DIVERSIFICATION OF PRODUCTION AS A STAGE technology that uses specific assets

DIVERSIFICATION OF PRODUCTION AS A STAGE technology that uses specific assets

Conceptual approaches to the analysis of the process of diversification of production

Currently, in the context of the search mechanisms of achieving sustainable economic growth is widely discussed possibility of using the strategy of diversification. However, in consideration of this problem is not clear clarity in the relationship of the concept of diversification to other economic categories — growth, technological change, production structure, export, etc.

Diversification is not a process of increasing the number of industries or companies. The growing number of companies that manufacture products of various product groups, is differentiation. Diversification is the process of increasing the product groups in the production of the same company, there is a specific equipment. Simplistically, this process can be represented as follows.

First comes growth and gain a stable share of sales of the company in one any industry market, the increasing specialization of technology and the use of resources and due to this the use of economies of scale. After obtaining a dominant position in a particular sector the company is facing growth problems — the problem of choosing areas of capital investment and the problem of solving the problem of reducing industry risks associated with changes in market conditions for the industry as a whole. A two-pronged solution to these problems is the issue of diversification based on the use of specific technologies and resources. The company is starting to get the effect of a change. This often yields from the «side» issue directions is smaller than the main areas in which the company specializes. Moreover, the direct costs of this new «spillover» production is usually higher than the direct costs of competing firms, which have long been present in this sector to use their tried and tested technology specific and occupy a dominant position. But thus diversifying capital, the company gets the stability of the presence of several commodity markets. If it turns out that the return on some other areas of the release is high enough, then there is specialization of technology and resources is in the production of this new type of product for the company. The logical conclusion of this trend becomes a selection of this technology in a separate proceeding, which can already be defined as the differentiation of production.

The concepts of «specialization», «diversification» and «differentiation» are substantially different successive stages in the development process of specialization technology.

In the first phase they are characterized by increasing specialization of technology for certain product groups, with specialized as a technical process — the actual technology and organization of production. This leads to the conquest of a dominant position in the grocery market and now obtain monopoly profits. The first phase ends when the process is limited volumes of the industry demand.

At the second stage — the stage of diversification — changes occur more with the organization of production, when changes are required, allowing to use the same specific resources — equipment and human resources — with the release of a different type of product.

Actually changes in technology occur minor not to lose the specific configuration of resources used to produce the initial product group. However, the purpose of this minor adjustment to the actual technical process is still output a single product group. When this goal is reached, the company receives an additional profit from diversity. The second stage is completed when the company already faces a choice: either continue the originally minor changes of a technical process towards a product group, and thereby disrupt the existing setting specific resources used to produce the initial product group, or to stop the change of available technology.

The third stage begins when the company decided to still strengthen the specialization of technology for production of a new product group to the detriment of the overall focus of all facilities at the output of the original product group. This is the division of a single process into two separate technologies to its product specialization. This stage of differentiation in market conditions and is accompanied by the release of a separate legal production.

In the real business practice the relationship between the specialization process and specific resources used in it, on the one hand, and the special characteristics of production — on the other, are complex and multifaceted. The situation when the special characteristics of the product can be obtained only by using unique production technology, and lack of compliance with certain quality parameters of the product manufacturing process.

However, common for economists is the assertion that «… together diverse consumer values, or trade body, manifests the totality of useful work …» This statement can be accepted as true enough in a market economy, when the formation of a variety of integrated structures not affect statistically separate facilities, and occurs at the level of fictitious capital. On the contrary, even within well-established integrated structures is released technologically independent productions in the self-supporting unit in order to improve monitoring and control. The planning and distribution economy is relevant specialization for the production and technological expertise is not respected. In the context of a weak budget constraints and high resource constraint, namely the inability to obtain external resources of a certain quality, «… … the company provides itself with itself through the creation of additional production.»

These facilities were not allocated, as a rule, in a statistically separate companies, otherwise their production was subject to central planning.

The consequence of this lack of control of the subsidiary industries, coupled with increased requirements to the quality of products has been supporting, in particular, repeated lowering of productivity.

On the other hand, companies with similar equipment and similar qualified employees can produce a variety of products. Available as a product specialization, where the company concentrates release of certain finished products of special consumer goods, and detailed hotel — in the production of their individual parts and assemblies. This production companies may differ in purpose, design and technical features, as well as space-time and consumer characteristics.

However, here we can take a second, quite true statement associated with the effect of scale, which in fact we are interested. The effect of scale is not associated with type of products, with a focus not on production, but with the peculiarity of the technology of its production, technological specialization, with the concentration of specific assets, a mechanism for determining the value of which is a second order mechanism. Therefore, the «market forces» will contribute to the unification of technologically homogeneous plants, even if they produce a variety of products.

This effect is known by the term «economies of diversity.» The same trend was observed in the planning and distribution economy to create ancillary industries.

On the role of the diversification of the Russian economy need to mention. The fact is that the problem is usually raised on the basis of diversification of external parameters of the economy — the export structure and industry structure.

With this approach, the main mechanism of state stimulation of diversification is a protection of selected priority sectors, which is associated with objective difficulties in the justification of some of its areas in a concrete historical situation. For different economies at different stages of their development was justified by the need to support the different sectors. «Before the government faces the task of correct selection of the priority sectors. The risk of an incorrect address it high enough. There are no effective methods of forecasting of promising new sectors of the economy. Even if it were possible to scientifically prove the prospects of a particular industry, the choice of priorities can not be justified only by economic calculations because such decisions made at the political level. In addition, serious distorting the signals can be brought about by various lobbying groups. «

Essentially, this approach we are talking about the economy of differentiation, differentiation of industry structure or the structure of exports.

I must say that these processes of specialization, diversification, closely linked to the quality of technological structure of the economy.

The domestic economy is well solved the problem of creating new, high-tech industries and common almost from scratch, and in a short time. This creation of space and nuclear industries and the establishment of the automotive or construction industry. But the problem for the national economy has always been a technological imbalance, diversity and «nepritertost» inconsistencies different technological structures. For example, the observed hitherto underutilized potential of the chemical industry. The reason is the absence of mechanisms of diversification at the micro level, forces me to technology and production with a view to fill existing voids and gaps. In principle, such a major mechanism driving the economic environment, there is a mechanism for profit, but its action or inaction in each case should be investigated. For the United States, for example, one such micro-economic mechanisms of diversification of technology is the existing practice of placing state orders for the production of military products. The government, seeking to minimize the expenditure side of the budget, sets out the minimum purchase prices, but as compensation for current expenditures corporations to develop and produce weapons defines the minimum duration of secrecy on military technology. Thus, corporations, designing military equipment directly involve the conversion, after a relatively short period of time, developed technology for the production of civilian goods. There is a conversion technology, developed and tested by the state order.

Russian transition economy just entering the stage of degeneration, or of a market investment mechanism in the cycle of reproduction processes. A national economic investment vehicle does not necessarily include the mechanisms of diversification, technological mechanisms fill the void, maintain an effective structure of the economy and ultimately — improve the standard of living.

Investment mechanism may be sent or in the creation of innovative industries, such as pushing the Russian government to finance large-scale high-intelligence technologies and thereby dragging the intellectual resources of the conventional industries, as it was in the Soviet economy. Or investment mechanism can be hypertrophied towards certain traditional industries to the detriment of others, for example, in favor of the mining and processing damage. Here, there is a tendency, the danger of which can not be seen clearly if we are not talking about the opposition of the mining and industrial sectors. It is «redrawing of the pie» to change the existing structure of the value added.

This can have both scandalous and occur under the guise of investment activity. For example, in the case of the construction of the plant «Severstal» or other groups separate pipe factory for the production of oriented strictly to the needs of Gazprom when this need can close the supply from existing domestic plants or from neighboring countries, there will be a kind of import substitution or restriction of competition, a loss or zero profit for the national economy as a whole. A similar situation was observed in the United States, when anti-dumping measures against Russian steel. However, the Americans regarded this policy only as a temporary order to allow time to re-own factory. In the long run for the Americans, the principle of «efficiency first», and if the detected inefficiencies of an industry, the «concessions» are short-term, as it was with steelmakers. Seeing no such problems, Russia can get involved in the processes of internal protectionism — that is, the struggle for the redistribution of large companies, without the added cost of the long-term efficiency gains. The state must in this situation is not just to be neutral, as in a political situation any lobby can take up and government funds can be directed to the creation of another «locomotive industry.» The State should encourage diversification activity at the micro level. In our opinion, proper investment policy for major Russian companies as it is built in the developed countries, would consist in investing in the production of technologically related to existing, but to produce, by commodity group of finished products is new.

At the same time it is not necessary for the expansion of the production of a large company it is accompanied by investment in new equipment in new buildings and plants, etc. It is enough to use the system of subcontracting cooperation of large corporations and small businesses. The Russian transient conditions it is believed that the low legal culture of contractual relations leads to vertical integration and unlimited growth of the company. Only some of this behavior is justified by the large companies in transition economy or the specifics of the Russian penchant for «megalomania». Closer to the truth of opinion about the elementary ignorance of the subcontracting system integration of large and small businesses, which in Japan has been widely applied to the 20s, in the US since the 50s, in Europe with the 60s of the last century. I must say that this lack of knowledge of wine to a greater extent lies with the state, because in all of the developed economies widespread subcontracting and scope of its stage of production, not only repair and service, took place under the patronage of the state.

In France, the task of integrating the production of large and small business was put in state plans for economic and social development.12. In France subcontracting exchanges — a form of interaction of large and small firms, fully supported by the state — at the beginning of its activity covers mainly the one industry — machine building and metal processing, as the industrial sector with a maximum spread of small business.

It is in such mechanisms at the micro level is hidden potential of import substitution, improve product quality, technology, and life in general. For example, for the steel industry, this means expanding production towards the consumer up to the release of ready-to-assemble metal skeletons industrial and public buildings (shops, hangars, easily constructed shopping pavilions, etc.) or metal parts ready for assembly (as in Mass production, in particular the automotive industry, and with the release of a special limited-edition art). In addition to production units the company can carry out certain functions related to servicing the main assembly plant. This practice accordingly technological and functional specialization, including ancillary industries.

In other words, in many cases promising is the specialized practice of subcontracting related to the specificity of how technology, funds and production contractor.

Finally, numerous examples where a particular process can be used to produce heterogeneous products not necessarily associated with the available vertically. Rational direction of this production becomes a concentration as possible of a wide range of products, including manufactured by subcontractors. In this technological specialization of production is closely connected with the trends of product diversification.

Today, the Russian economy there is a significant backlog in the degree of diversification of manufacture compared with developed countries. The current level of development of the domestic market does not allow domestic enterprises to master the many technologically insignificant changes in production and thereby to achieve the degree of differentiation of the product, which is typical for large foreign firms. By itself, this process should not be outside the focus of economic policy, since it is directly linked with economic growth, and import substitution, and increased competitiveness of the economy.

Analytical apparatus used for the quantitative assessment of the process of specialization in production

Microeconomic research tools specialization of production.

Consider the general order of the parameters studied, analyzed in the assessment of the project to expand production at the issue of diversification, which is used by financial institutions in project financing.

For the economic study for the expansion of production to the diversification of the production of the following three main indicators or, more precisely, the unit issues identified certain indicators. If you find the value of these parameters is necessary to produce a three-dimensional statistical studies involve peer reviews, etc.

Firstly, it analyzes the presence of economies of scale from the existing level of production and confirmation of his actions during the expansion issue. This indicator is used technological boundaries of production based on changes in the elasticity of the cost of production of goods, depending on changes in the use of physical capital in the company.

Similarly, food markets abroad by the technology industry should be carried out where there is a sharp jump in the value of the index in terms of the elasticity of the cost of capital used to produce the same type of products on the same or on different plants. However, unlike the boundaries of the product market for the technological frontier is necessary to check the stability of the changes in the elasticity of even greater scale.

The boundary of the product market is defined at the point where there is a jump in cross-elasticity of demand for the product.

This second figure gives an idea of ​​price and quantitative benchmarks possible diversification issue. In practice, the degree of market interdependence between different modifications of certain goods as calculated by measuring the closeness of correlation between the prices.

At that stage of integration of the commodity group (increasing the number of products included) when the correlation is much weaker, to draw the line that separates the industry market. It should be remembered that a number of «adjacent products», each pair of which has a high correlation, the property has a low correlation to the extreme tova-ditch in a row.

This is one of the possible formalization of the principles of complementarity of products. Accordingly, if the sector number (within the overall product or group), there is complete complementarity density or production, this range will be characterized by a lack of discontinuities, i.e. between all the «neighboring goods» within this group there is a high degree of correlation. Diversification and lead to such a situation. A side effect of this process is the same density of the money or the situation where a slight increase in the price of goods within the product group takes a slight increase in product quality.

It is here that you must answer the question of a monopoly position in the grocery market and the presence of this product specialization proper domestic or import substitutes. If not, there is a monopoly in the market for the type of product, therefore, the question of the possible establishment of a rival production by product as an alternative to other methods of antimonopoly regulation — unbundling, price controls, etc.

Finally, the third set of questions after a certain grocery with a view to diversify solves the problem of verification «the effect of economies of scope», ie confirmation of the positive effect of scale with the growth of clearly defined costs to produce certain products. That is measured in compliance with the specialization of production technology characteristics of the products, such as using a different elasticities, which will reflect the costs of the enterprise in the reaction modification of its products.

Feature increase of costs is that it is not calculated for different numbers of identical products, and for products which are close substitutes for which are known (according possible competitors) measures of potential variable cost. In other words, it takes into account the changes in the volume of production in the enterprise products similar purpose and similar features from the previous versions of this product or related goods, produced on the same equipment and the same staff.

If a small percentage change in the volume of production of alternative goods or a slight modification of the product characteristics value of the production costs will rise sharply in relation to the initial level, then we — rigid attachment to the specification process technology produced product. If this sharp increase is not observed, then this company can smoothly shift to the release of an alternative type of products that do not pose for him with substantial costs.

I must say that the profitability of the actual product diversification of this issue may be smaller than for undertakings specializing only in the production of this product.

Economic effect is achieved not by searching the most effective set of industries, and through the use of economies of scale in its various manifestations.

Despite the seeming simplicity of research at the micro level, the process of obtaining the necessary results are quite expensive and takes up to six months time. This high proportion of expert estimates and parameters with some probability of occurrence, which entails a high risk component.

Suffice it to cite such data that through project financing the Bank from 1991 to 1997 of the implemented 47 projects in Russia, only 10 were from industry, and the rest — from the extractive industries, communications, transport and finance.

Changes in the production of individual firms is reflected in the sectoral issue, it is not only in terms of production volumes, but also in the technology section, a cross-sectional structure of product quality in the industry.

Processes specialization by definition means moving upwards «workability» of effectiveness. If in fact there is deterioration of the quality of products in the amplification process specialization output, this means that from the «set of skills» product withdrawn are «quality», which are not generally mandatory for consumption which do not form it as a product, and They are by, optional.

In this case, the process of specialization, increasing the efficiency of these «essential qualities» and does not support cuts demanded by the market. For example, the characteristic of the current state of the technology trend towards not repairable components, parts and assemblies. That is a comparative cheaper compared to the «facelifted» similar goods consumed in the case where it is necessary to change rather than to repair, as it was with the «old» kind of the goods. But it is just a change in the characteristics of the «core set» of qualities that make up the product. Change the «core set» of qualities, rather, a change of attitude of the market, the demand to «set of skills» that form the product, we do not consider, though, of course, in many ways it is a manufacturer produces a change in demand. Diversification of the more complex process of change in the qualitative structure of industry output.

First, diversification means expanding existing production technology to produce products of other product groups, rather than one in which the existing production specialization achieved.

Second, the possible expansion of the scale of high-quality technology in the same direction, in the case of production of high quality at a higher price, and the other in the direction of reducing the technological component, if it occurs with a decrease in the quality of goods.

Third, since the scale of the technological variety of food groups is very different, the process of diversification, expansion of manufacture of other product groups on an imaginary scale processing may be on opposite sides of the level of goods, which had been achieved specialization.

In any case, the processes of diversification increases the density of space technology in national economy, and the processes used in technology specialization moved towards their complications. It should be noted that the study process scale high-quality technological economic structure easy to observe and analyze the changes of the structure, rather than its absolute performance.

Indeed, changes in the technological structure to analyze possible mechanisms through specialization issue and to formulate the absolute scale of the technological characteristics necessary to know the essence of the process in different sectors. The technological level of production to explore possible by various criteria. The most commonly used when talking about the technological structure of the economy, the criteria on the degree of processing of primary resources by skill level or an enabled workforce. Probably, in the future, and these statistics will master the task of monitoring technology, but now we are satisfied with the statistics release.

Moreover, the criterion of the degree of specificity, versatility is the most «economic», the most «value» as it may be reduced to universal quantitative measure — quasi-rent and the level of risk — they are used in the theory of specific assets.

Macroeconomic aspects of the research specialization of production.

Due to the complexity of the above micro-economic approach to the study of specialization is necessary to try and econometric way to confirm the other methods of evaluation expertise.

It appears that the macroeconomic analysis of the qualitative structure of the economy will greatly reduce the area of ​​further micro-economic studies.

The transition from microanalysis to macroeconomics in this case, not only does not cause difficulty, but also allows you to create macro-economic parameters for assessing the effectiveness of companies used technology, competitiveness, etc. micro level.

The entire industry output may be represented as the output of various technological level. This for us is not the very essence of the principle of technological scale. For example, it is possible to select the total for various N-bit test division from minimum to maximum technological level of the products or, conversely, used individually bit scale and then compare them according to certain schedules pravilam.Iz industry by successive laying on a scale of release to move the process of national economic structure.

We are interested in the processes that lead to an increase in «technological density» issue. The criterion of «the density of the issue» is defined as a smooth change in production volumes of the product group with the gradual transition of the technological scale.

In other words, it means being able to supply a particular product to get from this product group by the criterion of «price-quality». That is, no shortage situation where the consumer is forced to purchase goods at a higher price with higher quality characteristics or buy goods less, but at a price no higher than the price it considers «fair».

On the other hand, the criterion of «the density issue» characterizes the efficiency of allocation of resources, as the efficient allocation option affects complementarity (matching) of the goods.

Graphically industry output with high technological density not necessarily appears as a rectangle with the same amount of output of different quality. He will have a smooth transition when changing the volume of production of quality products.

For the domestic industry is characterized by «double-humped» appearance of technological structure. That is the relatively weak development of the middle level of technology.

Since technology is achieved by balancing the processes of diversification, its level can be assessed through a diversification measure.

At the same time as a guide, you can use similar rates of diversification in developed countries. Russian diversification corresponds to the developed countries 50 years of the last century. Now the norm for developed countries, the level of diversification is 3-4 times higher. Technological balance, expressed as the level of diversification is one of the indicators of industrial competitiveness and economic efficiency.

Non-equilibrium of the modern economy is directly related to the diverse manifestations of monopoly, is magnified during the transition period. Often these manifestations of deep, objective basis for a high degree of specialization of enterprises, as well as asset specificity.

It turns out that the degree of specialization or concentration of homogeneous production and capital in a particular business area is proportional to the level of specificity of the assets reflected in the index of dispersion, given the volume of their use in the industry. The higher the specificity of the assets, the higher the level of concentration and specialization of production, capital. Moreover, the specific factors of production is directly proportional to their economic profitability, and the coefficient of proportionality of market demand elasticity acts as a measure of the intensity of the reaction parameters of industry sales in volume terms in response to changes in the price of market. The elasticity of the market demand is one of the indicators to establish quantitative proportionality between the processes of specialization and concentration, and hence the specificity — on the one hand, and the rate of return of industrial production — on the other.

In general, the category of specialization and monopolization of production are not identical. The company may be a significant proportion of the total producer of national, or even international release of any product or service, but to practice the diversification of production and not to be a highly specialized business. Therefore, the monopolization of production can occur without specialization. Specialized manufacturer is also not necessarily a monopoly. It can compete with other specialized manufacturers of the same product using that technology.

However, the current economic reality is arranged in such a way that it is often highly specialized company, using the effect of increasing returns to scale, with the full satisfaction of all market demand monopolizes the market and the processes of differentiation and diversification require special institutional conditions that are not always present in the economy.

FINAL policy implications

Thus, for the purposes of economic industrial policies require a description of the technological structure of the Russian economy based on the above basic dependence of the degree of specialization, concentration, monopolization and market power. The complexity of this econometric problem associated with the fact that the transformation of the old structure is not yet complete and the observed processes have a great dynamic potential. However, the results of such an analysis, based on macroeconomic statistics, appear to be more objective to select the direction of application of government efforts to stimulate the growth of the domestic economy rather than the microeconomic findings largely based on expert opinion or a purely political decision, it is difficult to be separated from one or another lobbied interests.

As noted in several studies the current economic situation in Russia observed the difficulties of economic policy in the choice of areas to stimulate industrial growth is partly due to insufficient study of the issue of economics. It is widely believed that it is necessary to select a number of «locomotive industries» or areas of technology development, which in the state of stimulation will help «pull» the entire economy in the long run, any proposal to regulate macroeconomic parameters and rates of monopoly industries. It seems more balanced, less risky, more efficient in the medium-term approach where the emphasis is on the expansion of existing production facilities, having a specific technology through the mechanism of the diversification issue.

The task of diversification issue, if we bear in mind the lower the level at the leading domestic manufacturers as compared with the large foreign companies, in the medium term seems more urgent than the task of choosing the direction of technological breakthrough in the long term.

In an economic not enough fledgling state, which only develops the market mechanisms of regulation of economic processes and proportions, albeit modest, but real progress towards sustainable growth is more important than the search for a risky alternative technological breakthrough.

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