The effect of market competition on profit fluctuations of food industry companies listed in Tehran Stock Exchange

Master's Thesis - Industrial Management, Financial Orientation

Abstract:

The purpose of this research is to investigate the effect of market competition on the profit fluctuations of food industry companies that are members of the Tehran Stock Exchange. In this research, which is practical in terms of its purpose and semi-experimental research in terms of its method; After an overview of competitiveness and views related to it and volatility of profit, a questionnaire related to 6 sub-indices of Porter's five competitive forces model was considered and after confirming its validity and reliability, it was distributed among 284 managers and accountants of food industry companies and economics professors. The results of applying the t-student test, the significance of all 6 independent variables from the point of view of economists and five independent variables (except the number of customers) from the point of view of managers. and shows the accountants. At the end, these 6 variables (number of suppliers, distribution system, number of competitors, government support, alternative products and number of customers) were ranked using the standard beta column from the coefficients table in spss analysis, and finally, the number of suppliers and distribution system from the point of view of managers and accountants and alternative products and the number of suppliers from the point of view of economists were recognized as the most important factors affecting profit and profit fluctuations.

Specialized vocabulary:

Competitiveness, profit fluctuations, number Commercial competitors, industry

Introduction

A penetrating look at the surrounding world reveals the fact that ((today's world is very different from the past)). In the last two decades, the concept of competitiveness has gained special importance with the expansion of global trade, rapid changes in consumption and demand patterns, the revolution in information technology, as well as the increase in the number and quality of local and international competitors.

In the global economy, competitiveness means the possibility of obtaining a suitable and stable position in international markets. According to the Organization for Economic Cooperation and Development, the ability of a country to produce goods and services to be offered in international markets is one of the most important aspects of competitiveness (Kirimi Hasincheh, 2016).

Some consider competitiveness to be a macroeconomic phenomenon. Another view considers competitiveness as a product of abundant labor and cheap wages in the country. Recently, many views consider competitiveness to be heavily influenced by government policies. Also, some others have defined competitiveness as the ability to force the customer to choose the organization's offers over competitors. By examining all the above definitions, it is clear that each of them expresses one of the dimensions affecting the competitiveness of countries in a particular industry. Organizations need information about the environment to run their business, sometimes, instead of paying attention to general information, organizations only pay attention to minor fluctuations in the environment and rely only on available information. One of these information is profit fluctuations, which is of particular importance.

The materials presented in this chapter are aimed at expressing the generalities of the research and a brief explanation of why and how to conduct the research is presented. Therefore, first, the research problem and the importance and necessity of conducting this research are discussed, then topics such as research assumptions, research tools, data collection methods, research limitations, time domain, spatial domain and the use of the result of this research, the description of words and terms are described. The purpose of this section is to get familiar with why research is done and how to do it. 1-1- Statement of the problem In today's world where we are witnessing vast and fundamental changes in the world economy, competitiveness is a key issue at the world level and it is considered as a means to achieve economic growth. One of the characteristics of successful companies is the competitive advantage, and at the same time, the characteristic of unsuccessful companies is the lack of benefit from this advantage (Kayat and Gadlop, 2009). Smith (1995), with a global perspective, considers the competitiveness of organizations to be different in the way they operate and work methods. He considers world-class companies to have common characteristics compared to other companies in order to improve competitiveness. Smith was successful by formulating the competitive product market as the appropriate framework for resource efficiency and subsequently influencing inefficient management (Giroud and Muller, 2009). Machlap (1967) argues that there is no environment for mismanagement in a perfectly competitive market because all inefficient firms exit the market quickly.The main goal of companies is to define strategies that will bring the company to the highest level of performance as a result of high profits by increasing the intensity of competition among them. Earnings management occurs when a manager uses his personal judgment for financial reporting, which misleads some shareholders about actual economic performance or to influence the results of contracts that depend on reported accounting figures (Guttman et al., 2006). Managers who consistently consider themselves to be efficient, in order to show themselves to be efficient, they not only need a deliberately changed accounting profit, but also have to exert influence in the real market. Because the only way for companies to survive and last in the market is to be able to compete with other competitors in the industry in which they operate. As a result of this competition, companies may take measures such as profit management for various reasons due to the inability to compete (Bagnoli and Watts, 2007 and Kedia and Philippon, 2009).

According to the research conducted in related topics such as Powell (2009), which indicates that market competition has a negative effect on the quality of profit, and also in another study, Cheng et al. (2011) stated that a positive relationship between competition There is a product market and the quality of companies' profits. Therefore, it is likely that there is a relationship between market competition and profit fluctuations, which requires testing to determine its results.

In this research, Porter's model is used to investigate the effect of competitiveness on the profit fluctuations of food industry companies.

According to Porter's model, the industry's competitive environment is determined by the confrontation of five relatively stable forces that are common to all industries, but are different according to the economic and technological characteristics of each industry.

Competition These forces determine the long-term profitability of an industry. The characteristics and intensity of these forces depend on the structure and economic and technical characteristics of each industry. These five forces are: the threat of entry of new competitors, the intensity of competition between existing competitors, the threat of entry of substitute products, the bargaining power of the buyer, the bargaining power of the supplier.

The stated reasons have provided the main motivation for conducting the present research.

1-2- The importance and necessity of the research

Today, profit fluctuations are considered one of the most controversial and attractive topics in accounting and financial management research. Because investors pay special attention to the profit figure as one of the important decision factors, this research has its own importance from the behavioral aspect. Researches have shown that the low and stable fluctuation of profit indicates its high quality (Ebrahimi Kardler et al., 88). In this way, investors invest with more confidence in the stocks of companies whose profit trend is more stable. Among the expected results of this research is to create a new understanding and awareness of the impact of market competition on profit fluctuations, as well as providing suggestions for improving the profits of companies using international competitiveness. It has been developed. Conducting similar researches in Iran and examining the effective factors from other perspectives can enrich the literature on this topic. The purpose of this study is to investigate the effect of market competition on the fluctuations of profits of food industry companies listed in the Tehran Stock Exchange and to provide useful information to shareholders, investors, brokers, financial analysts and managers of industrial companies. In this research, factors such as government support, the number of competitors, etc.

1-4- Research questions

Main questions:

Are market competition and product prices related?

Does product brand have an effect on market competition?

1-5- Research hypotheses

Main hypothesis:

Market competition on fluctuations The profits of companies have an effect.

Sub-hypotheses:

From the point of view of industrial company managers, market competition has an effect on the fluctuations of company profits.

From the point of view of economists, market competition has an effect on the fluctuations of company profits.

From the point of view of accountants, market competition has an effect on the fluctuations of company profits.