Economic
Sciences / 10. Business Economics
Krasnokutskaja N. S.,
Kyiv National University of Trade and Economics
Competitive potential of trade enterprises:
problems and prospects of development in Ukraine
It becomes difficult to maintain and expand the share of loyal customers
in due to the increasing competitive pressures and rising levels of
concentration in trade. Since
the quantitative characteristics of the competitive potential can be provided by the indicators of the intensity of
competition, we have investigated the possibility of using and their informational content with respect to the prospects
for the expansion of competitive potential
in trade.
Typically, the basic problems of identifying such indicators relate to:
1) the complexities of determining the direct market size, the
boundaries of which tend to have a clear path;
2) the terms of bounded rationality of decision-making that affect
primarily on the quality of the information base for evaluation.
Taking into account the impact of the first group of issues we have made
such assumptions in the calculations:
- the object of evaluation is defined national retail market, because,
even though competition occurs in a geographically defined market and each
outlet has a clearly defined competitive space, but the regional
diversification of large domestic enterprises and the expansion of the zone of
their influence on all areas of Ukraine allow to consider them as direct or
potential competitors;
- the absence or the existence of small barriers to switching from one
product group to another is the feature of retail, which also allows us to
treat large trade companies as participants in a single commodity market.
Therefore, the definition of market share leaders in the national trade, which mainly
operate in the food segment of the consumer market, will be valid for the
national market.
Influence of the second group of issues, from our
point of view, makes impossible to practical use of some indicators of the
intensity of competition due to the branching of the trade network and its
representation in the overwhelming majority of small shops.
Many of the indicators of the intensity of competition
(coefficient of variation of market share, rank concentration index and the
index of reciprocals shares) based on coverage of all enterprises at the
market. It’s technically complicated by the presence of tens of thousands of
such objects. In addition, the use of the coefficient of variation of market
shares in industries with a large number of enterprises, even if there are
technical possibilities, has a controversial character and a weak scientific
basis. Based on the traditional formula of its calculation:
where υ - coefficient of variation of market shares, n -
number of enterprises in the market, q i - market share of i-th
enterprise, you will notice that the value 
for
most small trade enterprises (with market share is less than 0,01%) will
approach 0.
In such conditions it is advisable to formulate a
hypothesis about the possibility of obtaining objective results of the
calculation of the coefficient of variation for the first 25 (50) trade
enterprises, which will be relevant for the entire market. However, the
practical testing of this hypothesis has shown its incompetence - in spite of
the really low divergence in the sum of squared deviations of market fraction
of the value of “1/n” for all trade enterprises and only the largest 25 objects
the coefficients of variation were significantly higher than 1, but it is mathematically
incorrect.
The index of the maximum rate is also quite
interesting and mathematically meaningful coefficient, which is mainly used in
portfolio analysis:
where ²mr – the index of the maximum rate; dmax
– the maximum share in this market; M (d) – the arithmetic average
market share in this market.
However, the branching of trade network leads to a situation where M (d)
→ 0 and for any value dmax the index of the maximum rate approaches 1. Respectively, such
market should be considered a monopoly. The latter conclusion contradicts the
actual state of competition in the industry and demonstrates the incorrectness
of this indicator to assess the intensity of competition in trade.
So, having regard to the made remarks, the index of concentration and
the modified Herfindahl-Hirschmann index (as measured by the 50 largest
enterprises of the industry) will be more meaningful. The results of the
calculation of these indices for the Ukrainian retail market are listed in
Table 1.
Table 1
The intensity of competition in the Ukrainian retail market
|
The index, % |
|||
|
2006 |
2007 |
2008 |
|
|
Index of concentration CR3,
total including for the
food segment |
6,5 15,7 |
8,6 22,4 |
10,6 30,2 |
|
Index of concentration CR4,
total including for the
food segment |
8,7 20,9 |
10,4 27,3 |
13,1 37,2 |
|
Modified
Herfindahl-Hirschman Index (HHI), total including for the
food segment |
0,002 0,014 |
0,004 0,025 |
0,005 0,043 |
From these statistical estimates, it is possible to mark that:
– according to CR3 and CR4 Ukrainian retail market is
unconcentrated and the intensity of competition is quite high (estimates
<45%). Comparison of these indices in the dynamics allows concluding there
is a clear trend towards the gradual market consolidation of the most powerful
companies;
- Herfindahl-Hirschmann index also shows a low
concentration of the market (estimates are close to the bottom of the index – 0,00007
for all enterprises and 0,00012 for the food segment). Although the dynamics of
the value HHI increases, but even the absorption of several large retail
chains will not substantially affect the level of concentration of domestic
trade in the current competitive situation.
It should be noted that the exposed tendencies will
take place to the moment of domestic market saturation, which, on prognosis
estimations, will happen not before, than over some years. Therefore, the
competitive potential of the Ukrainian trade enterprises is strong enough,
although the conditions of its implementation become more complex in due to crises
in the economy.