Features of market competition in the field of agricultural production

Competition is defined as rivalry, a specific form of economic struggle to achieve the best results in any type of activity. Competition lies at the heart of the market mechanism; therefore, it is the rivalry between participants of the market economy (market entities) for the best conditions of production, buying and selling of goods, for obtaining maximum profit, other benefits, and increasing market share.

As noted in Chapter 14, it is customary to distinguish several types of markets based on the degree of competition restriction: a market of perfect competition, a market of monopolistic competition, an oligopolistic market, and a market of pure monopoly. Agricultural products are sold in a competitive market. This is a market with free entry and exit for a large number of sellers and consumers of identical or similar products (grain, potatoes, vegetables, milk, eggs, etc.). However, agricultural producers themselves purchase industrial goods for production in oligopolistic and even monopolistic markets.

In a competitive market, where the interests of many independent, separate entities realizing their own interests clash, their rivalry and the restriction of independent actions to influence market conditions are objectively manifested. Competition, along with prices and market conditions in general, contributes to the establishment of market equilibrium.

If the supply of a particular good is greater than the demand for it, competitive struggle among sellers intensifies. In this situation, the primary opportunity to sell the product is associated with a price reduction, which leads to a decrease in its production.

If demand is greater than supply, competition among buyers arises, and the price for the opportunity to purchase the product increases. An increase in price stimulates an increase in supply through the expansion of production.

The expression by the 18th-century English economist Adam Smith about the "invisible hand of the market" refers to market competition as a unique mechanism of selection and regulation in a market economy. At the same time, competition is possible only under conditions such as the existence of private property and ensuring the freedom of producers to enter the market and the industry producing goods and services, as well as the freedom to exit them, and the presence of a large number of producers and buyers who do not exert significant influence on price levels. A market is more competitive if individual producers offering their product to the market exert less influence on it (primarily through prices). Thus, it ensures the interaction of supply and demand, balancing the market price.

The following types of competition are distinguished:

• intra-industry;
• inter-industry;
• price;
• non-price;
• unfair;
• consumer competition.

Intra-industry competition is manifested in the fact that each producer strives to sell their product with maximum benefit, which leads to a reduction in costs and an improvement in the quality of industry products and stimulates industry producers to reduce unit production costs, increase labor productivity, use scientific and technological achievements, and adapt quickly to changing market conditions. As a result of intra-industry competition, an average supply price is established.

Inter-industry competition causes the redistribution of capital from one industry to another as a result of economic struggle in the market between producers of goods from different industries for the most profitable spheres of capital investment in order to ensure maximum profit. In the process of inter-industry competition, capital flows from less profitable production sectors of one industry to more profitable ones in another. As a result of inter-industry competition, a more favorable economic structure is formed, the development of promising industries is activated, and an average rate of return on capital is established.

Price competition is based on producers striving to sell their product at prices lower than those of their competitors. To this end, advance information about price reductions is used, or products are released for which the improvement in quality characteristics exceeds the increase in price.

Non-price competition manifests itself when, in the struggle for buyers, the focus is not on price reduction, but on active advertising campaigns, the variety of packaging and distribution of the product, its methods of sale, etc.

Unfair competition, which some producers resort to, consists of violating generally accepted norms and rules of competition and the provisions of current legislation, including the dissemination of negative information and knowingly false statements about competitors, deception of consumers, etc.

Consumer competition arises in the market due to the buyers' desire to purchase the goods and services they need at lower prices.

The competitiveness of products (works, services) is closely related to competition and is defined as the possibility of selling a product in the market, based primarily on cost indicators and a combination of properties that characterize it, distinguish it from a competitor's product, and manifest themselves only in a competitive environment. The consumer's costs for satisfying their needs for a specific product primarily characterize the competitiveness of that product. An expression of the degree of product competitiveness for a consumer K is the ratio of the utility effect E of the product's consumption by the buyer to the consumption price Cp:

In turn, the consumption price consists of the buyer's expenditure on purchasing the product, i.e., the purchase price of the product, and expenses related to the consumption of the purchased product.

The higher the Ep/Cp ratio, the higher the product's competitiveness.

The competitiveness of agricultural products is their compliance with the requirements of the market and the end buyer. When choosing a product, a consumer always evaluates its quality characteristics and their own costs for its acquisition and subsequent use. For an agronomist, this means that the value of the harvested yield is directly derived from its quality and production cost.

How the competitiveness of a farm and a region is formed

Each competitiveness indicator can be monitored and improved. In the field and in storage, one can purposefully improve the quality characteristics of products. At the same time, a farm is able to reduce costs for production, storage, transportation, and marketing. Such a comprehensive approach allows for increasing the value of the product for the end consumer.

The competitiveness of a region is built on its competitive positions and advantages. Favorable conditions within a territory create a stable position for local farms in related markets. The efficiency of a region is evaluated by its standing in several markets:

• goods and services;
• capital;
• investment resources;
• intellectual products.

If a region's competitive position is stable and reliable, local agribusiness becomes attractive for external financing. This facilitates the attraction of both domestic and foreign investors. As a result, agricultural enterprises receive additional resources for the development of production.