Basic competitive strategies for m porter. Competitive strategies according to M. Porter
"Strategy competition- these are defensive or offensive actions aimed at achieving a strong position in the industry, at successfully overcoming five competitive forces and thus to receive more high income from investment." Although Porter acknowledges that companies have demonstrated many different ways of achieving this goal, he insists that outperforming other firms can be achieved with just three internally consistent and successful strategies. These typical strategies are:
Minimizing costs.
Differentiation.
Concentration.
Cost minimization strategy. Advantages of this strategy:
Low costs protect this firm from powerful buyers because buyers can only use their power to force its prices down to the level of those offered by a competitor that is behind the firm in efficiency.
Low costs protect the firm from suppliers, providing greater flexibility to counter them as input costs rise.
The factors that lead to low costs also tend to create high barriers to competitors entering an industry—economies of scale or cost advantages.
Finally, low costs usually place a firm in an advantageous position relative to substitute products.
Thus, a low-cost position protects a firm from all five competitive forces because the competition for favorable terms of a deal can reduce its profits only so long as the profits of the next best performing competitor are not destroyed. Less efficient firms will be the first to suffer in the face of increased competition.
The lowest cost strategy is not suitable for every company. Companies wishing to pursue such a strategy must control larger market shares relative to competitors or have other advantages, such as better access to raw materials. Products need to be designed to be easy to manufacture; In addition, it is wise to produce a wide range of interrelated products in order to evenly distribute costs and reduce them for each individual product. Next, a low-cost company needs to reach a broad consumer base. Such a company cannot be content with small market niches. Once a company becomes a leader in cost minimization, it is able to maintain high levels of profitability, and if it wisely reinvests its profits in upgrading equipment and plants, it can maintain leadership for some time. Dangers: Managers must immediately respond to the need to dismantle obsolete assets, invest in technology - in short, do not lose sight of costs. There is a chance that some new or old competitor will take advantage of the leader's technology or cost management techniques and win. Cost leadership can be an effective response to competitive forces, but there is no guarantee against defeat.
Test
Topic of work for the strategic planning course:
Competitive Analysis. Strategies according to M. Porter
Competitive analysis based on the five forces of competition according to M. Porter……..4
Strategies of M. Porter…………………………………………………………….9
Conclusion…………………………………………………………………………………12
List of references……………………………………………………………….
Introduction
The essence of competitive strategy is the company's attitude towards its external environment
. 1
^ M.E. Porter
Over the past decades, increased competition has been observed virtually all over the world. Until recently, it was absent in many countries. Markets were protected and dominant positions in them were clearly defined. And even where there was rivalry, it was not so fierce. Increased competition was curbed by the direct intervention of governments and cartels.
Today, no country or company can afford to ignore the need for competition. They must try to understand and master the art competition.
The structure and development of the economy and the ways in which companies achieve competitive advantage are the essence of competition theory. A clear understanding of them serves as the basis on which the company's competitive strategy is based.
A recognized leader in the development of competitive analysis is Harvard Business School Professor M. Porter, the author of the main models for determining the main forces of competition and options competitive strategies.
Target test work- give an idea of the competitiveness of the enterprise. Analysis of literary sources was chosen as research methods.
^
Competitive analysis based on the five forces of competition according to M. Porter
Competitive conditions in different markets are never the same, and the processes of competition in them are similar. This was demonstrated by Professor Michael Porter from Harvard Business School: - the state of competition in an industry is the result of five competitive forces. 2
Rivalry between competing sellers in an industry.
Market attempts by companies in other industries to win over consumers with their substitute products.
Potential emergence of new competitors.
Market power and leverage used by raw material suppliers.
Market power and leverage used by product consumers.
Porter's Five Forces Model, shown in Figure 1, provides a powerful tool for diagnosing competitive market conditions and assessing how important and effective each force is. This is the most popular method of competition analysis and is easy to put into practice.
^
Rice. 1 Forces governing competition in the industry.
Using the five components of competitive structure, we can describe the prerequisites for the long-term profitability of an industry and the ways in which companies can keep it under control.
There is still a narrow and pessimistic view of competition, although some company executives make statements to the contrary.
1. New members. Their appearance in the industry can be prevented by the following entry barriers:
economies of scale and production experience of firms already established in the industry help keep costs at such a low level that is inaccessible to potential competitors;
differentiation of products and services, that is, reliance on trademarks that emphasize the uniqueness of the product and its recognition by customers (for example, it is difficult to compete with the unique properties of folk crafts - Palekh, Gzhel. The very appearance of numerous counterfeit goods emphasizes the practical unsurpassability of these trade brands);
need for capital. Very often, effective competition requires large initial investments. This barrier, combined with economies of experience and scale, creates, in particular, serious obstacles to new investment in the Russian automotive industry; reorientation costs associated with changing suppliers, retraining, scientific and design development of a new product, etc.;
the need to create new system distribution channels. Thus, due to the lack of well-established distribution channels, Apple was unable to widely introduce its personal computers on Russian market;
state (government) policies that do not promote market penetration, for example, setting high customs duties for foreign competitors or lack of preferential government subsidies for newbies.
Obstacles to substitute products may include:
conducting price competition, which switches the buyer’s attention from quality problems to price reductions;
advertising attacks on consumers;
production of new, attractive products. For example, feeling competition from manufacturers sausages, cheese producers are starting to produce new, original varieties with a variety of additives;
improving the quality of service when selling and distributing goods.
a large number of competitors;
uniformity of manufactured goods;
presence of cost reduction barriers, for example, consistently high fixed costs;
high exit barriers (when a firm cannot exit an industry without incurring significant losses);
maturity, saturation of markets (this situation today is typical for the global computer market, which is faced with saturation of customer needs).
4. The power of influence of sellers. The company competes, that is, wages an economic struggle, not only with similar manufacturers, but also with its counterparties-suppliers, competitors.
Strong sellers can:
increase the price of your goods;
reduce the quality of supplied products and services.
the presence of large selling companies;
lack of substitutes for supplied goods;
a situation where the industry to which supplies are made is one of the non-main customers;
the decisive importance of the supplied goods among the necessary economic resources;
the ability to join the buyer company through vertical integration.
in putting pressure on prices to reduce them;
in requirements more High Quality;
in the requirements better service;
pitting intra-industry competitors against each other.
cohesion and concentration of the consumer group;
the degree of importance of products for consumers;
range of its application;
degree of product homogeneity;
level of consumer awareness;
other factors.
Strategies according to M. Porter
To strengthen the position of the enterprise, M. Porter recommended using one of three strategies.
^ 1. Leadership through cost savings.
Enterprises that decide to use this strategy direct all their actions towards reducing costs in every possible way. An example is the company “British Ukrainian Shipbuilders” (B-U-ES) for the construction of dry cargo ships. The production of ship hulls will be carried out by low-paid workers of Ukrainian shipyards. Cheap Ukrainian steel will be used in the production of ships. The filling of the ships will be supplied mainly by British companies. Therefore, it is expected that the cost of new ships will be significantly lower than the price of similar products from European and Asian shipbuilders. Thus, a dry cargo ship with a displacement of 70 thousand tons is estimated at 25-26 million dollars, while a similar ship built in Japan costs 36 million dollars.
Prerequisites:
large market share,
Availability competitive advantages(access to cheap raw materials, low costs for delivery and sale of goods, etc.),
strict cost control,
opportunity to save costs on research, advertising, service
enterprises are profitable even in conditions of strong competition, when other competitors suffer losses;
low costs create high barriers to entry;
when substitute products appear, the cost-saving leader has greater freedom of action than competitors;
low costs reduce supplier power
competitors may adopt cost-cutting techniques;
serious technological innovations can eliminate
concentration on costs will make it difficult to timely detect changes in market requirements;
unforeseen factors that increase costs may lead to a narrowing of the price gap compared to competitors.
Enterprises that decide to use this strategy direct all their actions towards creating a product that has greater benefits for consumers compared to the product of competitors. At the same time, costs are not among the primary problems. An example of a differentiation strategy can be the strategies of Mercedes, Sony, Brown, etc.
Prerequisites:
special prestige of the enterprise;
high potential for R&D;
perfect design;
production and use of the highest quality materials;
full consideration of consumer requirements is possible;
consumers prefer the product of this enterprise;
consumer preference and product uniqueness create high barriers to entry;
product features reduce consumer influence;
high profits facilitate relationships with suppliers.
the price of the product can be so significant that consumers, despite being loyal to this brand, will prefer the product of other companies;
imitation of other firms is possible, which will lead to a decrease in the advantages associated with differentiation;
a change in the value system of consumers can lead to a decrease or loss of the value of the features of a differentiated product.
Enterprises that decide to use this strategy direct all their actions to a specific market segment. At the same time, an enterprise can strive for leadership through cost savings, or product differentiation, or a combination of one or the other.
Prerequisites:
The company must satisfy customer requirements more effectively than its competitors.
^ Advantages of the strategy:
Indicated earlier.
Risks of the strategy:
differences in prices for products of specialized enterprises and enterprises serving the entire market may, in the eyes of consumers, not correspond to the advantages of products specific to this segment;
competitors can specialize their product even further by sub-segmenting within a segment.
The basic competitive strategy proposed by M. Porter represents the basis of an enterprise's competitive behavior in the market and describes a scheme for ensuring advantages over competitors, being a central point in the strategic orientation of an enterprise. From her the right choice all subsequent marketing actions depend.
As practice shows, successful and promising markets have high entry barriers, government protection, unpretentious consumers, a cheap supply chain and the smallest number of alternative industries that can replace them. Business with the latest technologies and high efficiency most susceptible to attacks from competitors; the probability of bankruptcy in such markets is very high.
For many small businesses competition comes down to being similar to your large (powerful) competitors. This gives them self-confidence. But to imitate others means to deprive yourself of any advantage. Lack of competitive advantages is a sure path to bankruptcy. Some enterprises, having a certain competitive advantage, do not make any efforts to avoid losing them. Having a competitive advantage should not stop further search.
The desire to be first in all areas of competition, the pursuit of short-term profits often forces enterprises to abandon a previously developed competitive strategy, which brings chaos to the activities of the enterprise and does not allow it to focus on long-term goals in the field of competition.
The question of where to compete, in which market to make a profit is always one of the key ones.
List of used literature
A.A. Thompson, Jr. A.J. Strickland III. Strategic management. Textbook for universities - M INFRA-M, 2001.
Gusev Yu.V. Strategic management: Tutorial/part 1. NGAEiU. - Novosibirsk, 1995.
Zabelin P.V., Moiseeva N.K. Basics strategic management: Tutorial. - M.: Information and implementation center “Marketing”, 1997.
Kono T. Strategy and structure of Japanese enterprises. - M.: Progress, 1987.
M. Porter. Competition. M.: International relations, 1993.
Porter M. International competition./Ed. V.D. Shchetinina. - M.: International relations, 1993.
The famous American professor at Harvard Business School M. Porter proposed basic strategic models based on consideration of the relationship between two important factors - the size of the target market and competitive advantages. Based on these factors, M. Porter identified three basic competitive strategies:
1. Differentiation strategy. According to Porter, means that a firm seeks to give a product unique properties that may be important to the buyer and that distinguish the product from competitors' offerings. Thanks to distinctive features product and its uniqueness, the company receives significant competitive advantages. Differentiation may lie not only in the qualities of the product itself, but also in the image, brand, methods of delivery of goods, after-sales service and other parameters. Differentiation strategies come with higher production and distribution costs. Despite this, firms using this strategy make a profit due to the fact that the market is willing to accept a higher price.
2. Leadership strategy through cost savings. This basic strategy is typical for firms or SZH (strategic business area) that have wide market coverage by offering a standard product at a relatively low price. This strategy is based on high performance and low production costs. These benefits may come from economies of scale, high tech or favorable access to sources of raw materials.
3. Specialization (focusing) strategy. Using this strategy, a company seeks to focus on one segment or small group of customers and serve it (them) better and more efficiently than its competitors. There are two types of focusing strategy. Within a chosen segment, a firm seeks to achieve advantages either through low costs or through differentiation.
Each of the basic strategies has specific risks.
· Cost leadership risk is characterized by the fact that the firm is under constant pressure from competitors. Sources of risk may include: technological advances; new competitors; failure to recognize the need for product changes due to an exaggerated focus on costs; cost-push inflation, which undermines a firm's ability to maintain price gaps.
· The risk associated with differentiation is caused by the main sources:
The gap in costs between a firm using this strategy and firms using a cost leadership strategy turns out to be so large that it cannot maintain customers’ commitment to a special assortment, brand, prestige of the product, etc.
· The risk associated with focusing is due to the following reasons:
the price gap in relation to non-specialized goods becomes too large, i.e. the price level exceeds the effect achieved by focusing; the differences in product requirements between the target segment and the market as a whole are reduced, making the focusing strategy no longer practical.
STRATEGIES FOR INTENSIVE GROWTH (GOALS AND OPTIONS)
An intensive growth strategy is relevant when a company has not yet fully exhausted the opportunities associated with its products in the markets in which it operates.
The following alternatives are available.
1. Market penetration strategies. A penetration strategy should attempt to increase sales of existing products in existing markets. Options:
Development of primary demand, either by attracting new users of the product; encouraging customers to use the product more frequently; encouraging consumers to consume more one-time consumption; discovering new uses
Increasing the market share of goods by improving the product or services provided; change brand positioning; go for a significant price reduction; strengthen the sales network;
Change positioning trademark
Acquiring a market for your old traditional product by: buying a competing company to take over its market share; creating a joint venture to control a large market share.
2. Market development strategies
These strategies aim to increase sales by introducing existing products into new markets. Options:
New segments: address new segments in the same regional market;
New distribution channels: introduce the product to another network, noticeably different from the existing ones.
Territorial expansion: to penetrate into other regions of the country or into other countries.
3. Product development strategies.
Aimed at increasing sales by developing improved or new products targeted at the markets in which the firm operates. Options:
Adding features: increasing the number of features or characteristics of a product and thereby expanding the market.
Expansion of the product range: develop new models or product variants with different levels of quality.
Updating the product line: restore the competitiveness of outdated products by replacing them with products that are functionally or technologically improved.
Quality improvement: improve the performance of a product as a set of properties.
Acquisition of a range of goods: supplement or expand the existing range of goods using external means.
STRATEGIES FOR INTEGRATED AND DIVERSIFIED GROWTH (OBJECTIVES AND OPTIONS)
Integrated growth strategy.
1. Backwards Integration Strategies Used to stabilize or protect a strategically important source of supply. Sometimes such integration is necessary because suppliers do not have the resources or know-how to produce the parts or materials the firm needs. Another purpose could be access to new technology, critical to the success of the underlying activities.
2. Forward integration strategies. The motivation in this case is to ensure control over the output channels. On industrial markets the main objective is to control the development of subsequent links in the industrial chain, which are supplied by the company. This is why some basic industries are actively involved in the development of firms that further transform their products. In some cases, forward integration is done simply to better understand the users of your products. In this case, the company creates a branch whose task is to understand the problems of clients in order to better meet their needs.
3. Horizontal integration strategies. These strategies have a completely different perspective. Their goal is to strengthen the firm's position by absorbing or controlling certain competitors. The justifications here can be quite varied: to neutralize an interfering competitor, to achieve a critical mass to obtain economies of scale, to benefit from the complementarity of the product range, to gain access to a distribution network or customer segments.
Diversified growth strategy.
Justified if the value chain in which the firm is located offers little opportunity for growth or profitability, either because competitors are very strong or because the underlying market is in decline. There are concentric and pure diversification.
1. Concentric diversification strategy. In implementing this strategy, the firm goes beyond the industrial chain within which it operates and seeks new activities that complement existing ones technologically and/or commercially. The goal is to create synergies and expand the firm's potential market.
2. Pure diversification strategy. In this case, the company masters activities that are not related to its traditional profile either in technology or in commercially. The goal is usually to update your portfolio.
THE CONCEPT OF STRATEGIC ECONOMIC PORTFOLIO (PURPOSE AND CONDITIONS OF STRATEGIC PLANNING, FULL PLANNING CYCLE, STRATEGIC BUSINESS UNITS, BASIC STEPS IN ANALYZING APPLICATIONS)
Agricultural production - the main elements of construction strategic plan marketing. Each of them has the following General characteristics: specific orientation; precise target market; one of the company's marketing managers at the head; control over your resources; own strategy; clearly identified competitors; clear differentiating advantage.
Research has shown that: for firms producing industrial products, the most important marketing goals are related to the share of profit, the efforts of sales agents, development new products, sales to primary consumers and pricing policies; for manufacturers consumer goods- with profit sharing, sales promotion, new product development and pricing policies, sales force efforts and advertising costs; for companies operating in the service sector - with the efforts of sales agents, advertising themes, customer service and sales promotion.
Strategic planning requires compliance with 3 main conditions:
· Management of the company's activities is based on the principles of managing an economic investment portfolio. SHP is a set of activities and goods that the company is engaged in or will be engaged in in the future. When planning, it is considered that each activity in this portfolio has a certain profit potential for the company. The firm's resources are allocated according to this profit potential. It is generally accepted that an agricultural portfolio is good if this portfolio optimally adapts the strengths and weaknesses of the company to the opportunities of the environment.
· A thorough assessment of the prospects for each type of activity in agricultural enterprises. It is provided through the study of analyzes of market demand indicators and the competitive position of the company in a particular market.
· For each direction, SHP develops a plan for achieving long-term strategic goals.
The result of 3 conditions: i.e. the company analyzes its existing agricultural production and makes decisions on which areas should be directed in what volume of resources (financial, labor). The company must develop growth strategies with the possible inclusion of new directions in agricultural production.
Strategic business units (SBU)
SBU is an area of activity of a company that has its own mission and objectives of its activities. The activities of an SBU can be planned independently of other SBUs. As an SBU there can be a separate product group, separate product(if it is very unique and has its own market).
SBU is a business organization that produces a clearly defined list of goods and services sold to a certain homogeneous group of buyers, and deals with specific group competitors. notice, that external factors(e.g., customers or market) are important in determining the SBU. The essence of the strategy is to position your business in such a way as to most effectively satisfy the needs of consumers for a longer period of time. high level than the competitor.
Typical characteristics of SBU
· The SBU must be represented on a one-time market with related technologies;
· SBU has all the necessary resources for successful activities (NT, financial, labor base)
· SBU management is not responsible for the performance indicators of its SBU;
The company can carry out corporate strategies and support any individual SBUs to ensure their existence in the market. Due to the synergistic effect, SHP allows you to receive additional profit. Enterprise resource management when analyzing agricultural production is carried out using certain tools. The most common: BCG matrix; GE (General Electric) matrix (McKinsey matrix).
By general strategies, Porter means strategies that have universal applicability or are derived from some basic postulates. In his book “Competitive Strategy,” M. Porter presents three types of general strategies aimed at increasing competitiveness. A company that wants to create a competitive advantage must make strategic choices so as not to “lose its face.”
For this there are three basic strategies:
1) leadership in cost reduction;
2) differentiation;
3) focusing (special attention).
To satisfy the first condition, the company must keep costs lower than those of its competitors.
To provide differentiation, it must be able to offer something unique of its own.
The third strategy option proposed by Porter involves the company focusing on certain group buyers, a specific part of the product or in a specific geographic market.
Leadership in cost reduction, perhaps the most characteristic of all three general strategies. It means that the company strives to become a low-cost manufacturer. The company's supplies are diverse and serve many industry segments. This scale is often key factor leadership in cost reduction. The nature of these types of advantages depends on the structure of the industry, and may be a matter of economies of scale, advanced technology, or access to raw material sources.
Low-cost production is about more than simply moving down the experience curve. The product manufacturer must find and exploit every opportunity to gain cost advantages. Typically, these advantages are obtained by selling standard products without added value, when mass-market goods are produced and sold and when the company has strong distribution chains.
Porter goes on to point out that a company that has achieved cost leadership cannot afford to ignore the principles of differentiation. If consumers do not consider the product to be comparable or acceptable, the leader will have to discount prices to weaken its competitors and thereby lose its leadership. Porter concludes that a cost leader in product differentiation must be on par with, or at least not far behind, its competitors.
Differentiation, According to Porter, means that a company strives to be unique in some aspect that is considered important by a large number of customers. It selects one or more of these aspects and behaves in such a way as to satisfy the needs of consumers. The price of this behavior is higher production costs.
From the above it follows that the parameters of differentiation are specific to each industry. Differentiation may lie in the product itself, delivery methods, marketing conditions, or some other factor. A company focusing on differentiation must find ways to improve production efficiency and reduce costs, otherwise it risks losing competitiveness due to relatively high costs. The difference between price leadership and differentiation is that the former can only be achieved in one way - by establishing an efficient cost structure, while differentiation can be achieved in many ways.
The third type of strategy is focusing efforts on any aspect of activity. It is radically different from the previous two and is based on choosing a narrow area of competition within an industry.
Meaning focusing is to select an industry market segment and serve it with your strategy better and more efficiently than your competitors. By optimizing its strategy for a selected target group, the company that chooses this course tries to achieve competitive advantages in relation to the selected group.
Exist two types of focusing strategies.
A company within a selected segment is either trying to achieve cost advantages or increasing product differentiation in an attempt to differentiate itself from other companies in the industry. Thus, it can achieve competitive advantage by focusing on specific market segments. The size of the target group depends on the degree rather than the type of focus, and the essence of the strategy in question is to work with a narrow group of consumers that is different from other groups.
According to Porter, any of the three main types of strategy can be used as an effective means of achieving and maintaining competitive advantage.
Relationship. Almost all countries of the world participate in them to one degree or another. At the same time, some states receive large profits from foreign economic activity, are constantly expanding production, while others can barely maintain existing capacity. This situation is determined by the level of competitiveness of the economy.
Relevance of the problem
The concept of competitiveness is the subject of much discussion in circles of people taking corporate and government management decisions. The increasing interest in the problem is due to various reasons. One of the key ones is the desire of countries to take into account the economic requirements changing within the framework of globalization. Michael Porter made a great contribution to the development of the concept of state competitiveness. Let's take a closer look at his ideas.
General concept
The standard of living in a particular state is measured by national income per person. It increases with improvement economic system in the country. Michael Porter's analysis showed that state stability in the foreign market should not be considered as a macroeconomic category that is achieved through the methods of fiscal and monetary policy. It should be defined as productivity efficient use capital and labor. is formed at the enterprise level. In this regard, the welfare of the state’s economy must be considered in relation to each company separately.
Michael Porter's theory (briefly)
To operate successfully, enterprises must have low costs or provide differentiated quality products with more high cost. To maintain their position in the market, companies need to constantly improve products and services, reduce production costs, thus increasing productivity. Foreign investment and international competition. They provide strong motivation for businesses. Together with the international level, it can have not only a beneficial effect on the activities of companies, but also make certain industries completely unprofitable. However, this situation cannot be considered completely negative. Michael Porter points out that the government can specialize in those segments in which its enterprises are most productive. Accordingly, it is necessary to import those products in the production of which companies show results worse than foreign companies. As a result, the overall level of productivity will increase. One of the key components in it will be imports. Productivity can be increased by establishing affiliated enterprises abroad. Part of production is transferred to them - less efficient, but more adapted to new conditions. Profits generated from production are funneled back into the state, thus increasing national income.
Export
No state can be competitive in all production areas. When exporting in one industry, costs increase labor and materials. This, accordingly, negatively affects less competitive segments. Constantly increasing exports cause an increase in the exchange rate of the national currency. Michael Porter's strategy assumes that the normal expansion of exports will be facilitated by the transfer of production abroad. In some industries, positions will undoubtedly be lost, but in others they will become stronger. Michael Porter believes that they will limit the state's ability to foreign markets, will slow down the improvement in the standard of living of citizens in the long term.
The problem of attracting resources
And foreign investment can certainly significantly increase national productivity. However, they can also have a negative impact on her. This is due to the fact that in each industry there is a level of both absolute and relative productivity. For example, a segment may attract resources, but exports from it are not possible. The industry is not able to withstand import competition if the level of competitiveness is not absolute.
Michael Porter's Five Forces of Competition
If the country's industrial sectors are losing ground foreign enterprises, are among the more productive in the state, then its overall ability to provide increased productivity is reduced. The same is true for firms that move more profitable activities abroad, since costs and earnings are lower there. Michael Porter's theory, in short, connects several indicators that determine a country's stability in the foreign market. Each state has several methods for increasing competitiveness. Collaborating with scientists from ten countries, Michael Porter formed a system of the following indicators:
Factor conditions
Michael Porter's model suggests that this category includes:
Explanations
Michael Porter points out that key factor conditions are not inherited, but created by the country itself. In this case, what matters is not their presence, but the pace of their formation and the mechanism for improvement. Another important point consists in classifying factors into developed and basic, specialized and general. It follows from this that the stability of the state in the foreign market, based on the above conditions, is quite strong, although fragile and short-lived. There is ample evidence in practice to support Michael Porter's model. Example - Sweden. She made good use of her largest deposits low sulfur iron until the main market Western Europe The metallurgical process has not changed. As a result, the quality of the ore no longer covered the high costs of its extraction. In a number knowledge-intensive industries certain basic conditions (for example, cheap labor resources and abundant natural resources) may not provide any benefits at all. To improve productivity, they must be tailored to specific industries. These may be specialized personnel in processing industrial enterprises, which are problematic to form elsewhere.
Compensation
Michael Porter's model admits that the lack of certain basic conditions can also act strong point, motivating companies to improve and develop. Thus, in Japan there is a land shortage. Lack of this important factor began to act as the basis for the development and implementation of compact technological operations and processes, which, in turn, have become very popular on the world market. The lack of certain conditions must be compensated by the advantages of others. Thus, innovation requires appropriate qualified personnel.
State in the system
Michael Porter's theory does not classify it as a basic factor. However, when describing the factors that influence the degree of stability of the country in foreign markets, the state is assigned a special role. Michael Porter believes that it should act as a kind of catalyst. Through its policies, the state can influence all elements of the system. At the same time, the influence can be both beneficial and negative. In this regard, it is important to clearly formulate the priorities of government policy. As general recommendations encourage development, stimulate innovation activity, increasing competition in domestic markets.
Spheres of influence of the state
The indicators of production factors are influenced by subsidies, policies in the field of education, financial markets, etc. The government determines internal standards and norms for the production of certain products, approves instructions that influence consumer behavior. The state often acts as a major buyer of various products (goods for transport, army, education, communications, healthcare, and so on). The government can create conditions for the development of industries by establishing control over advertising media and regulating the operation of infrastructure facilities. State policy is able to influence the structure, strategy, and characteristics of competition between enterprises through tax mechanisms and legislative provisions. The government's influence on the level of competitiveness of the country is quite large, but in any case it is only partial.
Conclusion
Analysis of the system of elements that ensure the stability of any state allows us to determine the level of its development and the structure of the economy. A classification of individual countries was carried out in a specific time period. As a result, 4 stages of development were identified in accordance with four key forces: production factors, wealth, innovation, investment. Each stage is characterized by its own set of industries and its own areas of enterprise activity. Identification of stages allows us to illustrate the process of economic development and identify problems encountered by companies.
