Competitive Intelligence: Key to Informed Decision Making PhilExport Region III Gen Membership Meeting, July 17, 2008 Senen M. Perlada Director Bureau

Competitive Intelligence: Key to Informed Decision MakingPhilExport Region III Gen Membership Meeting , July 17, 2008

Senen M. PerladaDirectorBureau of Export Trade PromotionDepartment of Trade and Industry

Variables Impacting Competitive Advantage: Porter’s DiamondVariables Impacting Competitive Advantage: Porter’s Diamond

Sourced and adapted from “The Competitive Advantage of Nations” by Michael E. Porter, March-April 1990, p.77. Copyright c 1990 by the President and Fellows of Harvard College; all rights reserved.

DemandConditions

Firm Strategy,Structure, and Rivalry

Related and Supporting Industries

Factor Conditions

Influences on Domestic RivalryInfluences on Domestic Rivalry

Source: Michael E. Porter, The Competitive Advantage of Nations (New York: Free Press, 1990), p. 141. Copyright c 1990, 1998 by Michael E. Porter. Reprinted with permission of The Free Press, a division of Simon & Schuster.


c

Factor Conditions

DemandConditions


Early product penetration feeds

entry

Factor abundance or specialized factor-creating

mechanisms spawn new entrants

World-class users enter supplying

industries

New entrants emerge from related and supporting industries

Influences on the Development of Related and Supporting IndustriesInfluences on the Development of Related and Supporting Industries



c

Factor Conditions

DemandConditions


A group of domestic rivals encourages the

formation of more specialized

suppliers as well as related industries

Large or growing home demand

stimulates the growth and deepening of

supplier industries

Specialized factor pools are transferable

to related and supporting industries

The Complete SystemThe Complete System



c

Factor Conditions

DemandConditions


Chance

Government

The Value ChainThe Value Chain

Creation ofEconomic

Value

Managerial, legal, and administrative infrastructureManagerial, legal, and administrative infrastructure

Human resource managementHuman resource management

Technology developmentTechnology development

ProcurementProcurement

ProductDesign

Sourcingof raw

materialsand

components

Manufacturingand

assembly

Distributionand

logistics

Marketingand

sales

Post-salesservice

Support Activities

Primary Activities

Source: Adapted from M.E. Porter, Competitive Advantage (New York: Free Press, 1985).

Illustrative Business Services in the Value ChainIllustrative Business Services in the Value Chain

• Transportation Services

• Warehousing Services

• Engineering Services

• Building Maintenance

• Equipment Maintenance and Repair

• Security Services

• Industrial Laundry Services

• Fulfillment Services

• Waste Disposal

• Transportation Services

• Warehousing Services

• Credit Reporting

• Information Processing

• Advertising

• Direct Response Marketing

• Coupon Processing

• Databases

• Installation and Testing Services

• Repair and Overhaul

• Financial Services

• Accounting

• Management Consulting

• Legal Services

• Conflict Resolution Services

• Compensation Consulting

• Health Services

• Education and Training

• Temporary Help

• Employment Agencies

• Contract Research

• Calibration Services

• Design Services

• Testing Services

• Custom Software • Market Research

• Rating Services

• Telecommunications Consulting

FirmInfrastructure

HumanResourcesManagement

TechnologyDevelopment

Procurement

Industries

INBOUND LOGISTICS

OPERATIONS OUTBOUND LOGISTICS

MARKETING AND SALES

SERVICES

M A R G I N

Who is a business competitor?

Business competitors are organizations:Offering the same product or service nowOffering similar products or servicesThat could offer the same or similar products or

services in the futureThat could remove the need for a product or

service

Why monitor competitors?

By knowing our competitors we may be able to:Predict their next movesExploit their weaknessUndermine their strengths

What is involved?

There are four stages- 4 C’s- in monitoring competitors:Collecting the information (with s first stage –

deciding what to collect)Converting information into intelligence (with three

steps: CIA- Collate and catalogue it; Integrate it with other pieces of information; Analyze and interpret it

Frederick the Great once said:

“It is pardonable to be defeated, but never to be surprised”

Communicating the intelligence

Competitor intelligence needs to be evaluated and selectively communicated to all who need to make decisions on what customers, suppliers, or other companies in the market are doing or are likely to do.

That usually means everybody…

Countering Competitor Actions

Having identified what competitors are doing, battle can be entered…

What is Market Intelligence? MI is about the company having a view of a

market using existing sources of information to understand what is happening in a market place; the emerging concerns and issues what; what the likely market potential is

Can be obtained fromExternal sources Internal sources

Market Intelligence Usually relies purely on external sources of data such as

analysts’ reports, industry and market profiles/ outlook, etc. Desk research on published information World wide web Trade shows, conferences Networking meetings Trade Promotion Orgs (TPOs), Business Support Orgs (BSOs) Customers

Quite often, a great deal of untapped information is available internally company’s own website (esp. if interactive; website traffic analysis) sales reports, previous inquiries databases, prospect lists, etc. Company’s own staff (knowledge about customers, markets, and

competitor)

What is Competitive Intelligence?

It is a specific form of Market Intelligence, typically undertaken on an on-going basis

Involves ethical, though deliberate gathering of news, materials, and information about competitors from a wide variety of sources, to make better strategic business decisions

Due to on-going nature, CI is more about putting structures in place than finding “loose” or one-off pieces of data

In the name of the customer, companies compete in order to gain his favor in parting with

his money…

Western concept: “The customer is always right.” “The customer is never wrong.”

Japanese concept: “Okyakusama wa kami- sama desu.”

Translation: “The customer is God”

Sun Tzu (500 B.C.) and the Art of War

In the battle for customers, his views are still relevant today, e.g.

“If you are ignorant of both your enemy and yourself, then you are a fool and certain to be defeated in every battle.

If you know yourself, but not your enemy, for every battle won, you will suffer a loss.”

If you know your enemy and yourself, you will win every battle.”

As in war, it is necessary to understand the enemy:

How he thinks His strengths His weaknesses His vulnerabilities Where he can be attacked Where the risk of attack is not too great…

Competitive Intelligence vs. Business Intelligence

CI is more focused on qualitative information rather than quantitative market research data

CI primarily more concerned with the scanning and tracking of market and competitive news and information through open secondary sources and primary interviewing

Competitive Intelligence vs. Business Intelligence BI more focused on gathering, storing, and

analyzing customer data and in-depth analysis of business statistics, mostly a quantitative exercise

Sometimes CI is used to gain insight on ‘costly’ and/or hard-to-find data for BI initiatives

CI & BI are related disciplines and both help senior management make more informed strategic decisions

Competitive Intelligence vs. Market Research CI & MR overlap, but MR tends to focus on

gathering and analyzing consumer-centric information via large scale surveys; relys on statistical analysis in general; CI usually generates more B2B data sets with focus on strategic business topics

MR group also responsible for CI data so the two disciplines definitely go hand-in-hand

Why is CI important?

Offers a real strategic advantage for many businesses

Some of the largest corporate organizations have a dedicated CI department, while smaller businesses practice CI on an ad-hoc basis by informally collecting data from variety of internal and external sources e.g. internet, trade shows or conferences, networking meetings or even customers

“If you don’t have a competitive advantage, don’t compete.”

- Jack Welch, CEO, GE

Military Intelligence- the Genesis for CI

Intelligence networks were patterned after Military Intel, and methods were both overt (open) and covert (secret)

4th century Chinese military theorist Sun Tzu advocated the value of ‘foreknowledge’

Western Intel came about with the opening of trade routes from Europe to Africa and India and later to the New World

Political and Commercial Intel became important to European nations with governments, large trading houses and banks developing extensive intel networks

CI Allows businesses to gain Competitive Advantage

“Behind every successful strategy there has been a tireless effort to collect intelligence”

- Benjamin Gilad

CI Enables Effective Business Strategies

Every time a customer decides to buy something, a competitive assessment takes place

Every sale that is made, therefore, is up against some competitive force.

Information is key for both tactical and strategic business decisions

“Treat information as the main strategic advantage. It is not just information, but being alert to opportunities and having intuition play a large part in developing flexible and effective strategies.”

- adapted from: Robert Waterman, The Renewal factor

Transforming Information to Intelligence is the key…“Competitiveness is based on learning, which is based on the

ability to listen: to customers, to consumers, to partners such as suppliers, or to competitors, to industry experts and, most important, to one’s own employees. The essence of this is so simple it is embarrassing.

The competitive environment sends messages all the time: signals about change, trends, prospects, threats and weaknesses. Early on, these signals are weak, ambiguous and hidden. Tapping them and learning from them is an art that requires open eyes, ears, and mind.”

Using IT modalities enhances productivity

Computerization in each of the major areas of competitive intelligence: discovery, development, and delivery…

Companies are finding the availability of information on the internet especially beneficial for carrying out secondary research, for monitoring government information, and for dissemination of intelligence via intranets.

According to a survey, the top 3 reasons cited by respondents why companies use the internet

and intranets:

Improve the quality of competitive or business intelligence (70%)

Increase the cost-effectiveness of acquiring, disseminating, and using internal information (58%)

Add value to existing products and services (55%)

CI is used by Top companies

In the ’70s and ’80s, it was large corporations that adopted strategic planning as an essential management tool…but now small companies also use strategic planning methodologies; while large companies have been the leaders in the use of CI, small companies are becoming aware of its application.

According to Futures Group Survey (USA)…

82% of USA companies with revenues over US$ 10 Billion have an organized CI system.

Companies making best use of CI and BI in the order of ranking are: Microsoft Motorola IBM Procter & Gamble GE Hewlett-Packard Coca-Cola Intel

CI process- designed for Efficiency

Destination phase- readiness and capability to perform the task

Demand phase- indentifies info needs and determines approach to be taken

Discovery phase- involves seeking out and collecting the info sources by legal means

Development phase- produces a meaningful picture from pieces of data that have been discovered and analyzed

Delivery phase- communicates the resulting intelligence to the right people at the right time

Disengagement phase- involves debriefing clients and reflecting to improve process

Areas where intelligence is needed to make informed decisions, ranked in order of

importance

Competitive Activities Changing Market or Industry Structure Customer or Supplier Activities Emerging Technology Initiatives Global Economic Conditions Regulatory Climate Political Climate

From Information to IntelligenceFrom Information to Intelligence

Information on:

Competitive activities

Information on:

Customer or Supplier Activities

Information on:

Emerging Technology Initiatives

Information on:

Political Environment

Information on:

GlobalEconomicConditions

From Information to IntelligenceFrom Information to Intelligence

Information on:

Competitive activities

Information on:

Customer or Supplier Activities

Information on:

Emerging Technology Initiatives

Information on:

Political Environment

Information on:

GlobalEconomicConditions

Information on:

RegulatoryEnvironment

Information on:

ChangingMarket

orIndustryStructure

Competitive Intelligence

The Flagship ModelThe Flagship ModelSelected

Competitors

FlagshipFirm

KeySuppliers

KeyCustomers

OtherSuppliers

KeyCustomers

Network Partners GovernmentsNon-Business Infrastructure

Key:

Network

Relationships

Commercial

Relationships

The following discussion is adapted from M. Rugman and Joseph R. D'Cruz, Mulintationals as Flaship Firms (Oxford University Press, 2000).

THANK YOU!!!

Documents

Competitive Intelligence: Key to Informed Decision Making PhilExport Region III Gen Membership Meeting, July 17, 2008 Senen M. Perlada Director Bureau