THE EFFECT OF COMPETITION FORCES AND COMPETITION STRATEGY IN THE MARKET OF ORGANIC PRODUCTS

Abstract

Rapid increase of organic farming areas is observed after Latvia acceding to the EU, and alongside with the support available for organic farmers in the scope of agro environment programmes. In order to ensure the growth of the sector, it is necessary to identify level of the sector’s development and analyze competition environment that affects the market attractiveness, and consequently – the changes in the capital investments investigation. In order to perform research authors made analysis of the existing competitiveness forces in the market (competition environment), identified the life cycle level of the market of organic products (the attractiveness of the sector for the development of business activities), characterized the most appropriate strategic formulations of the competition between organic farms and suppliers of conventional farming (the competition advantages in the level of enterprises), studied the elements of the product value formation (the competition advantages in the level of enterprises and the sector).
The indicators, characterizing the market of organic products, give evidence, that organic farming at present faces the transition period from the period of growth to the period of maturity, which points at the expected considerable changes caused by the influence of competition forces. Under the conditions of external environment factors’ consistency, the market of organic products at present has depleted its potential for the development, and only the state intervention in the management of the competition forces regarding substitute products and consumers will be able to stabilize and renew the growth of the organic market.
The analysis of the value chain prove that the organic farming in Latvia is peculiar with poorly developed elements of inlet and outgoing logistics, where few suppliers of agricultural products perform minimal activities in the area of marketing, and the complex of support activities necessary for the organic farming – scientifically practical research, consultations, availability of market information – is also insufficiently organized.
Basing on the research factors, which affect the organic farming market environment, the competition forces and elements of the product value formation chain, the authors created a hierarchy analysis model to detect which of the factors, existing in the market environment, are the most important for the promotion of the organic product market development and the stimulation of exactly which value chain core activities element can cause the most considerable effect on the development of organic product market.
The method of the hierarchy analysis comes up with a convincing answer, that at present the priority measures for the promotion of the development of organic products should be the increase of the production amounts and the implementation of the integrated marketing communication activities, secondary - facilitation of the processing and the outgoing logistic.