FROM CLUSTER POLICY TO REGULATION OF VERTICAL COMPETITION
Abstract
The key problem of the agro-industrial complex is the inequality of the market power of related enterprises. In fact, there is unfair vertical competition. Monopolists (producers of mineral fertilizers, chemical plant protection products, and large retail chains) sell their products at an inflated price. Organizations that occupy a monopsony position (processing enterprises, retail chains) buy products at low prices. As a result, the economic availability of food for the population decreases, and the main transaction costs are borne by small and medium-sized agricultural producers. This problem is partially solved by the agro-industrial integration of ownership, as a result of which adjacent enterprises cease to be organizationally independent, and the relationship between them is regulated by the management of the agro-industrial formation. For a significant number of agricultural organizations that are not part of integrated entities, as well as for peasants (farmers), "price scissors" still remain a factor constraining development. The attempts to use new forms of integration, in particular agro-industrial clusters, have not changed the situation. More than 10 years after the activation of the cluster policy of the Ministry of Economic Development of the Russian Federation and subsequent measures for the formation and development of regional agro-industrial clusters, there have been no drastic changes in the economic situation of organizationally independent agricultural producers. The purpose of the study is to clarify the reasons for the insolvency of cluster policy and substantiate promising measures to regulate vertical competition in the agro-industrial complex. It is established that the main disadvantage of cluster policy is that the cluster as an economic phenomenon does not have clear boundaries and does not have the property of subjectivity, which significantly complicates the implementation of regulatory impacts on organizations included in the agro-industrial complex and on the relationship of processing enterprises with large retail chains.
Introduction
Cluster as a scientific term was first used as a tool for multivariate statistical research, which is cluster analysis in the 30s of the 20th century. In relation to the methods of cluster analysis, “a cluster is usually understood as a part of the data that stands out from the rest by the presence of some homogeneity of its elements” [Mirkin B.G., 2011].
According to the National Standard of the Russian Federation, which establishes procedures of randomization and random sampling, the cluster is “part of the population, which is a union of disjoint groups of sampling units, allocated in accordance with the established rule” [National Standard of the Russian Federation. Statistical methods. Randomization and random sampling procedures, 2013].
The term cluster came into use in economic science at the turn of the century after the publication of a number of works by M. Porter, including the article “Clusters and the New Economics of Competition” (1998), which notes the following: “Clusters are geographic concentrations of interconnected companies and institutions in a particular field. ... Clusters promote both competition and cooperation. Rivals compete intensely to win and retain customers. Without vigorous competition, a cluster will fail. Yet there is also cooperation, much of it vertical, involving companies in related industries and local institutions. Competition can coexist with cooperation because they occur on different dimensions and among different players” [Porter, Michael E., 1998].
It is possible to find dozens of similar interpretations of the economic cluster with their inherent individual variations. N.V. Karamnova and S.N. Trunova admit that the subjects of the cluster have common goals: “A cluster is a group of interconnected enterprises belonging to a single geographical area, including research institutes and universities, enterprises ... complementing each other to achieve their goals and strengthen as their competitive advantages, and the region as a whole” [Karamnova N.V., Trunova S.N., 2020]. At one time, we also could not resist the temptation to give a “refined” formulation: “clusters are groups consisting of interconnected economic entities, often belonging to different industries and different owners, but forming an integral economic community” [Anichin V.L., Chugai D.Yu., 2008].
Many publications follow the logical link. Since the cluster is a modern and perspective form of interaction of business, scientific and educational institutions, its (cluster) should be formed (in any problem area). In connection with the fact that for a long time one of the most problematic areas of the Russian economy was the agro-industrial complex, a large number of scientific works are devoted to various aspects of the agro-industrial cluster: the formation of an effective model [Yudin A.A., Tarabukina T.V., Oblizov A.V., 2022], experience and prospects of formation [Shchetinina I.V., Stenkina M.V., 2021], development of regional one Savina S.A., Kalashnikov D.V., Zemskova O.M., 2021], potential [Oborin M. S., 2020].
A.A. Arsky, in the context of his research, interprets the agro-industrial cluster as “an organized system, cooperation, of several subjects of the agro-industrial complex, whose activities are aimed at the production of agricultural products or the provision of services to enterprises of the agro-industrial complex” [Arsky A.A., 2020].
The definition of “Agro-industrial cluster” is also used in practice. It is part of the construction terminology, where the agro-industrial cluster is “a group of enterprises on production, storage, primary processing and delivery to the consumer of agricultural products, technologically connected, located in a designated area, united by a common system of transport and engineering communications, administrative and household services” [Code of Rules. Agro-industrial clusters. Design Rules, 2020].
As a result of this analysis, we agree with the opinion of a number of authors who note the lack of unambiguity in the interpretation of the term “cluster” as an economic phenomenon. L.S. Markov notes the absence of not only a single generally accepted definition of a cluster, but also any noticeable progress in this direction [Markov L.S., 2014]. P.S. Yunusova also believes that in Russia there is no single generally accepted definition of the concept of “cluster” [Yunusova P.S., 2021].
Mainpart
Terminological uncertainty, which, according to L.S. Markov, represents the main fundamental problem of clusters [Markov L.S., 2015], due, in our opinion, to the inability to clearly define the boundaries of the cluster. It is also obvious that the cluster lacks subjectivity, which is characteristic of any commercial and non-commercial organization and their associations. These findings apply both to economic clusters in general and to agro-industrial clusters in particular. It is not surprising that more than 10 years after the cluster policy received official methodological support from the Russian Ministry of Economic Development [On the implementation of cluster policy in the Russian Federation, 2008], A.E. Kalinina et al. note the lack of data on the presence of clusters and the results of their development in open publications of government statistics [Methodological approaches to assessing the effectiveness of cluster policy implementation in the regions of the Russian Federation, 2019].
Therefore, the widespread use of the term “cluster” in publications devoted to the issues of agro-industrial integration is not always justified. We proceed from the fact that, firstly, it is not desirable that the semantic content of any term be overloaded. Secondly, if there is an objective need for any new form of interaction between agribusiness entities, then this new form should receive a distinctive name that is unambiguously interpreted and, accordingly, allows accumulating and summarizing factual and theoretical material in order to analyze, evaluate the effectiveness and improve this new form of interaction.
The multiplicity of meanings of the term “cluster” and the vagueness of the content of the definition of “agro-industrial cluster” give reason to abandon the “cluster” terminology in relation to the description of the interaction of agribusiness entities. At the same time, it is obvious that under the agro-industrial cluster, many authors understand a new kind of agro-industrial integration, which is at the same time a new kind of public-private partnership. The latter follows from the goals and content of the interaction of agribusiness entities postulated in a number of publications with the coordinating role of public authorities.
In the agrarian economy, it is not an abstract cluster that is really in demand, but more effective interaction between agribusiness entities and related enterprises, which can be achieved on a new institutional basis in a digital economy, in which, according to the Decree of the President of the Russian Federation, the key factor is the operational analysis of a large volume information covering the areas of logistics, production, storage, sale, delivery of goods and services [On the Strategy for the Development of the Information Society in the Russian Federation, 2017].
In the meantime, in the structure of the retail price of food products, a large and increasing share (in terms of the prevailing number of positions) is occupied by the turnover of the sphere of circulation (Table 1).
Таблица 1
Доля оборота сферы обращения в розничной цене продовольственных товаров, %
(по данным Росстата [Цены в России, 2012, 2021])
Table 1
The share of turnover of the sphere of circulation in the retail price of food products, %
(according to Rosstat [Prices in Russia, 2012, 2021])
2000 | 2021 | Linear trend for 2000-2021 | |
Fat cottage cheese | 17.9 | 35.83 | 0.746 |
Low-fat cottage cheese | 17.0 | 32.87 | 0.662 |
Pork (excluding boneless meat) | 16.8 | 33.23 | 0.611 |
Boiled sausage | 17.3 | 26.11 | 0.481 |
Wheat flour of the highest grade | 32.0 | 31.52 | 0.476 |
Wheat flour pasta | 30.1 | 46.74 | 0.427 |
Wheat bread and bakery products from flour of the highest grade | 17.9 | 23.22 | 0.323 |
Beef (except boneless meat) | 15.8 | 28.88 | 0.197 |
Sour cream 15–20% fat | 15.6 | 19.92 | 0.080 |
Butter | 15.9 | 19.69 | 0.057 |
Rennet cheeses, hard and soft | 28.9 | 20.08 | 0.013 |
Granulated sugar from sugar beet | 26.3 | 26.88 | -0.072 |
Chilled and frozen chicken | 20.1 | 19.86 | -0.076 |
Whole milk pasteurized | 23.2 | 19.52 | -0.078 |
Table eggs | 17.8 | 13.63 | -0.386 |
Sunflower oil | 42.2 | 20.63 | -0.413 |
How, apart from the exercise of unrestricted market power, can it be explained that the share of turnover in the retail price of pasta is almost 50 %?
At the same time, there is an increase in the cost of most types of material and technical resources used in agriculture (Table 2).
Таблица 2
Динамика соотношения цены за 1 т производственных ресурсов
(электроэнергия – тыс. кВт•ч) и 1 т пшеницы в России (по данным Росстата
[Сельское хозяйство в России, 2021])
Table 2
Dynamics of the price ratio for 1 ton of production resources (electricity – thousand kWh) and 1 ton of wheat in Russia (according to Rosstat [Agriculture in Russia, 2021])
1995 | 2020 | Linear trend for 1995–2020 | Average for 1995–2020 | Trend to average | |
Nitrogen fertilizers | 1.04 | 3.58 | 0.192 | 3.21 | 0.060 |
Potassium fertilizers | 0.92 | 3.50 | 0.155 | 2.61 | 0.059 |
Phosphorus fertilizers | 1.76 | 4.04 | 0.174 | 3.46 | 0.050 |
Electrical energy | 0.27 | 0.46 | 0.018 | 0.47 | 0.038 |
Diesel fuel | 2.42 | 3.93 | 0.107 | 3.76 | 0.028 |
Automobile gasoline | 3.27 | 4.28 | 0.104 | 4.32 | 0.024 |
The difference in the market power of the representatives of the 1st and 2nd spheres of the agro-industrial complex is so great, and the price regulation is so inefficient, that the amount of wheat grain that needs to be sold to purchase a unit of the resource is characterized by a long-term upward trend.
It is important to consider that the agro-industrial production in Russia is still multi-structural, despite the actively ongoing processes of economic concentration. The number of peasant farms and individual entrepreneurs is increasing, the volume of their production activities is growing (Table 3).
Таблица 3
Объем и структура продукции сельского хозяйства, произведенной в России
по категориям хозяйств [Сельское хозяйство в России, 2021]
Table 3
Volume and structure of agricultural products produced in Russia by category
of farms [Agriculture in Russia, 2021]
| 2010 | 2016 | 2017 | 2018 | 2019 | 2020 |
Agricultural products in actual prices, billion rubles | ||||||
Households of all types | 2462.2 | 5112.3 | 5109.5 | 5348.8 | 5801.4 | 6468.8 |
Agricultural organizations | 1102.9 | 2818.4 | 2818.5 | 3022.1 | 3348.4 | 3787.0 |
Households of the population | 1182.5 | 1659.2 | 1655.4 | 1656.7 | 1659.7 | 1717.6 |
Peasant (farming) households, including individual entrepreneurs | 176.8 | 634.7 | 635.6 | 670.0 | 793.3 | 964.2 |
% of total | ||||||
Households of all types | 100 | 100 | 100 | 100 | 100 | 100 |
Agricultural organizations | 44.8 | 55.1 | 55.2 | 56.5 | 577 | 58.5 |
Households of the population | 48.0 | 32.5 | 32.4 | 31.0 | 28.6 | 26.6 |
Peasant (farming) households, including individual entrepreneurs | 7.2 | 12.4 | 12.4 | 12.5 | 13.7 | 14.9 |
According to the results of the All-Russian Agricultural Census, in 2016 in Russia only 21.0% of small agricultural enterprises had processing facilities used to produce one or more types of products, and among peasant farms and individual entrepreneurs there were only 5.2% of such enterprises. Consequently, these economic entities will enter contractual relations with processing enterprises regarding the sale of the bulk of their products. Since the market power of most processing enterprises is much greater than that of small businesses, the latter will face price discrimination, which can be eliminated either by the cooperation of sellers or by regulatory influence from public authorities.
At the same time, not all agro-industrial formations, including the largest agricultural holdings, control the technological chain “production + processing of agricultural products”, which means that contractual integration and vertical competition relations that require regulation also arise between them.
In our opinion, it is advisable to carry out state regulation of vertical competition in the agro-industrial complex based on regulatory pricing and incentives for participants in the state program of contract integration (hereinafter referred to as the Program), which bring the essential terms of contracts for the supply of material and technical resources, electricity, agricultural products, products processing of agricultural products. Essential conditions include terms, objects, prices and delivery addresses.
Regulatory pricing involves the establishment of a price level that provides economic entities with an average for the totality of related enterprises, profit per unit of standard industry costs. Enterprises in which the cost of production will be below the industry standard will have a level of profitability above the average.
The participants of the Program shall be considered as economic entities that have agreed to participate in the Program, have indicated the planned volume of purchase and sale of goods and have concluded the main and supporting contracts drawn up and proposed by the governing body of the Program.
Schematically, the interaction of the main participants of the Program is shown in the Figure.
The main benefits from the implementation of the Program for agricultural producers consist in an increase in purchase prices for their products and a decrease in prices for material and technical resources. For enterprises in I and III spheres of the agro-industrial complex it is an increase in income from a fuller utilization of production capacities, which over the past years have been used only partially (Table 4).
Таблица 4
Уровень использования среднегодовой производственной мощности при производстве промышленной продукции в России, % [ЕМИСС URL: https://fedstat.ru/indicator/58629]
Table 4
The level of use of average annual production capacity in the production of industrial products in Russia, % [EMISS URL: https://fedstat.ru/indicator/58629]
Types of industrial products | 2017 | 2018 | 2019 | 2020 | 2021 |
Cereal | 37.14 | 37.83 | 37.18 | 37.62 | 42.53 |
Milk | 49.56 | 50.91 | 50.85 | 54.4 | 54.21 |
Flour from cereals, vegetables, and other crops | 51.90 | 51.84 | 56.82 | 55.56 | 54.56 |
Compound feed | 67.29 | 70.55 | 70.06 | 70.61 | 71.16 |
Vegetable oils and their fractions, unrefined | 58.87 | 62.63 | 67.47 | 81.09 | 72.31 |
Meat and offal, edible (poultry) | 76.09 | 74.14 | 76.54 | 67.23 | 72.34 |
Beef, pork, lamb | 65.51 | 69.05 | 71.39 | 72.95 | 73.42 |
White beet sugar | 95.49 | 90.12 | 94.39 | 88.50 | 90.12 |
Mineral fertilizers | 90.16 | 85.83 | 87.34 | 89.06 | 90.80 |
Conclusion
Imperfect vertical competition is the main institutional constraint for the development of the agro-industrial complex and increasing the economic availability of food for the population. The subjects of vertical competition are related organizationally independent enterprises, between which purchase and sale transactions are possible or take place.
The agro-industrial integration of property, the processes of which have been actively proceeding since the beginning of the 21st century, has only partially solved the problem of imperfect vertical competition. The development and activation of the cluster policy by the Ministry of Economic Development of the Russian Federation in 2008, despite numerous expectations, did not lead to an improvement in the situation. The concept of economic clusters has not stood the test of practice due to the fuzziness of the boundaries and the lack of subjectivity of the economic cluster, which limit the possibilities of targeted managerial influences.
Promising is the state regulation of vertical competition in the agro-industrial complex in an environment of organizationally independent enterprises based on regulatory pricing, centralized collection of information on the planned volumes of purchases and sales of goods, development of a set of interrelated contracts and incentives for participants in regulated contractual relations.
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