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the Belarusian goods as well as through reducing production
costs;
• to improve the mechanisms of transforming in-house
savings into investments for priority industries and productions, to better draw direct foreign investments and credits;
• to increase the financial efficiency of state and privat-
ized enterprises maintaining a high level of technical and pro-
duction potential;
• to develop the market infrastructure providing a fast
capital accumulation and mobility in priority industries and
productions;
• to implement production quality systems that will con-
form to international standards into most enterprises according
to the international standards.
However, the following things are to be done for the
country’s economic safety:
• in the social sphere — to normalize the demographic
processes; to prevent from reaching a critical unemployment
threshold; to regularly increase living standards, to decrease
income differences of various social, industrial and economic
groups of the population; to provide minimum social guaran-
tees to the poorest groups of the population for them to be able
to access social benefits and services;
• in the economic and ecological fields — to rationally
use the fixed capital; to develop the scientific and technical,
production and technological potential necessary for surviving
as well as for developing and strengthening the country’s inde-
pendence; to preserve resources for the needs of future generations; to recover soil fertility; to preserve flora and fauna as
well as an ecological balance.
221
Literature
1. Dmitrakovich, F. A. Zaschita interesov belorusskih
proizvoditeley na vneshnem ryinke // Belorusskaya ekonomika:
analiz, prognoz, reguliro-vanie. — 2004. — № 2. — P. 20–28.
2. Kalinin, T. F. Ot belorusskih predpriyatiy k belorusskim TNK // NEG. — 2005. — № 39.
3. Kozlovskiy, V. V., Lutohina, E. A. Mirovaya ekonomi-
ka (sotsialno orientirovannyiy podhod) / Pod red.
E. A. Luhotinoy. — Mn. : IVTs Min-fina, 2015. — 352 p.
4. Lyich, G. Predpriyatiya v protsesse globalizatsii: problema vyizhivaniya // Direktor. — 2015. — № 2. — S. 18–21.
5. Tarasov, V. V. Natsionalnaya ekonomika Respubliki
Belarus // BEZh. — 2005. — №2. — S. 124.
6. Udoveko, I. O strategicheskom razvitii Belarusi v XXI
veke // Be-lorusskaya ekonomika. Analiz. Prognoz. —
2004. — № 7. — S. 51.
7. Fedosenko, V. N. Globalizatsiya mirovoy ekonomiki i
problemyi adaptatsii k protsessam globalizatsii ekonomiki
Respubliki Belarus // Ekonomika i upravlenie. — 2005. —
№ 2. — S. 8.
Questions for self-check
1. What is the idea of the theory of "The National
Rhombus"?
2. Name four determinants of competitive advantages of
the country.
3. What is the idea of the theory of "comparative advantages" (D. Riccardo)?
4. Name exogenous factors (at least three of them)
threatening national economic interests.
5. Name endogenous factors (at least three of them)
threatening national economic interests.
222
6. What are the main characteristics of the demonopolization and competition promotion in the Republic of
Belarus (at least three of them)?
7. What does the concept "lawful monopoly" mean according to the Belarusian legislation?
8. Name the main problems (at least three of them) of the
privatization in Belarus.
9. What are the reasons for why Belarus keeps good
chances for a profitable privatization?
10. Name the main problems of the development of the
innovation business in Belarus (at least three of them).
11. What government body controls the performance of
the antitrust law in Belarus?
12. In what cases are business entities holding the market lead not allowed to operate?
13. What is the main legal act regulating competition
promotion in the Republic of Belarus?
223
APPENDICES
APPENDIX A
PRACTICAL APPLICATIONS
OF COMPETITION THEORY MODELS
The market of Coca-Cola drinks and coffee
Each market of drinks and coffee is saturated with vari-
ous brands of goods that slightly differ from each other, but
still can substitute each other. Each type of Cola drinks, for ex-
ample, tastes slightly different from others (almost nobody can
see any difference between "Coca-Cola" and "Pepsi", between
"Coca-Cola" and "Coca-Cola light").
All ground coffee varieties slightly differ in smell, aroma
and caffeine contents. Most consumers’ tastes differ. Some
people, for example, prefer the Maxwell House coffee to other
varieties and they regularly buy it. However, commitment to
this or that variety is limited. So if the price for "Maxwell
House" considerably increases in comparison with the prices
for other varieties, most of fans of this coffee variety will probably switch to another one — a cheaper one.
Let's try to define how elastic is the demand for "Max-
well House" or what kind of monopoly power "General Foods
Corp" (the producer of this coffee) gains. Research done by
companies themselves and its results are usually commercially
confidential, but we have carried out a retail trade experiment
studying the demand for different brands of Coca-Cola drinks
and ground coffee to define in what way the share of each vari-
224
ety will change if the price will change1. Table A.1 generalizes
Products variety
Elasticity coefficient
Coca-Cola
drinks
"Coca-Cola light"
–2,4
"Coca-Cola"
–5,2 to –5,7
Ground
"Hills brothers"
–7,1
"Maxwell House"
–8,9
"Sheis and
senborn"
–5,6
the research results showing the elasticity of demand for different brands of goods.
Table A.1
Elasticity of demand for some types
of Coca-Cola drinks and coffee
coffee
First, we will note that among drinks the price elasticity
of "Coca-Cola light" is much lower than that of "Coca-Cola".
Though it doesn’t occupy a big share in the market of CocaCola, its taste is considerably different from "Coca-Cola",
"Pepsi" and other varieties and therefore the consumers buying
"Coca-Cola light" are addicted to it. But though "Coca-Cola
light" has more monopoly power than "Coca-Cola", it does not
mean yet that the former is more profitable. Profits depend on
fixed costs, production volume and price. Though the average
income of "Coca-Cola" is lower, the latter will gain more profit
in general as it has a big share in the market.
Secondly, we will note that in terms of price the demand
for coffee is more elastic, than the demand for Coca-Cola
drinks. Among consumers of coffee, only a few people prefer
1
In this experiments, the consumers had to choose those brands of goods that they prefer from
a number of different varieties. These experiments were carried out several times, each time
with a different price for the goods.
225
exactly this or that brand because the difference between coffee
varieties is less notable than the difference between drinks. In
comparison with different brands of Coca-Cola drinks, con-
sumers pay less attention to the difference between varieties of
the Hills brothers and Maxwell House coffee.
With the exception of "Coca-Cola light", the demand for
all varieties of Coca-Cola drinks and coffee is very elastic in
terms of price. If the elasticity is from –5 to –9, the monopoly
power of each brand is considered limited.
To define what type of market the drinks and coffee market belongs to we will use Table A.1. The sellers are many, the
buyers are many. Our market turns out to be a bilateral polipo-
liya. It means that it is either monopolistic or perfect competi-
tion. However, the goods in this market are differentiated (i.e.
different varieties of drinks and ground coffee are provided),
which allows to draw the following conclusion: the structure of
the market is that of monopolistic competition. To confirm the
conclusion, we will use Table A.2. According to the experi-
ment, the elasticity is ranging from ∞− to 0, which again con-
firms that it is a typical monopolistic competition.
The market of mobile communication
Fully connected networks entered a commercial market
as a result of scientific and technical development, attracting
different groups of users. Even today, hundreds of millions
people use a wireless communication. A mobile phone has
stopped being a prestige symbol, and has become an instrument
allowing to use working hours more effectively, to manage
quickly engineering, economic and other procedures. The
boom in the mobile market happened after the Crisis of 1998
though the main role is still played only by Moscow and St.
Petersburg. About 3,400,000 Russian people were estimated to
use cellular communication in 01.01.2011 — the number of
226
users grew by 152 % in comparison with the end of December,
Company
City
Number of
subscribers
MTS
Moscow
1190000
Vympelcom
Moscow
810000
NW-GSM
St.-Petersburg
253329
Kuban-GSM
Krasnodar
106233
MSS
Moscow
100500
Delta Telecom
St.-Petersburg
78000
SMARTS
Samara
91000
Beeline Samara
Samara
37900
Tarif-Telecom
Kazan
32340
NSS
N - Novgorod
32000
Faure Communications
St.-Petersburg
31200
TatinCom
Kazan
30500
SSS-900
Novosibirsk
30000
2010. The results of 2010 exceeded numerous estimates and
forecasts by approximately 10 %.A distinctive feature of an
oligopoly is that several large companies satisfy the demand
well and they are big in size in comparison with the cumulative
market that they serve. This statement is confirmed by the data
provided in Table A.2 and in Figure A.1.
Table A.2
The largest mobile operators of Russia
A rapidly developing market of cellular communication
draws attention of many companies. In Russia, about two
hundred firms are involved in this business — operators, some
holding companies, and everyone aims to pay back the costs as
quick as possible and to gain profit. In 2010, a consolidation of
cellular assets was still on in Russia. Three holding
227
companies — "System the Telecom", "Vympelcom" and
40%
25%
10% 10%
6%
2%
7%
0%
10%
20%
30%
40%
50%
"Telekominvest" — controlled 75 % of the market
(Figure 11.1).
Today’s competition forces the companies to diversify
the activity towards providing a wide and qualitative range of
services. After all, it is not only the cost of a minute of a tele-
communication time that interests clients, but also a coverage
zone of this cellular network, possibility to use a mobile phone
while travelling across Russia and abroad (roaming), etc.
Therefore, competitors mainly struggle in this sphere.
Figure A.1. The market of cellular communication
of Russia in 2010
Today, a user is provided with various tariff plans, a possibility to use the Internet for data transmission (fax, e-mail) —
the mobile office, SMS (short-message service), voice mail.
Further development of the information contents of the mobile
Internet and applications is going to happen. Such companies
as Beeline and MTS provide users with a possibility to make
certain inquiries, call the emergency service, to book airplane
and railway tickets and even to fix an appointment with any
doctor. The Moscow Cellular Communications (MCC) implemented a network of cellular pay-phones that are located in
228
housing estates near Moscow. "Novosibirsk cellular communi-
cation" provides a flexible system of tariff plans, which is im-
portant for a regional user. "Baykal" provides its users with
conference communication — a possibility to talk to three and
more subscribers simultaneously. Thus, a range of services of
cellular communication is wide and diverse.
The analysis of the development of modern means of
communication shows that in the nearest future all of us will
witness a widespread and daily use of mobile communications.
The market of a mobile radio communication is undergoing a
rapid development around the world. The fundamental strategy
of improving a mobile radio communication implies imple-
menting unified international standards and creating regional,
federal, public international networks on their basis.
To determine the type of a market structure, we will turn
to Table 1.1. 75 % of the market are controlled by three large
companies (i.e. several sellers) the services of which are used
by a large number of buyers. The type of the market structure is
an oligopoly.
A key feature of an oligopoly is that actions of one firm
directly influence the others. It is typical of all spheres of com-
petition: services (roaming, readdressing, determination of
number, voice mail, acceptance and departure of the facsimile
or text message, etc.), innovative activities (video telephony,
wireless Internet access), sales volume, market share, sales
promotion strategy.
The facts above prove that the market of mobile
communication is an oligopoly.
In an oligopolistic market, it is difficult to manage a firm
because of strategic pricing decisions, production volume, advertizing and capital investments. As only a few firms com-
pete, each firm has to weigh the actions carefully as well as
their influence on rivals, and rivals’ reaction.
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Let's assume, for example, that because of the sales stagnation of cars, “Ford” expects to reduce its prices by 10 % to
stimulate the demand. The Ford Company should think it over
carefully how "General Motors" and "Chrysler" will react to it.
They can show no response at all, or can reduce the prices less
than by 10 %. In this case, "Ford" will be able to achieve a significant increase in sales, generally at the expense of its competitors. They can also meet the challenge of "Ford", and then
all three automobile companies will sell more cars, but their
profits will decrease because of lower prices. Another alternative is that "General Motors" and "Chryslers" will reduce their
prices more than "Ford". They can go for a 15-percent decrease
to punish "Ford" for rocking the boat, but it can also lead to
pricing wars and sharp profit drops for all the three firms. The
Ford Company needs to weigh all the pros and cons attentively.
Actually, almost any far-reaching decision made by a firm —
price fixation, calculation of production volume, expansion of a
strengthened advertizing campaign or an investment in extra
output capacities — requires predicting a likely reaction of the
competitors.
Strategic thinking can be difficult and complex. When
making a decision, each firm has to take into account a possible
reaction of its competitors, knowing that its competitors will
also weigh its reaction to their own decisions. Moreover, deci-
sion making, responses, and competition are dynamic processes. When business managers estimate potential effects of their
decisions, they have to assume that their competitors are as rational and reasonable as they are: they have to get into the
competitors’ shoes and think what their reaction could be.
230