Research Of Road-Building Industry Enterprise Competitiveness Of The Region

Abstract

Modern economic conditions pose enterprises with new challenges in the field of competitiveness predominating a stable competitive position in the market. The article gives the results of assessing the competitiveness of an enterprise in the road construction industry operating in the regional market of Kuzbass, the main activity of which is the construction of roads and highways. The paper also considers the main directions of increasing the competitiveness of this enterprise. The work considers a comparative analysis of the competitive situation and identifies leading enterprises in the field. In order to assess external factors that are not directly related to the activities of this enterprise, but that can influence long-term decisions, PESTLE analysis was used, which is an extended version of PEST analysis and gives an idea of ​​what key factors of the external macro environment can create various opportunities and threats in future. As a result, the factors that maximally affect the enterprise were identified and the probability of occurrence of each factor for this enterprise and the degree of influence of each event factor were assessed. In order to assess the market position, a SWOT analysis technique was used, thanks to which it was determined that the organization has a significant number of strengths. A strong internal position is confirmed by the IFE matrix. At the same time, the SNW analysis showed that the weakness of the enterprise is marketing. A detailed analysis of the level of competition in the industry in the local market was carried out according to the model of "5 forces of competition" of M. Porter. Based on the results of the assessment, recommendations are given aimed at maintaining and increasing profits and profitability of the enterprise.

Keywords: CompetitivenessenterpriseSWOTKuzbass

Introduction

It is generally accepted that in a competitive environment, each organization seeks to improve the quality of its products, reduce costs, increase the level of service, reduce the price of products. Today, there no organizations that would not assess their activities, including competitiveness. Improving the competitiveness of the enterprise determines a stable competitive position in the market.

Thanks to the assessment of competitiveness, solving problems such as determining the place of an enterprise in the market, identifying competitors in this industry, developing an effective strategy, finding reliable investors and partners, raising capital, entering new markets, introducing new developments, etc., open up (Quint, 2012). The company cannot work without a sustainable competitive position in the market.

Problem Statement

Most Russian companies trust only indicators of product competitiveness. The mistake is that world quality indicators and production costs as well as sale of goods are not taken into account. For this reason, the main priority in the development of the national economy is to increase the competitiveness of Russian enterprises, while the development of the region directly depends on the efficiency of enterprises located in this place (Fathutdinov, 2005). The above problems are also characteristic of the road-building industry of our country.

The foundations of the competition theory are laid down in the works of A. Smith (2020), later developed in the neoclassical approach of Marshall (2013), the structural approach is presented in the works of Chamberlin (1962), Robinson (1986), the adherent of the functional approach is done by J. Schumpeter (1983), this approach is also presented by Porter (1998, 2000). A functional approach in the broad sense interprets competition as a struggle between the old and the new. Studying the theory of competitiveness Porter (1998, 2000) brings to the fore the ability of market structures to adapt to technological changes. A lot of attention is paid to the study of competitiveness problems in the works of various foreign and Russian economists: Meskon et al. (1997), Tompson and Striklend (2015a, 2015b), Drucker (1954), Fathutdinov (2005), Khrutsky and Korneeva (1991), Shvandar (2010), etc. There is great variety of approaches to this problem in the literature, which is caused not only by the versatility of the very essence of competitiveness, but also by the features setting goals and objectives of the study and selection of the research object or selecting features of the research subject. This category is the most important characteristic that evaluates the performance of a business entity. This is an indicator that can be used in many aspects of life, despite the fact that it is economics. It should not be considered in general; it should be focused on its subject.

At the same time, despite a significant number of scientific papers devoted to the assessment and management of enterprise competitiveness, there is a wide range of both theoretical and methodological approaches. Competitiveness studies are conducted both at the macro-, meso- and micro- levels. This multiplicity is determined by the economic essence of competitiveness and has a number of characteristics. Difficulties in developing the definition of competitiveness are associated with the complexity, multicomponent and variability of the analyzed phenomenon. Review of a variety of sources led to the conclusion that at present there is no single concept of competitiveness, as well as methods for its assessment. Depending on the goal and objectives of the study, it adapts to the specific requirements of the market actors and the extent of the company's activities. Also, competitiveness assessment should take place at the current moment, at the present time, for a given period.

Research Questions

A high level of competitiveness is a guarantee that the enterprise will receive the greatest profit. In order for the company to make profit for a long time and function successfully, it is necessary to monitor the quality, innovation, price, adaptability of the enterprise, the electronic environment, the interaction between the state and business, new markets, customers, business value, as well as company products. Thanks to these efforts, the company's competitiveness will increase.

According to Porter (1998), a company's success in competition depends entirely on its competitive advantage. Through innovation, a company can attain a competitive advantage. Innovation can be found not only in products, but also in technologies and management methods. Innovation should not be significant. Most often they are small, but most importantly, the inventions are really new and have never been used before. We can give an example of a small innovation as follows: “opening” a new segment on the market, which for one or another reason was avoided by competitors. The competitive advantages are characterized by variability; they are not frozen in time. The development of technologies, globalization leave an imprint not only on the nature of competitive advantages, but also on their structure (Midov, 2018).

Effective management of competitiveness of enterprises is a continuous process of the systematic impact on the functioning of the enterprise systems, the formation of the competitive position of the enterprise in market conditions. Management of the enterprise’s competitiveness is reduced to creating competitive advantages in all areas of the enterprise’s life, representing an extensive and purposeful solution to the issues of strengthening and maintaining the enterprise’s competitiveness.

In this way, the enterprise competitiveness management is an action or process, and the competitiveness management system is a mechanism that creates and guarantees this process. The object of regulation in the competitiveness management system is the enterprise’s potential in terms of creating its competitive advantages, which gives it greater value than that of competitors. It allows achieving strategic and tactical goals with the best use of any kind of resources. The enterprise competitiveness management system, as well as the enterprise management system, is a complex system, the complexity of which is constantly increasing, due to the constancy of internal development taking place within the organization.

As competitiveness is directly related to the use of the limited resources of the enterprise, the assessment of competitiveness can be expressed in terms of indicators of resource efficiency. Efficiency assessment is necessary to quantify the impact of an economic entity on its activities. As a rule, different parameters are used for measurements, which are based on the totals of the business entity.

Purpose of the Study

The hypothesis of the research is the assumption that the category of "competitiveness" on the one hand, acts as a backbone for the enterprise concept, to harmonize into a single unit all the factors that determine the effectiveness of the company, on the other hand, it is influenced by all aspects of financial and economic activity of the enterprise.

Due to competitiveness, one can determine the ability of any object to effectively confront its competitors. It happens because of the insufficient level of competitiveness that various indicators of financial and economic activity are declining. For example, the competitiveness of enterprises affects the ability to generate income. Low income in the future leads to lower profits, and, consequently, profitability. These indicators, in turn, are responsible for effective work.

Research Methods

As a rule, the competitiveness assessment methods presented in the economic literature are divided into two groups:

1) According to the criterion for applying formalized assessment procedures:

a) Quality techniques. These include: SWOT analysis, matrix and rating - expert methods;

b) Quantitative methods. These are index methods, valuation methods for market share or products.

2) According to the criterion of dependence on the nature of the data:

a) The methodology of documented data. These include: methods for reviewing statistical data, methods for evaluating reporting;

b) Methods that are based on someone else's opinion of the respondents (expert assessment, conducted sociological research).

In some sources, there are three approaches: marketing, factor and integrated. In the marketing approach, the market share, its attractiveness and customer satisfaction are evaluated, matrix methods are used, as well as the method of questioning, questioning and statistical processing. The factor approach identifies, evaluates key success factors and compares them with competitors. In an integrated approach, a comprehensive assessment of competitiveness is carried out, which may vary depending on the method used.

Findings

The market of road construction in Russia over the last ten years shows a tendency of growth, in accordance with the State Program "Development of Transport System" and the national project "Safety and quality of the road".

Road construction industry is characterized by the fact that the interaction between buyer and seller is carried out in a specific way, as in most cases, as a buyer are state and municipal governments, and from merchants are road construction companies that compete with each other. In addition, the road construction industry has its own peculiarities, and as an activity, in particular, small amount of work performed at one site leads to the need to carry out work at different sites, often located at a considerable distance from each other, a considerable influence and specificity of road technology construction. Competitive situation in the road construction market of Kemerovo region is characterized by a fairly large number of enterprises, to 2019 in the construction industry, there were 4108 organizations, including 226 specialized in road works (Federal State Statistic Service, 2020).

The main competitors of the analyzed enterprise are companies operating on the market for more than 15 years. Competitive advantages of such companies are: accumulated base of contracting parties (including a client base and stable relations with suppliers and investors), formed image of companies, stable pricing policy.

Table 01 shows the main competitors of OJSC Kemerovospecstroy (we considered enterprises with main activity in the construction of roads and highways with positive financial results). The enterprises are ranked by the amount of sales proceeds. Young companies are in a phase of rapid growth showing the highest values of profitability, but they cannot compete with the analyzed company by revenue and assets. It should be noted that an enterprise from a neighboring region is actively starting to operate on the regional market.

Table 1 -
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In terms of revenue, OJSC Kemerovospetsstroy takes the 158th place among all companies in the region and the 2nd place in the category "Construction, repair and maintenance of roads, bridges, tunnels, airfields and railway tracks". In terms of business value, the enterprise takes the 150th place among all companies in the region and the 2nd place in the industry. Among enterprises, bidders (under the Federal Law "On the contract system in the procurement of goods, work, services for state and municipal needs" dated 04.04.2013 N 44-ФЗ), the company ranks the 43rd in the Russian Federation, with a total of state contracts of 4,572,609,902 rubles.

Considering the geographical representation of the enterprise in the regions, we see that the main volume of activity falls on the Kemerovo region is 43,216,528 rubles (94.48%), a small amount of work is carried out in the Novosibirsk region (252,447,374 rubles - 5.52%). The types of activities also show a clear specialization of the enterprise: 433,974,291 rubles or 94.89% falls on the type of activity "automobile roads and motorways; construction work on the construction of roads and motorways" and 2,333,535,611 rubles or 5.11% belongs to other spheres.

Thus, the company is one of the industry leaders in the region. The competitive advantages of this enterprise can be identified as follows:

PEST analysis focuses on factors that are not directly related to the activities of the enterprise but are able to influence the long-term decisions of the enterprise. Political, economic, social, technological, environmental and legal factors make it possible to fully analyze the environment. OJSC Kemerovospetsstroy is particularly affected by the external environment. Therefore, the entire environment of this enterprise requires in-depth study, and with the help of PEST analysis it is possible to conduct this study. But it is important to say that the PEST analysis is focused exclusively on the macro environment of the company (Bezborodov & Bezborodov, 2018).

PESTLE-analysis is an extended version of the PEST-analysis and gives an idea of what the key factors of the external macro environment of OJSC Kemerovospetsstroy can create a variety of opportunities and threats in the future. Each factor has a different level of impact on the company. For example, some political or social aspects to a greater extent affect the organization, in contrast to the environmental. As a result, the factors that maximally affect OJSC Kemerovospetsstroy were identified. Further assessed the probability of occurrence of each factor to the enterprise and the degree of influence of each factor-events. A summary assessment of the influence of factors gives an idea of the readiness of the enterprise to respond to environmental factors, the resulting score of 3.02 points indicates the average level of influence of external factors. The greatest influence is exerted by economic and legal factors. Changes in legislation, strengthening state regulation of the industry, changing the regulation of public procurement can have both positive and negative effects on the position of the enterprise; economic growth rates, currency exchange rate dynamics, inflation, the company's energy costs have a significant impact on the company's profitability. We also add that with various transformations of the external environment, OJSC Kemerovospetsstroy should respond to them, as the company's strategy should correspond to its capabilities and the external environment.

SWOT analysis is the fundamental analysis during the study of enterprise competitiveness (Jenster & Hassi, 2016). This analysis evaluates the actual and the current situation of the company and assesses its prospects, it is based on a study of how the strengths and weaknesses of the company and its competitive opportunities and threats (Table 02 ). Thanks to the SWOT analysis, it was determined that OJSC Kemerovospetsstroy has a large number of strengths. However, there are also weaknesses, the main of which is dependence on the state. It is the state that sets the rules: regulates competition, sets prices and is the main customer.

Table 2 -
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The IFE matrix is ​​used to evaluate the internal factors of the enterprise. It is less subjective in contrast to SWOT analysis and TOWS analysis. Basically, this matrix is ​​used to develop and formulate an enterprise strategy. The main internal advantages and internal disadvantages in all areas of the company are disclosed. In the IFE matrix of OJSC Kemerovospetsstroy, fifteen different factors of the internal environment are applied. Weighted score is 3.05. This indicates that OJSC Kemerovospetsstroy has a strong internal position, above the average level. If the estimate were below the average value (2.5), we could say that the business is weak.

The conducted SNW analysis made it possible to form the profile of Kemerovospetsstroy OJSC. A weakness of the company is marketing as the company pays enough attention to this part of the activity, focusing on the state and municipal authorities as a customer for work, as well as the existing positive reputation of the enterprise. But now such a position does not allow the company to hold positions of strategic leader in the industry for a long time.

Each organization should look for a special area of activity in which it will be protected from various influences of competitive forces. It can be assumed that the stronger external factors affect the enterprise, the less opportunities it has to increase its profit.

The Porter's model helps determine the OJSC Kemerovospetsstroy position in the industry (Porter, 1998). This model provides an assessment of the market power of consumers, the market power of suppliers, the threat of the emergence of new players in the market, the threat of the emergence of substitute products with a better price and the level of competition. It is an external analysis of the competitiveness of OJSC Kemerovospetsstroy (Figure 01 ). It is based on a three-point system, where 1 is of low importance, 3 is good, and 2 is of medium importance.

The bargaining power of the buyer is high, and the average ratio is equal to 3. This is because, in general, the main customer of OJSC Kemerovospetsstroy is the state as well as public institutions at the regional level. In these conditions, the customer, namely the state, determines the standards for construction and reconstruction. According to estimates, suppliers have medium power (2 points), due to high competition. This is due to their large number, so suppliers by any means try to attract customers, including various privileges. However, because of this, suppliers have a great responsibility to customers for the quality of the goods and services provided, as well as the timing of the work (Necheuhina et al., 2018).

The intrusion of new members is rated at 2 points, which is an average rating. The emergence of new participants in the market is hampered by the fact that at present there is an economic crisis. And also, the enterprises on the market have established themselves and are respected by customers, this serves as a significant plus for choosing them as a contractor. To do this, the company must meet certain requirements: have a large fleet of vehicles, special equipment and qualified highly paid employees.

The threat of replacement products is low, and is estimated to be 1 point. According to this assessment, in the studied segment there are no worthy replacement products, and the appearance of new ones is inappropriate. Since, the use of other pavements in the work is not planned in the near future, otherwise it will be necessary to transform the way of movement on vehicles itself. At present, no other coating has been identified that could cope with the current load on the roads of the region: severe climatic conditions, the load on the roads with heavy equipment.

Figure 1: Model of the five forces of competition
Model of the five forces of competition
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The greatest influence is exerted by the power of buyers and intra-industry competition.

According to five interacting structural factors leading to intense competition identified by Porter [2018], the current situation can be described as the coexistence of balanced competitors. As competitors have similar characteristics and in this case the predicted risk of fierce competition.

The strategic position of the enterprise in the industry is defined as the leading one, since OJSC Kemerovospetsstroy is one of the three largest enterprises of the industry in the region for various indicators. From the point of view of the stage of development of the enterprise, it is in the stage of maturity.

EFE matrix is an analysis of the external factors of an enterprise: social, economic, political, legislative and others. It serves as a good tool for visualizing and determining the position of the enterprise. The matrix allows you to assess the factors, allows you to identify key opportunities and threats that affect or may affect OJSC Kemerovospetsstroy. The EFE matrix process uses the same five steps as the IFE matrix.

In the analysis of OJSC Kemerovospetsstroy, sixteen different environmental factors were used. This analysis is based on a PEST analysis and analysis based on the Porter’s five forces model; the total weighted indicator is 2.75 (the average indicator is 2.5). This indicator is above average, which means that the business is able to respond to external factors and threats. However, this indicator should be increased.

Thus, this strategic management tool allows us to summarize the factors and assess the current conditions of reference OJSC Kemerovospetsstroy business. An analysis of the internal and external environment of OJSC Kemerovospecstroy has established that the competitiveness indicator is above average. But the road construction sector of the region cannot be called stable (Ivanova, 2018).

First of all, the issue of improving the quality of products and provided services is relevant for OJSC Kemerovospetsstroy. The main problem is that the road surface, especially in our region, is strong enough subject to deformation or in other words, a rut. In particular, this is found on sections of highways and roads along which a large number of vehicles travel (Sekletsova et al., 2019). The quick deterioration of the road surface is enhanced on the busiest routes, as well as in the areas of movement of heavy trucks. Thus, the enterprise should work to improve the quality of products, tighten control procedures, introduce innovative technologies, analyze the quality of raw materials, these measures will help the company improve the quality of services provided. These measures will allow the company to avoid forfeits, as well as gain an advantage over competitors and attract new investors and partners.

Other participants in the environment who are involved in the construction of road infrastructure have an interest in the long-term pavement, in its high quality, since the capacity of the road section depends on it.

Touching upon the topic of competitiveness, an enterprise is often forced to act in conditions of a lack of information on the competitive environment, as well as a lack of understanding of what distinguishes it from competitors and what does not. In this regard, it is reasonable to develop this area and explore the competitive environment and give it a special place in the work of the enterprise itself.

Development of competition analysis system of OJSC Kemerovospetsstroy will improve the company's ability to recognize a pre-competitive threats and to take any action, allowing to maintain its position in the market.

A significant cost item for the enterprise is the transportation of goods, since the objects are located at a remote distance from each other and from the warehouse, therefore, the most important measure to reduce this type of cost is competent logistics.

Transportation of huge volumes of construction materials to remote objects from each other presupposes that the enterprise special distribution centers, their absence increases the costs of the enterprise in the provision of construction. Well-designed logistics will reduce transportation costs. The development of supply chains for building materials can develop in several directions: the development of outsourcing of transport and logistics services and the consolidation of shipments. Considering that OJSC Kemerovospetsstroy needs to deliver large volumes of goods, it is beneficial for this company to conclude contracts with companies that deliver goods and have transportation capacities, which will reduce logistics risks. This interaction model can lead to the enlargement of parties, which, due to the economies of scale, will also reduce the cost of delivery.

Conclusion

Today's competitive environment is characterized by the complexity of the relationships of all the elements, the degree of influence of all forces, the aggravation of the intensity of competition. At present, the development of competition is closely connected to innovation. There is competition from all divisions throughout the product origin chain. A potential buyer through the purchase of a particular product or service evaluates the product of the manufacturer, thus evaluating the product or service from the starting point (production) to the final point, that is, all participants in the production process. In this regard, it is necessary that all parts involved in the process of creation should be jointly responsible in all stages of its occurrence.

Leading quality of any organization formed by external and internal factors and emerging at all levels of the economy, may be used in assessing the competitiveness of the enterprise (Porter, 2000).

As part of the study of competitiveness of industrial enterprises are invited to understand by the competitiveness of the company's ability to leverage existing production factors: physical (production), financial, natural, human capital to withstand negative external effects with the aim to surpass competitors in the given conditions.

Economic categories such as multidimensionality, relativity, specificity, and dynamic displays should be used when assessing competitiveness. Opportunity and competitiveness management is an essential factor in development strategies.

As noted by most researchers, the sources of enterprise competitiveness are production efficiency or operational efficiency and strategic positioning, which characterize the company's ability to adapt to changing environmental conditions, as well as innovation in all areas of activity (Christofi et al., 2015). This category, which is a complex system that includes resources, productive forces, finance, etc. Economic efficiency must be understood.

The analysis of the internal and external environment of OJSC Kemerovospecstroy makes it clear that the competitiveness indicator is above average. But the road construction sector cannot be called stable and the company needs to pay regular attention to the efficient use of available resources. Since the company receives the bulk of orders by participating in tenders, which can be won on condition that the price is lower than that of competitors. To maintain the required level of profitability in the given conditions, it is necessary to ensure a low level of costs, provided that the required quality of the work is ensured (Ryabko et al., 2016).

The enterprise should work to improve the quality of products, to tighten control procedures, introduce innovative technologies, to analyze the quality of the feedstock, these measures will help the company improve the quality of services provided. These measures will allow the company to avoid forfeits, as well as to gain an advantage over competitors and attract new investors and partners (Fleisher & Bensoussan, 2002).

Thus, in order to remain at the current level or increase its position in the market and in the industry OJSC Kemerovospetsstroy should focus on such aspects of the work that will improve competitiveness. The main recommendations are related to the implementation of measures aimed at maintaining and increasing profits and the level of profitability of the enterprise, which can be achieved by lowering costs if the quality of work is ensured. To increase their competitiveness, organizations need to constantly improve themselves and develop various innovations, because they can cause competitive advantages.

References

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Publication Date

20 October 2020

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978-1-80296-089-1

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European Publisher

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90

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Economics, social trends, sustainability, modern society, behavioural sciences, education

Cite this article as:

Seklecova, O. V., Komarcheva, O. S., & Shemchuk, M. A. (2020). Research Of Road-Building Industry Enterprise Competitiveness Of The Region. In I. V. Kovalev, A. A. Voroshilova, G. Herwig, U. Umbetov, A. S. Budagov, & Y. Y. Bocharova (Eds.), Economic and Social Trends for Sustainability of Modern Society, vol 90. European Proceedings of Social and Behavioural Sciences (pp. 137-148). European Publisher. https://doi.org/10.15405/epsbs.2020.10.03.17