Table 3.
Characteristic |
Description | Strategic |
Key factors of success (potential competitive advantages) | Importance in COVID 19 |
---|---|---|---|---|
Features | importance | |||
Suppliers | ||||
Internal suppliers in most cases (integration of the companies) | Fertilizer companies are large vertically integrated industrial enterprises with the high level of dependence on the supply of the main limited raw materials (potash ores, phosphoric ores, natural gas). Companies, in most cases, try to provide access to main kinds of mineral resources in accordance with the list of fertilizers produced, as well as try to operate independently of the terms and conditions offered by suppliers. | Determines lower production costs for integrated companies, threatens non-integrated producers who are vulnerable due to possible irregularities in the supply chain and a variability in supply prices | Vertically integrated business model | Resilience of the supply chain of raw materials |
Access to all types of mineral resources | Low production costs during low prices | |||
Access to unique mineral resources | ||||
Customers | ||||
Huge amount of customers | The customers, in most cases, are the final consumers (several hundred thousand farms), spread across continents, countries and regions, which determines seasonal fluctuations of demand and remoteness places of consumption from places of production. Production is sold through own sales divisions, international traders and by digital retail platforms in some companies (for example, Nutrien). None of the customers can affect market transactions and the level of competition in the market. | Determines lower costs and security of supply for the companies with own logistic and distribution systems, as well as explains the special role of possibilities to transform the production and sale systems depending on the demand for fertilizers in regions and by types | Own logistic system | Independence from individual consumers |
Own distribution system | Resilience of the supply chain of fertilizers | |||
Flexible business model (quick change of the manufactured products) | Low distribution costs during low prices | |||
Flexible sales model (quick change of delivery regions) | Constant utilization of production facilities Maintaining production and sales efficiency | |||
Industry barriers | ||||
High barriers to entry in the industry | There are high barriers to entry because of considerable costs of gaining a share in the oligopolistic market. In addition, production is very capital-intensive. | Increases requirements for start-up capital, contributes to maintaining the positions and income of existing companies | Significant market share | Restrains increased competition in the market during the crisis (restrains the entry of new players, maintains the existing market share of the companies) |
Characteristics of the product | ||||
Many types of standardized products and several types of modified products with various service offerings; no substitute products | Fertilizers produced by different manufacturers are almost identical and completely interchangeable, however, some types of modified (innovative) products appear. The content of harmful substances may vary (depending on the quality of the ore). At the same time different quality of ore substantiate disparity for companies' costs. Whereas a few years ago, consumers bought products from any seller provided the best prices and delivery conditions, today buyers began to appreciate modified products, environmentally friendly fertilizers, as well as after-sales services and digital solutions that facilitate the purchases and use of fertilizers | Eliminates cross-industry competition; determines the orientation of companies towards diversification and a low cost strategy at the production stage and a differentiation strategy at the sales stage. Emphasizes the special role of ecological safety, digitalization and integration with farmers | Wide standardized product range | Diversification of production (decreasing risks) |
Access to unique mineral resources (high quality of ore) | Digital offerings that are particularly relevant in crisis (purchases through digital platforms, ready-made solutions) | |||
Modified (innovative) products | Satisfaction of individual inquiries of buyers and increasing their loyalty | |||
Digital solutions | ||||
After-sales services | ||||
Competitive rivalry | ||||
Competition of limited number of companies in mature industry with high environmental turbulence | Consolidated global market structure, large firm's market power. High degree of concentration in the market determines strong competition. Market share of OCP company on the world fertilizer product market - about 31% (OCP Group, 2020). The share of 5 largest phosphate fertilizers producers - about 38%a. | Determine the global competition of fertilizer companies with the need to retain a market share; define the special role of strategies for survival in a mature industry | All presented above | All presented above |
Source: authors' compilation with the use of Dmitrieva et al., 2017); Food and Agriculture Organization of the United Nations, 2017; IFA, 2020; Phosagro (2020); Litvinenko and Sergeev (2019); Litvinenko (2020); Plotkin and Khaikin (2017).
Calculated by the authors based on IFA reports.