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petition, weakens monopoly, helps consumers to get acquaint-
ed with new products, and also finances national communication systems — newspapers and magazines, radio, television.
Opponents of advertising fairly note its negative sides: bias (as
it misinforms rather than educates); high expenses that increase
the price paid by the consumer; self-neutralization tendency;
creation of financial barriers against entering the industry;
"contamination" of mass media.
2.4. COMPETITIVENESS AND METHODS
OF ITS ACHIEVEMENT
Competitiveness of a product is a degree of its attractive-
ness for the consumer making real purchases.
It is possible to single out two major features of goods
competitiveness:
1. Competitiveness is related to goods attractiveness for
the clients making purchases rather than with excellent characteristics of goods. In this respect, what is more important is a
consumer's sovereignty even if he or she is objectively wrong
in his or her choice.
2. We should remember that high sales and goods com-
petitiveness are not the same things.
First, disappointing (and, consequently, uncompetitive)
products can be actively purchased under the conditions of
commodity or choice shortage.
Secondly, quite competitive goods can aim at satisfying
the needs of small-groups of consumers.
Basic principles of the product competitiveness assessment.
The principle of contrasting purposes and means (at the
stage of controlling the product competitiveness) means that it
is necessary to consider the interests of both the subjects of the
market relations (consumers and producers) whose purposes
are interconnected but opposed to each other: producers are
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interested in the parameters that influence the cost level while
consumers are interested in the parameters influencing con-
sumptive qualities of products.
The principle of considering special characteristics of
different market segments suggests that, in the market, con-
sumers differently react to the same goods having the same
properties. The degree of product competitiveness at different
segments of a consumer market will be different. It is necessary to perform a proper consumer segmentation to ensure a
product competitiveness.
The principle of the quasi-stability of market conditions.
Though the qualitative and cost characteristics of the product
can be invariable, its competitiveness can change greatly and
quickly. Things that can influence its changes include wage
rates and spending patterns of consumers, fashion, habits; tools
of public economic administration (tariffs, state standard speci-
fications, quotas, limits, tax and interest rates, etc.).
The principle of a rational (mainly rational) behavior of
the market subjects is based on the assumption that the behav-
ior of either of the subjects of the market relations — that of
the consumer and that of the producer — can be considered as
a series of interconnected rational actions for a definite purpose.
This behavior model is mainly used by producers. Each
producer aims to use all the reserves to get the maximum return
from the available resources.
Actions of most product consumers also depend on the
principle of rationality. Each consumer aims to get the most of
the product quantity and quality.
Goods value for the consumer.
Either individuals or other firms (corporate consumers) can
act as consumers of goods and services produced by the firm.
Goods value for corporate consumers.
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The value of any goods purchased by the firm is positive-
ly related to the profit that the company can gain as a result of
using this product. That’s why, the value can be assessed in
terms of money.
Thus, there is some crucial factor that effects a possibility
or impossibility of a transaction and that has been suggested by
M. Porter. This factor is called a consumer value.
The sales price of each competitive commodity is lower
than its consumption value. For the consumer, the unpaid part
of the consumption value is equal to the additional profit that
he or she gets as a result of using these goods. For the producer, it equals "competitiveness reserves" of their products.
Thus, the consumer is interested in this unpaid share’s
being as high as possible. As for suppliers, their attitude to-
wards this value depends on two thing:
• considerable reserves of competitiveness guarantee
that it is their product (but not the product of other firms) that
will be purchased;
• by raising a selling price, and, thus, by reducing com-
petitiveness reserves, they directly increase their profit.
Factors of competitive growth.
Profit can be increased by two factors:
• by cost reduction,
• by income increase.
The costs of a consumer can be kept down as a result of
the following actions:
• reducing the price for the product consumed;
• reducing its transportation, installation, adjustment
costs;
• reducing product operating costs;
• minimizing risks to produce a defective final product.
The income of a user can grow as a result of the follow-
ing things:
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1) owing to an increase in prices for a final product that
he or she wants; it is possible when the component parts of the
product have been used:
• the quality has been improved;
• a chance to produce essentially new products has been
provided;
• a product that will satisfy consumers’ needs better has
been made;
• the product prestige has been facilitated;
2) owing to an increase in amounts of goods (services) sold.
Goods value for individuals.
The main difference between the goods value for indi-
vidual consumers and the goods value for corporate ones is that
in the former case, the goods value cannot be expressed in
terms of money.
Numerous marketing surveys showed that most of the
buyers are guided by the criterion "price vs. quality" while
making a purchase. A person considers whether the quality he
or she is offered is "enough" for this price.
Assessment of the goods consumption value for individuals is a real challenge. One of the solutions to this problem is
based on the use of the Kano model. Kano noticed that people
react differently to different goods qualities, as a result of
which he differentiated three main types of reactions.
The first group of characteristics referred to as "obligatory" ones is considered by people as self-evident. Satisfaction of
buyers’ needs for obligatory characteristics does not almost
facilitate an increase in goods consumption value, but the backlog of these needs sharply reduces it.
The second group of characteristics is called "quantitative" characteristics. In this case, the consumer’s satisfaction
rises as the quantitative improvement of a certain factor rises.
For example, the more economical is the car (in terms of gas
consumption), the happier is its owner.
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The third group of characteristics bears the name of
The answer to
question
sharp
dissatisfaction
quantitative characteristics
satisfaction
dissatisfaction
complete
satisfaction
unimportant characteristics
indifference
indifference
satisfaction
satisfaction
dissatisfaction
dissatisfaction
"surprising" ones. A lack of certain properties of the goods
does not reduce its consumption value as the client does not
expect them. However, if a new product is characterized by
additional properties, the consumption value of goods sharply
increases.
Kano practically classified different types of characteristics for each product. For this purpose, there has been developed a special technology of the interview (with consumers)
that implies each question’s being formulated twice (once — in
its positive form, and the other time — in its negative one).
On having processed the answers to both of the questions, it turns out possible to establish the type of a certain
characteristic of a product.
Besides those described, two more combinations of con-
sumers’ answers are shown in the table below.
Table 2.3
Classification of goods characteristics
according to the Kano model
The type of the charac-
teristic
obligatory characteristics indifference
surprising characteristics
problematic characteristics
The answer to the
positive question
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the negative
indifference
The fourth group of characteristics — "unimportant"
ones — results in indifference for both a lack or an availability
of certain properties of the goods. It is a sure sign of minority
and insignificance of a certain characteristic, i.e. the client
doesn’t care whether it is available or not.
The fifth group — "problematic" characteristics — im-
plies either an availability or a lack of a certain property, which
both satisfy and (at the same time) dissatisfy buyers’ wants.
Thus, by means of the Kano model, the producer can estimate the influence of his or her actions on the consumption
value as well as he or she can see at once what properties he
has to provide the product with for sure (obligatory characteristics); what qualities can serve as the "highlight" attracting the
client to the innovation (surprising characteristics); what prop-
erties are to be used in adequate quantities, which is possible
through comparing the costs for their introduction to the scales
of growth in buyers, the latter’s being predetermined by the
improvement of certain qualities (quantity characteristics). At
last, the producer can find out that some qualities of a product
are of no interest to the consumers (unimportant characteristics). The producer can also come to a conclusion that instead
of one product it is necessary to produce two different goods
with different qualities (problematic characteristics).
The degree of the goods competitiveness depends not on
the objective technical perfection of the product but rather on
the value subjectively ascribed to the product by the consumer
(the so-called conscious value).
To avoid this problem, we should analyze the product by
means of Simon's Matrix "Objective/subjective quality"
(Scheme 2.1).
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Subjective quality
(the
consumer
Objective quality (the firm’s opinion)
low
high
Technical and
Information surplus
’opinion)
high
information
advancing
Technical and
low
information
Information deficit
retardation
Scheme 2.1. Simon's matrix
"Objective/subjective quality"
The hardest times for the firm to experience happen in
table cell 3 (table segment 3) "Technical and information re-
tardation". The quality of its products, is objectively and subjectively (from consumers’ point of view) lower than that of
similar products of the competitors. The best way to solve this
situation is, of course, a quality improvement in combination
with intensive informing the consumers about new advantages
of the products.
The firm that finds itself in table cell 2 (table segment 2)
"Technical and information advancing" deals with the opposite
situation. It is an ideal position in which the firm is objectively
ahead of competitors and is able to inform the consumer about
its achievements. In this case, it is necessary to continue operating in the way that has brought success.
Segment 1 "Information surplus" (low objective quality in
combination with its high value judgment by consumers) is most
often occupied by the firms whose market reputation depends on
the trademark. It is tactically important to preserve a good image
of the company. However, the main strategic efforts have to be
concentrated on the product quality improvement.
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Segment 4 "Information deficit" is typical of firms over-
estimating the technical part of the business and underestimat-
ing the marketing one. Their goods are better than their reputation. Therefore, first of all, it is necessary for the company to
facilitate their communication with the clients and to find out
whether those high standards that the firm aims to follow while
producing their products are necessary to them. But if they
don’t need them, they should deliberately lower the quality.
The money saved from it will allow them to reduce the prices.
This money can also be used to improve those qualitative characteristics that are actually appreciated by clients.
If the product created by specialists of the firm is really
good and could be extremely useful for the consumers, but the
latter are simply not able to take to advantage all its properties,
then what becomes of primary importance is awareness-raising
activities.
Literature
1. Azoev, G. L. Konkurenciya: analiz, strategiya i prakti-
ka. — M. : Centr ehkonomiki, 1996. — 350 p.
2. Azoev, G. L., CHelenkov, A. P. Konkurentnye preimush-
chestva firmy. — M. : Mezhdunar. otnosh., 2005. — 157 p.
3. Baye Michael, R. Management economy and strategy
of business: studies. a benefit for higher education institutions. — N.Y., 1999. — 743 p.
4. Basovskij, L. E., Protas'ev, V. B. Upravlenie
kachestvom. — M. : INFRA-M, 2000. — 211 p.
5. Mikroehkonomika / V. M. Gal'perin [and oth.]. — SPb :
Economicheskaya shkola. — 1997. — T 2. — 503 p.
6. Golubkova, A. N. Konkurenciya: teoriya i praktika. —
URL : http://bibliofond.ru/view.aspx?id=22440.
7. Gorbashko, E. A. Konkurentosposobnost' promyshlen-
noj produkcii. — SPb : SPbUEHF, 1991. — 64 p.
8. Ivanov, I. D. Sovremennye monopolii i konkurenci-
ya. — M. : Mysl', 2000. — 457 p.
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9. Magomedov, SH. Konkurentosposobnost' tovarov. —
M. : Dashkov i K°, 2003. — 294 p.
Questions for self-check
1. List and explain the types of market structures according to Shtakelberg.
2. Comment on the assumptions of perfect competition
with regard to the market organization.
3. How can we determine the production output that will
help the competitive company get the maximum profit?
4. On the basis of what indicators (under the conditions
of perfect competition) does the company make a decision on
the losses minimization?
5. List the market entrance barriers that are necessary to
make the monopoly be introduced and function.
6. Explain the model of the price and production volume
determination under the conditions of net monopoly.
7. Under what conditions (according to H. Leibenstein)
is X-inefficiency possible (in the case of perfect competition
and monopoly)?
8. What indicators are applied to calculate the degree of
the market concentration?
9. What factors determine the competitiveness reserves
for the consumer?
10. What factors determine the competitiveness reserves
for the supplier?
11. Do you agree that if the answers to both the positive
and negative questions demonstrate the buyer’s satisfaction
with the product, we deal with the quantitative characteristics
of the product?
12. What quality are we dealing with if the answers to both
the positive and negative questions show buyers’ indifference?
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CHAPTER 3.
INNOVATIVE COMPETITIVE STRATEGIES
AND A COMPETITIVE POTENTIAL
OF AN ORGANIZATION1
3.1. DEFINING AN INNOVATIVE STRATEGY. TYPES OF INNOVATION STRATEGIES
Innovation strategies can be classified into some large
groups:
• product strategies (portfolio, entrepreneurial or busi-
ness strategies aiming at the creation and implementation of
new products, technologies and services);
• functional strategies (scientific and technical, produc-
tion, marketing, service strategies);
• resource strategies (financial, labor, information and
material strategies);
• organizational and managerial strategies (managerial
technologies, structures, methods, systems).
Features of the innovation strategy
The innovation strategy creates especially difficult condi-
tions for the project, corporate and corporate management.
These conditions include:
• increase in the uncertainty of the results. It helps to de-
velop such specific function as management of innovation risks;
• increase in investment risks of projects. In the portfolio of the innovation projects, mainly medium-term and especially long-term projects prevail. It is necessary to look for
more investors ready to take more risks. The managing system
1
Vasilev S. V. Menedzhment II. V. Novgorod : NovGU im. Yaroslava Mudrogo, 2003.
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