CHAPTER NINE

© 2000 South-Western College Publishing

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CHAPTER NINE

CREATING A COMPETITIVE ADVANTAGE USING

COMPETITIVE INTELLIGENCE

Prepared by Jack Gifford

Miami University (Ohio)


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COMPETITIVE ADVANTAGE

Also called a differential advantage

A set of unique features of a company and its products that are perceived by the target market as significant and superior to the competition

This tennis racket has the largest sweet spot and longest shaft in the industry!


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COMPETITIVE ADVANTAGE

THREE TYPES OF COMPETITIVE ADVANTAGECost leadershipProduct or service differentiationNiche strategies


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COMPETITIVE ADVANTAGESources of Cost Differential Advantages

Experience curvesEfficient laborNo frills goods and servicesGovernment subsidiesProduct designReengineeringProduction innovationNew methods of service delivery


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Experience curves Efficient labor No frills goods and services Government subsidies Product design Reengineering Production innovation New methods of service

delivery

• Declining costs due to economies of scale

•Learning by doing

•Technological advances

•More accurate forecasting models

CO

STS

TIME


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delivery

•Pools of cheap labor•Off shore sourcing•Outsourcing•Use of temporary labor

•Reduce options

•Southwest Airlines


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delivery

• Governmental financial assistance

•Reverse engineering•Cutting edge engineering technology

•Downsizing by layoffs of employees•Pruning product lines•Closing factories•Renegotiating contracts


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Experience curves Efficient labor No frills goods and

services Government subsidies Product design Reengineering Production innovation New methods of service

delivery

•Simplified production techniques

•New technology, CAD/CAM and robotics

•EXAMPLES

•out-patient surgery

•walk-in clinics

•ticketless travel


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UNFORTUNATELY:Cost competitive advantages are rarely sustainable,

because…Competitors copy your low cost structureTransferable technologyLower costs from alternative suppliersAcquisitions and mergers


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COMPETITIVE ADVANTAGEProduct or Service differentiation

Common differential advantages include…Brand namesStrong dealer networkProduct reliabilityImageService levelValue impressions (packaging, shape,

personnel, slogans, etc. )Augmented products


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Seeks to target and effectively serve a single segment of the marketMay be a niche overlooked by competitorsMay be a niche too small for a competitor to

effectively serveMay have a unique advantage that allows one

company to serve the niche better than others; for example geographic proximity for a low value, high weight product (cement)

COMPETITIVE ADVANTAGENiche Competition Advantage


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Competitive intelligence is the creation of a system that helps managers assess their competitors and their vendors in order to become a more efficient and effective competitorIntelligence is analyzed information

Environmental Scanning

Competitive Intelligence

+ Marketing Intelligence

Part of...

DecisionSupportSystem


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Functions of competitive intelligence include…Help identify a competitor’s competitive

advantageFewer surprisesPredict changes in relationshipsIdentify marketplace opportunitiesGuard against threatsForecast competitor’s strategiesDiscover potential new competitorsLearn about new technologies, government

regulations


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SOURCES OF INTERNAL COMPETITIVE INTELLIGENCE

Sales personnel, through observation or communication with customers and vendors Formal reports & informal feedback

Competitive Intelligence Audit (CIA) Employees from all areas Independent databases Marketing research studies Warranty cards and back order reports Returned merchandise forms Repair records and customer order forms Inquiries stimulated by promotions


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NON-COMPUTER-BASED EXTERNAL SOURCES OF COMPETITIVE INTELLIGENCE

Experts, such as... •Editors

•Writers

•Reporters

•Functional experts

•Educators

•Authors


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CI consultants, such as...

• One main source can be identified at http://www.scip.org the home page for the Society of Competitive Intelligence Professionals


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Government agencies, such as...

•OSHA

•EPA

•FCC

•FDA

•SEC

Freedom ofInformation

Act


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Uniform Commercial Code FilingsIdentify goods that are

leased or pledged as collateral to banks or other lending institutions

• Learn of additions of plant assets


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Suppliers Competitors volume,

new product launch dates, test markets, delivery dates, inventory levels

Non-disclosure agreements

Photographs


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Newspapers and other publications Newspaper clipping services Industry and association directories Announcements

Yellow pages Location & number of competitors Industry size Product line information


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Trade shows New product introductions Sales literature Pricing information New technology Industry trends Industry seminars Compare competitor’s offerings


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Speeches by competitors Financial community Employees Trade associations

Neighbors to competitors Visit a local pub or restaurant and talk

to employees

Advisory boards Broad or very specific Internal or external


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USING THE INTERNET AND DATABASES FOR COMPETITIVE INTELLIGENCE

CI researchers can use the Internet and databases to answer these and other similar questions: What articles were written about this market? What companies are associated with the product group? What patents have been filed for this technology? What

are the major publications in this industry? Industry statistics and events? List of leading experts in the industry? Can obtain both domestic and global data. Databases can be acquired over the Internet or on CD-

ROMS


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INDUSTRIAL ESPIONAGE

Industrial espionage is an attempt to learn a competitor’s trade secrets by illegal or unethical means Theft Hiring away key

employees Listening devices or

communications intercept Video surveillance

Economic Espionage Act of 1996

CHAPTER NINE

Documents

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