entry of new players in the construction materials market in Ust-Kamenogorsk is not significant and level is average.

Analysis and assessment of the market power of buyers in the market.

This step demonstrates how customers are committed to the sold goods of "Megastroy Oskemen" LLP and how high is the risk of loss of the current customer base.

Analysis and evaluation of customer loss risks are analyzed in terms of:

- The proportion of customers with a large volume of sales;

- A tendency to switch to substitutes goods;

- Low sensitivity (using elasticity);

- Satisfaction with product quality.

Part of the customers, who has a large volume of the sales, accounted to wholesalers, construction companies. They get most of the products of «Megastroy Oskemen» LLP for construction of facilities on the East Kazakhstan region. There is propensity to switch the substitute goods, due to a diverse selection of goods on the market of construction materials in Ust-Kamenogorsk. Goods of «Megastroy Oskemen» LLP presented by 30,000 name of goods and each of them is unique in its segment, causing interest among customers.

Price regulation of «Megastroy Oskemen» LLP enterprise is one of the most important control measures. Attractive prices of enterprise help to attract customers from outside and from other competitors.

It is necessary to say, that the analysis and assessment of customers threats is defined as the average, but very close to the high level.

The third stage is the analysis and assessment of threats to the «Megastroy Oskemen» LLP from suppliers.

Analysis and evaluation of suppliers of «Megastroy Oskemen» LLP conduct in terms of stability, reliability and the ability to raise prices.

The main suppliers of «Megastroy Oskemen» LLP are companies from Europe and Asia, which together create a group more than 30 suppliers of goods. Suppliers are always providing required volume of the goods. These volumes of goods are always available for order from suppliers. The main threat is the change of supplier, since it is related to the costs of labor and getting empty warehouses.

Central Asian direction is priority for suppliers and chance to create a cooperation and is the key for partners - suppliers, because the economy is growing, not taking into account a slowdown due to the economic situation around the world.

In general terms, it appears that the level of threat posed by suppliers is an average, and is nearing a low. The reason for this is confidential and honest relationship management with suppliers and «Megastroy Oskemen» enterprise.

Summarizing the results of the analysis on the model of the five forces of Porter:

- Threat from substitute products is high, since its saturation in the market. There is a predominance of a similar product on the market.

- Level of threat of intra-industry competition is mean, as the company is a young, competitive and promising market of the city of Ust-Kamenogorsk.

- Level of threat from new players in the middle level, as the emergence of new players is rare in view of the existing barriers.

- Threat of losing customers exist, but not critical.

- Threat from suppliers is large, but not significantly. Cost of the search for new suppliers is considerable.

2. "PEST" analysis of «Megastroy Oskemen» LLP - analysis of the factors of external environment of the enterprise.

Political factor:

Legislative regulation of commercial activities in the Republic of Kazakhstan (Law of the Republic of Kazakhstan dated April 12, 2004 № 544-II regulation of commercial activities; program of support of small and medium-sized businesses).

Economic factor:

- Rate of inflation in 2015 year - 13.6% [3];

- Devaluation of the national currency;

- Purchasing power of consumers.

Social factor:

- Changes in the structure of income and expenditure;

- Changes in population (slight increase).

Technological factors:

- Development of competitive technologies;

- Introduction of new software;

- Information and communication, internet influence.

Of course, not all of these macro factors have equal influence on the activity to «Megastroy Oskemen» LLP. For determining the most significant factor was produced an expert evaluation method, showing the degree of influence on the activity of the enterprise.

In evaluation of analysis, it was concluded that only 6 macro factors are relatively more important for the functioning of the analyzed organization. As we see that the maximum positive impact on the functioning of the organization belongs to such factors as: effective demand, changes in the population, as much as possible the negative impact related to factors such as inflation and the rate of inflation.

3. «SWOT» analysis of «Megastroy Oskemen» LLP - analysis of the internal environment of the enterprise.

Strengths were identified according to the analysis:

- Organizational structure;

- Location and scale;

- Increase the number of employees

- The range of goods (30 000 names);

- Quality of service;

- Product quality;

- Price policy;

- Events and activities;

- Advertising

- Decentralization of trading activities (trading room, wholesale, warehouse);

Weak sides:

- Internal controls;

- Accounts dept;

- Staff turnover;

- Infrastructural dependence;

Capabilities:

- Development of new market segments;

- Improving staff communication culture with visitors, the formation of an atmosphere of hospitality and kindness;

- Reduction of debts receivable;

- Implementation of a unique product;

Threats:

- Strengthening the position of existing competitors;

- Changes in customer preferences;

- Active advertising campaign of competitors;

- Expansion of the product range competitors;

As a result of «SWOT» analysis obtain the strengths of the enterprise, which can be attributed to the competitive factors. In addition, it is worth considering the weaknesses that are to some extent able to influence the company's competitiveness factors. Therefore, it is necessary to apply the management weaknesses for their change in a positive direction.

According to the analysis, the matrix was compiled, which includes factors of opportunities and threats for the company. As a result, to increase the competitiveness of the enterprise, company’s management can use the factor to increase the enterprise culture and the development of a new segment.

4. The results of analysis of competitiveness based on a "polygon competitiveness" identified the main competitiveness factors that have been identified in previous models of analysis:

- Range of goods;

- Commitment to the customer;

- Brand;

- Advertising;

- Carrying out of actions;

- Location;

- Sales area;

- Quality of service;

- Product quality;

- Price policy;

- Distribution.

By ranking factors in the degree of their impact on the company, we identified the major competitive advantages of the enterprise.

Competitive advantages for the «Megastroy Oskemen» LLP are the range of goods, advertising, promotions, pricing, quality of service, quality of the goods.

The study on the management of the above competitive advantages highlighted the main actions and measures which the company carries out in order to maintain its competitiveness:

The range of goods covers large areas of the enterprise. Management process of a variety of goods consists on the steps and enters the competitive advantages of the control system. Consistent and thorough implementation steps allow the company to competently manage the entire volume of the existing product.

Advertising and marketing enterprise «Megastroy Oskemen» LLP is based on the monitoring of the environment. The main areas of advertising is television, newspapers, radio, outdoor advertising. Marketing activity is caused by market research economic conjectures, searching for effective ways of selling goods. One of them is now held shares. Their importance, both for the enterprise and for the population of the city is very high.

The pricing policy of «Megastroy Oskemen» LLP is based on the cost method. The essence of the method is that it takes into account all the costs of the enterprise and includes them in the overall cost of the product.

The quality of visitor services is one of the main areas of the enterprise, which has received considerable attention. Human resources management division is engaged in the activities of training and development of employees by means of regulations. Documents are included in a single list of enterprise, personnel management standards and referred to as "Common Management Standards" [4].

Product Quality of «Megastroy Oskemen» LLP confirmed the existing quality certificates. «Megastroy Oskemen» LLP makes business only with partners who are responsible for its quality.

According to the results produced by the study, it can be concluded that the process of managing competitive advantages of the company is not possible without a thorough analysis of the competitive environment of the company that put forward by Michael Porter. These test results demonstrate the presence of specific competitive advantages of the enterprise. Management in «Megastroy Oskemen» LLP makes clear existing enterprise management system as a whole. Competitive advantage management process in the competitive construction materials market allows being the most competitive.

Approach of competitive advantages management process enables «Megastroy Oskemen» LLP promptly and adequately respond to change in the environment of their operation and create a competitive advantage in the long run will ensure the growth cost of the business units and to achieve strategic goals.

Management relies on human potential as the basis of organization, directs production activities to consumer demands, flexibly responds and conducts timely changes in the organization, meets the challenges from the environment and allows to achieve competitive advantage, which together allows the organization to survive in the long term, while achieving that its objectives.

Current economic conditions in construction material market are determined by the dynamism and complexity of market conditions, increased competition, changes in legislation. All this leads to the development of a competitive approach to enterprise management process.

Analysis of the competitive advantages is the initial step in the development strategy of the enterprise, which is based on the study and evaluation of internal and external environment.

Consequently, it is the fact that the management of the competitive advantages of the enterprise is a factor in increasing the competitiveness of enterprise. This identity is clearly set out in the current study on «competitive advantage management of company at the stage of growth.

BIBLIOGRAPHY

1. Competitive Strategy: Methodology of Analyzing Industries and Competitors / I. Minervina; - M.: «Alpina Publisher», 2011. - 454 p.

2. Competitive Advantage: How to achieve high results and ensure its sustainability/ E. Kalinina. - M.: «Alpina Publisher», 2008 (2nd ed. 2008) – 720p.

3. Data from portal «kapital.kz»

4. Data from the enterprise «Megastroy Oskemen» LLP.



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

  
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