5.5.5. Market openness for interregional and international trade
The ability to enter the commodity market of sellers from other regions (or other countries) significantly reduces market concentration, reduces the share held by local (domestic) sellers on the market. On the contrary, the weak involvement of the market in interregional (international) exchange strengthens concentration in the market and increases the share occupied by local (domestic) sellers, with all the ensuing consequences for buyers. Approximately the degree of openness of the market for participation in interregional and international trade can be estimated by the share of imported (imported) products in the total volume of sales (delivery) in a specific commodity market.
This indicator is the starting point for assessing the state of the commodity market when dealing with issues related to protective measures for domestic producers.
In Fig. 5.6. The version of the influence of the degree of market openness on the level of market concentration, the share of imports and the level of competition is presented. The contradictory nature of this influence is seen. On the one hand, with an increase in the degree of market openness, the level of market concentration is reduced, which, to a certain extent, leads to increased competition and, as a result, to an improvement in the quality of the goods. On the other hand, increasing the degree of openness of the market
Fig. 5.6. The effect of market opening on market concentration, import share and intensity of competition (version)
ka in conditions of low competitiveness of domestic goods leads to an increase in the share of imports and the replacement of the domestic producer from the market. Inevitably, the task arises of state regulation of the level of market openness.
As presented in Fig. 5.6, the interests of the protection of the domestic producer and the interests of maintaining the level of competition and high quality of the goods can be more or less compatible with an import share of about 1/3 of the total market volume.
Market potential of an economic entity
The term market potential means the ability of an economic entity to exert a decisive influence on the general conditions of circulation of goods in the relevant product market and (or) impede market access to other economic entities.
The main indicator of market potential is the enterprise competitiveness index (D), , defined as the product of the competitiveness index of the marketable commodity (/, & quot;), and the index production efficiency (/ 0):
The index of competitiveness of the commodity mass is determined by the formula:
where & iquest; 4 с! щ - the specific weight of the 2nd product presented in the market by the studied and the base enterprise (the leading competitor), respectively;/(k/s & gt; is the competitiveness index of the 7th product, n - the breadth of the product range being compared.
The enterprise's marketable mass is competitive at/m & gt; 1.0.
The production efficiency index can be represented in the form
where R, Rb are the coefficients of profitability of the researched and basic (main competitor) enterprises, respectively.
In the short run, the enterprise performance index can be calculated by comparing the average profitability of products; in the long-term period it is more expedient to estimate the profitability of invested capital.
If/= /, 4 & gt; 1, the enterprise is competitive, that is, it is capable of either retaining its market share or increasing it. The higher the value (/ - 1), the faster the process of expelling the competitor. At 1 = 1 the enterprise is able to retain its share.
The integral indicator of the market potential of an economic entity operating on the commodity market is the price set by it, exceeding the level of competitive prices in this commodity market, including the monopolistically high price.
However, if an enterprise increases the price of a commodity above the equilibrium price, then at the same level of quality as that of other sellers, it thereby lowers the competitiveness index of the commodity and the commodity mass and risks losing its market share. Excess of price over the equilibrium price is justified in cases when:
o the enterprise has significantly improved the quality indicators (but this is another commodity);
o the price of the product is inelastic and the company will benefit from the price increase, because, despite the decline in sales, total sales revenue will increase.
State regulation of the structure of commodity markets
The main policy in the field of state regulation of the structure of commodity markets is to achieve and maintain a moderate market concentration at which it is achieved (Table 5.4):
o moderate intensity of competition;
o the degree of openness of the market for foreign sellers is sufficient to attract imports;
o there is a fairly wide possibility of regulating entrance barriers to the market of potential competitors;
o moderate support of the domestic producer, which creates an opportunity for him to expand the production of competitive goods.
The measures of antimonopoly regulation are differentiated depending on the level of market concentration (Table 5.5).
Table 5.4. Summary table for assessing the state of the competitive environment on the commodity market
Table 5.5. The main directions of antimonopoly regulation of the structure of the commodity market
Market structure type
The main areas of antitrust regulation
Highly concentrated market
Demonopolisation of the market:
o Unbundling of monopoly structures;
o control by the antimonopoly authority of the creation and reorganization of commercial structures; transactions with shares (stakes), rights and property of commercial organizations;
o prohibition of the seizure of commercial structures by stronger structures;
o easing entry barriers to the market for new competitors
Moderately concentrated market
Stabilizing the market structure:
o monitoring the dynamics of market concentration;
o control over the activity of enterprises included in the Register of economic entities that have a share of more than 35% on the market of a certain product (warning of the possibility of their monopolization);
o Limiting the market potential of enterprises dominant;
o control over the processes of mergers and acquisitions of enterprises;
o prohibition of the seizure of enterprises by stronger structures;
o differentiation of entry barriers to the market
Increase in the level of market concentration:
o Promoting the consolidation of commercial structures;
o activation of the investment process;
o facilitating entry into the market of producers (sellers) from other regions and countries
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