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10COMPETITIVE ENVIRONMENT IN HOUSING AND UTILITY INFRASTRUCTURE
Natalia G. Pletneva
St. Petersburg State University of Architecture and Civil Engineering, Russia E-mail: [email protected]
Ksenia V. Iarkina
St. Petersburg State University of Architecture and Civil Engineering, Russia E-mail: [email protected]
Abstract. The presented research is determined by the presence of a number of problems in the field of housing and communal services, the solution of which depends on the competitive environment formation. The purpose of this study is to identify the features of the competitive environment formation for housing and communal services on the basis of a comprehensive analysis of factors relevant to the study area. As a result, the article proposes directions for the competitive environment formation of housing and communal services, taking into account the identified features.
Keywords: entrepreneurship, housing and communal services, competitiveness, competitive environment. JEL codes: D41, O18, P52
For citation: Pletneva, N. G., & Iarkina, K. V. (2021). COMPETITIVE ENVIRONMENT IN HOUSING AND UTILITY INFRASTRUCTURE. JOURNAL OF REGIONAL AND INTERNATIONAL COMPETITIVENESS, 2(1), 73-82. Retrieved from http://jraic.com/index.php/tor/article/view/21
Introduction
The development of a competitive environment and improving the quality of services are being prioritized in housing and utility infrastructure in Russia in accordance with 2035 Industry Development Program. According to a poll conducted by WCIOM, 84% of Russians are not satisfied with the quality of housing and utilities services they are provided with, 37% are dissatisfied with the timing of their provision; 9% — response speed to residents' requests, 11% — repair speed) (WCIOM, 2020).
There are several ways to improve service quality. One of them is used in many industries. It is to create a competitive environment that motivates service providers to compete for consumer attention and pay close attention to service quality.
Poor competition negatively affects the housing and utilities services industry, and the effect grows stronger each year. Common problems, such as high tariffs and aging of the housing and utilities infrastructure (the deterioration of heating, electricity and water supply systems reaches 50-70%) are supplemented with the dissatisfaction of the consumers with the quality of the services provided and the lack of a real choice of the service provider.
According to the report on the state and development of the competitive environment in the markets of goods, works, and services of St. Petersburg in 2019, the largest number of appeals for consumer rights protection was related to services — 63.2% (19,647), among them, violations of housing and utilities services — 13.2% (2,582). In general, the increase in the number of appeals that year was due to an increase in the number of appeals to poor-quality provision of housing and utilities services (Report on the state and development of competition on commodity markets of St. Petersburg, 2019).
According to the data on consumers' perception and dynamics of assessment of competition between sellers of goods, works, and services in St. Petersburg, the lowest competition level was observed among the competitors in housing and utilities services, which also affects the limited choice of services. Only one out of three (31.2%) is rather or fully satisfied with the possibility to choose the services of approximately the same quality from different companies. The level of satisfaction of St. Petersburg residents with the choice of goods and services in the market of housing and utilities services is shown in Fig. 1.
Currently, despite the fact that the housing and utilities services became competitive more than 20 years ago, the mechanism of formation of a competitive business environment in this area is still not perfect, and its elements still do not show the necessary efficiency.
0,251 0,061
0 0.2 0.4 0.6 0.8 1 1.2
■ 1 (Mot at all satisfied) a2 B3 b4 ■ 5 (Completely satisfied)
Figure 1. The level of the residents of St. Petersburg satisfaction with the opportunity to choose goods and services, based on the analysis of answers to the question "Please rate, using a five-point system, to what extent are you satisfied with the opportunity to choose goods and services on the commodity markets?"
Source: Report on the state and development of competition on commodity markets of St. Petersburg, 2019
Solving the problem of improving the mechanism of formation of the competitive environment in the housing and communal services within this study, we aim to identify the features of the competitive environment of this industry. This will further identify areas and tools for improvement.
Research grounds
The methodological basis of the study are general scientific methods based on a systematic approach: methods of scientific abstraction, analysis and synthesis, typology and systematization.
The study is based on the works of Russian and foreign researchers on the theory of competitive business environment, functioning of business structures in housing and utilities sphere: Petrova (2013); Usik (2012); Pavlova (2008); Firsenko (2002); Shurchikova (2002); Chirikhin (2017) et al.
This study continues our own research on competitiveness (2019) as the identification and analysis of the features of the competitive environment in the housing and utilities sector.
Study contents
The housing and utilities sector is developing rapidly. It has both great potential for entrepreneurial activity and significant constraints because the entrepreneurs are not able to competitively provide the fullest range of services in the housing and utilities infrastructure. In addition, conditions for the formation of a competitive business environment, where possible, are not sufficient to provide consumers with quality services.
The entrepreneurial structures of housing and utilities services are characterized by both traditional tasks of entrepreneurial activity and specific ones, which, accordingly, affect the competitive environment. To identify the features of the competitive environment in the housing and utilities sector, let us analyze the approaches to the definition of the concept of «competitive environment». In this case besides the definition itself, such factors as the subject of competitive environment and specific aspects of its formation are also of
interest.
Table 1 shows the analysis of definitions of the competitive environment in order to identify the differences and features of its formation in the housing and utilities services.
Table 1 - Analysis of approaches to the «competitive environment» definition
Approach to definition Authors of the «competitive environment» definition Competitive environment object Features of the competitive environment formation
Institutional Oiken (1995) aggregate of regulating principles directive nature of creating conditions for the market environment formation for deregulated sectors of the economy
Usik (2012) conditions of activity of market entities directive and democratic nature ofthe development of institutions, allowing to control the social component of the economy
Pylneva, Koryakin, Azarin (2008) conditions of organizations rivalry competitive environment as a set of competing firms that produce goods or provide services to competitors
Shurchikova (2004) aggregate of competitives the competitive environment is made dependent on a number of conditions, which can be divided into several levels: the state, competitors and market participants
Marketing Porter (2005) aggregate of indicators of competition development existing at a certain point in time coordination of the activities of market entities
Petrov (2015) aggregate of factors that enable organizations to compete conditions that allow for the growth of production in a specific period of time
Pavlova (2008) aggregate of market competitive relations the competitive environment contains conditions for the development of full-fledged competition
Approach to definition Authors of the «competitive environment» definition Competitive environment object Features of the competitive environment formation
Firsenko, Yushkova (2002) aggregate of conditions of activity and relations of competing organizations the determining function is the synergia of the interaction of competitive factors
Source: composed by the authors
The analysis of approaches to the definition and formation of the competitive environment allows us to conclude that the difference in approaches is significant: some researchers associate this concept with conditions that help the economic development, and some of them — directly with the situation in the markets.
The housing and utilities sector now sees institutional approach to the definition of the competitive environment as relevant. It is based on the established state regulation, which sets not only restrictions, but also objectives. Development in this case occurs through decisions at the state level. However, it is more appropriate to apply the marketing approach to the competitive environment of the housing sector. It allows us to consider the effective market position of the economic entity as a source of competitive advantage. At the same time, the development of competitive environment happens at the expense of competition of entrepreneurial structures through quality improvement, innovation activity, etc.
The analysis of these concepts allows us to give the most precise definition of the competitive environment for housing and utilities sector: competitive environment of housing and utilities services is a set of factors and conditions for coordination of organizations' activities in the market of housing services in order to achieve the best results for all stakeholders. Natural monopoly is prevalent in the market of public utilities; therefore, it excludes a competitive environment at this stage of development. Subsequently, a competitive environment based on an institutional approach is possible.
The analysis of the table shows not only the diversity of approaches to the concept of competitive environment, but also allows us to notice the presence of a rather similar term — entrepreneurial environment. For the housing and utilities services, where there are insufficient incentives for the entrepreneurship, it is important to compare the concepts of competitive and entrepreneurial environment.
Both competitive and entrepreneurial environments are a set of factors affecting the market, while having many differences. The subject of the competitive environment is not only commercial, but also non-commercial and public organizations, as well as consumers. At the same time, the entrepreneurial environment shapes the market situation in such a way that entrepreneurial structures develop and function sustainably. This also leads to a difference in the purpose of forming environments. Regulatory policies and development instruments will differ accordingly. The common and different features of the competitive and entrepreneurial environments are shown in Fig. 2.
The specific aspects of formation of the competitive environment are determined by the entrepreneurial structures functioning in it. With regard to the housing and utilities sector, they should be considered as independently operating, carrying out at their own risk legal forms of commercial entities. These are aimed at obtaining benefits through the use of property, sale of goods, works, and services on an innovative basis.
Currently, the entrepreneurial structures of housing and utilities sector are characterized by interdependence, sufficient autonomy, and great diversity. The type of activity, form of ownership, size, and nature of the organization's activity can be singled out as classification attributes. A generalized classification is presented in Table 2.
Figure 2. Characteristics of the competitive and entrepreneurial environment
Source: composed by the authors
Table 2 - Classification of entrepreneurial structures in housing and communal services
A sign of the business structures classification Groups Characteristic
Resource supplying enterprises and organizations Production of material products (water, heat, electricity, production and consumption of which either coincide in time or follow each other. That is, enterprises cannot accumulate production, but must produce it exactly as much as is necessary in the current period)
Kind of activity (Koroleva, 2016) Housing management organizations, contracting repair and construction and maintenance enterprises and companies Engaging in the management of common property in apartment buildings, contracting for the operation, technical and sanitary maintenance of common property, as well as the provision of other services
Multiservice companies and organizations performing work on external improvement, landscaping, collection and disposal of municipal solid waste Carrying out repairs (current and capital) and technical operation of elevators, garbage chutes, collection and removal of household waste, maintenance, cleaning and improvement of common areas and the local area, as well as the provision of all or certain types of utilities (electricity, heating and hot water supply, gas supply, water supply and sewerage, including wastewater treatment)
A sign of the business structures classification Groups Characteristic
Private Owned by an individual or a group of individuals
Type of ownership State The owner is the state represented by the relevant authorities (municipal, regional, etc.)
Joint Presence of a share of private and state property
Micro The number of employees up to 15 people; annual revenue up to RUB 120 million.
Size of Small The number of employees is from 16 to 100 people; annual revenue up to RUB 800 million
organization Average The number of employees is from 101 to 250 people; annual revenue up to RUB 2 billion.
Large The number of employees is over 251 people; annual revenue over RUB 2 billion.
Commercial Self-financing organizations with a goal of making a profit
Nature of activity (Suleymanova, Blazhevich, Karachun, 2016) Non-profit The company's activities are not aimed at making a profit and is aimed at performing socially significant functions: these include non-profit utilities that provide services such as landscaping, lighting, external improvement, etc. They do not have sales proceeds, but are on the estimate of the local budget
Source: composed by the authors
In addition to the specific aspects of the status of entrepreneurial structures in the housing and utilities sector, which are determined by the type, nature of activity, size of organization, and form of ownership, factors (conditions) of internal and external environment of entrepreneurial structures have a key role in the formation of competitive environment.
Factors of internal environment include production and technical, social, economic (at the organization level), information, marketing, business relations. The external environment includes economic (region and country level), legal, political, scientific and technical, communication, business and natural-climatic factors (Khil, 2015). Their combination forms the conditions for the market functioning.
Factors that determine the formation and development of a competitive business environment in the field of housing and utilities services are presented in Table 3.
Table 3 - Factors of the external and internal entrepreneurial environment in housing and communal services
External Internal
Legal Open access to information Production and technical Innovative development
Political Government influence Management aspect
External Internal
Scientific and technical Infrastructure Marketing Quality of services provided
Economic Economic mentality Social Personnel potential
Crisis phenomena Energy resources cost Economic Availability of financial sources
Natural Impact of the season on provision of services
Source: composed by the authors
Before analyzing and forming the directions for the development of competitive environment, the elements of competitive environment and factors affecting it should be defined. At the same time, it is important to consider the patterns of its development.
Each business environment is characterized by certain patterns due to the economic nature of competition, which underlie the competitive process and determine the direction of competitive behavior of business entities, which in this context are invariant to the subjects of competition (Khakimov, 2019).
At the same time, the regularities of functioning of entrepreneurial structures and development of competition are manifested in the interaction at all levels of the competitive system: mega-, macro-, meso-and micro-levels (Khakimov, 2019).
It is most difficult to assess the competitive environment at the mega level due to the presence of barriers: difficulties in defining and systematizing parameters, lack of unified methodological approaches, different economic models of countries, etc. At the macroeconomic level, the competitive environment is considered within the national economy. Mesolevel - the competitive environment at the regional level. And the key level is the microeconomic level, the basis of which is the competitiveness of entrepreneurial structures, i.e., the ability to function successfully in the market. State policy underpins regulation at all levels.
In order to identify how a competitive environment of housing and utilities services is formed, it is also necessary to compare the housing and utilities services industry with other industries. We have selected similar activities related to housing and utilities services for comparison: construction and transportation. As the market for housing and utilities services includes the provision of both housing and utilities, it is advisable to specify such factors as the level of government control, types and forms of ownership of economic entities, the state of market infrastructure, the availability of financial and other resources, technology, innovation nature of demand, the nature of demand for services, market structure, the availability of information on each market separately. The results of the comparison are presented in Table 4.
The analysis of the formation of the competitive environment in construction, transport, and housing and utilities services, presented in Table 4, allows us to find the differences in the competitive environment between the reviewed markets of services provision:
- the division of the housing and utilities sector into the housing market and the utilities market affects the formation of a competitive business environment. In the market of utilities services at this stage it is difficult to develop competitive relations, forms of ownership are limited to state and municipal, and public-private partnerships. The government also controls it strictly. However, the housing services market is a promising area for the development of competition and self-organization;
- the continuous nature of the demand and the lack of opportunities for consumers to refuse services also distinguishes the sector of housing and utilities services from the rest, where the demand is discrete, and determines the special importance of the industry for the population;
- the need for housing and utilities is formed collectively in contrast to construction and transport, where it can be both collective and individual.
Table 4 - Features of the formation of a competitive environment in the housing and communal,
construction and transport sectors
Housing and communal services
Factor Housing services market Utilities market Construction sector Transport sector
Government control level Public administration at all levels, self-organization Rigid government control at all levels Self-organization, public administration Self-organization, public administration
Types and forms of ownership of business entities All forms of ownership State and municipal property, public-private partnership All forms of ownership All forms of ownership
Market infrastructure condition Large volume of new commissioning and the presence of high-level emergency housing stock High wear and tear of production facilities Satisfactory condition of the construction infrastructure The state of the backbone transport network does not correspond to the existing and future cargo and passenger flows
Availability of financial and other resources, technologies, innovations Providing state financial support, development within the framework of the digitalization of the economy Direct budget financing, provision of state financial support, development within the framework of the digitalization of the economy Providing state financial support, development within the framework of the digitalization of the economy Providing state financial support, development within the framework of the digitalization of the economy
Nature of demand Continuous nature of demand, there is a choice of some services (except for those that are required) The continuous nature of demand and the inability of consumers to refuse services Discrete demand, there is an opportunity to refuse services Discrete demand, there is an opportunity to refuse services
The nature of the formation of the need for services Collective Collective Individual, collective Individual, collective
Market structure Monopolistic competition Natural intra-industry monopoly Monopolistic and pure competition Oligopoly, monopolistic and pure competition (by mode of transport)
Factor Housing and communal services Construction sector Transport sector
Housing services market Utilities market
Availability of information Information in the public domain on the website of the State Information System of Housing and Communal Services Information in the public domain on the website of the State Information System of Housing and Communal Services Information in the public domain on the website of the Federal State Statistics Service Information in the public domain on the website of the Federal State Statistics Service
Source: composed by the authors
Results and conclusions
The analysis of scientific approaches allowed us to determine the need to take into account the specifics of the sector in the development of a mechanism for the formation of a competitive business environment: division of services into sectors where formation of competitive environment is possible (housing services) and where formation of competitive environment is impossible (utilities services), special importance and mandatory nature of services for the population, strict state regulation, availability of territorial binding of housing and utilities infrastructure.
At the same time, at the moment, the entrepreneurship and its competitive environment in this area are developed due to forming the regulatory framework of business structures of housing and utilities services, implementing the process of privatization of municipal property, forming business structures as public-private partnerships, as well as forming new private structures: associations of homeowners, managing, operating, and servicing organizations and their associations; developing small and medium-sized businesses, developing competitive relations among the subjects of the housing and utilities services market and promoting the role of the population as a homeowner and a subject of the housing and utilities services market.
This shows the need and feasibility of development and implementation of marketing approach to the formation of a competitive environment and customer satisfaction management methods in the formation of market mechanisms of housing and communal services, as well as the formation of a system of feedback from consumers and comparative analysis of business structures on indicators of customer satisfaction and loyalty.
An important direction is also the creation of a comprehensive approach in order to assess the quality of housing and communal services at the level of self-regulatory organizations, identifying gaps «expectation - perception» and making decisions to terminate contracts and impose obligations on companies that do not properly fulfill their obligations. A competitive business environment should act as a stimulus to develop a client-oriented approach to housing and utilities services aimed at understanding clients' needs and improving the efficiency of work with them.
Thus, the competitive entrepreneurial environment of housing and utilities services in the modern economy is the ability to combine and structure the potential of organizations, their advantages, market positions and tools to influence the environment of functioning to improve its level in qualitative and quantitative measurements.
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© Natalia G. Pletneva, Ksenia V. Iarkina, 2021
Received 15.01.2021
Accepted 20.02.2021
