Competitive intelligence: Assessing market strength and weakness

The origin of the model

In the 1970s, CI became popular in the United States. Michael Porter's book Competitive Strategy: Techniques for Analyzing Industries and Competitors was published in 1980. 1 The Society of Competitive Intelligence Professionals (SCIP) was created in 1986 to provide competitive intelligence insights and training and establish industry standards. Since then, it has evolved into the Strategic and Competitive Intelligence Professionals (SCIP), which publishes Competitive Intelligence Magazine.

What the model looks like, and how does it work.

Competitive intelligence (CI) is market intelligence aimed at learning as much as possible about business competitors, as the name implies.

Every business is subjected to some level of competition. When deciding on a business plan, it's vital to know your competitors' strengths and shortcomings.

For product planning, pricing, strategy, and acquisition policy, a competitor profile is essential.

With enough time, a significant amount of intelligence on competitors can be gathered. Researchers rarely have infinite time; therefore, they must set out to collect as much data as feasible, given their constraints. CI is a continual process at some firms. The following are typical topics covered in a competitor intelligence gathering exercise: 

• Financial data on the competitor
• Customer of the competitor
• Products and turnover of the competitor
• Prices of the competitor
• Distribution
• Deliveries
• Promotions
• Selling methods
• Production facilities/capacity
• Company organization and philosophy

Source of competitive intelligence

-      Financial data: Publicly traded corporations are required to provide detailed accounts within months after the conclusion of their fiscal year. The 10-K filings for US public corporations contain much information, and they can be found on the business websites or in the Edgar database of the US Securities and Exchange Commission (SEC). Firms House provides financial information about companies in the United Kingdom, albeit the data is limited for small and medium businesses. Hoovers is a valuable data source for companies all over the world.

-      Websites: We live in an era of self-promotion, where businesses publish a great deal of information about themselves on their websites. It is possible to set up alerts so that any changes to a website notify the researcher. Competitor intelligence is available on websites other than the competitors' own. Industry journals and newspapers provide stories about firm activities, which frequently include mentions of competitors' actions. Websites, such as www.glassdoor.com, give feedback on an organization's culture from former employees.

-      Google maps: Without leaving our workstation, Google Maps and Google Street View allow us to have a good look at the fabric and premises of businesses.

-      Market research reports: Market research papers covering practically every industry, including specialist niches, are accessible for a low cost. Market research reports provide information on market structure as well as market share statistics on suppliers.

In addition to publicly available data on the internet and journals, other sources of CI are:

-      Customers: Customers with whom you have a common interest might be a valuable source of competitive intelligence. Customers can report on the performance of rivals' products, deliveries, sales service, prices, and so on. Customer satisfaction and Net Promoter Score (NPS) are examples of effective benchmarking measures.

-      Suppliers: Companies that provide supplies and information are likely to supply competitors and be willing to share information about them.

-      Distributors: These businesses work with various suppliers and customers, some of whom may be competitors.

-      Industry experts, journalists and observers: Attending seminars, conferences, and exhibitions provide people in the sector with information about companies.

-      Past employee: Past employees may be willing to reveal their previous employers if confidentiality agreements do not constrain them. 

Any coordination between competitors could be construed as being detrimental to the public good. This includes price-fixing, segmenting geographical regions and clients within them, limiting product supply, and so on. This does not stop a corporation from gathering as much information about the competition as possible from various sources. Most companies have intelligence on the topics listed above, albeit it may be put together from several sources.

For international corporations, CI has become an essential tool. They utilize CI to benchmark, design scenarios, and assess risks and opportunities. Although CI is a type of market intelligence, it focuses on risks and opportunities. The Strategic and Competitive Intelligence Professionals group addresses the ethical principles that all professional CI practitioners follow. Observing moral norms in data collection is vital to intelligence analysts and their employers, who would otherwise risk breaking the law if data was gathered through deception or illegal means.

The model in action

A prominent manufacturer of maintenance and repair equipment sought to branch out into technical component distribution. It was looking to buy high-volume resellers of semiconductors, printed circuit boards, and specialist electronic lines. The study's geographical scope included all of Western Europe. The project started with a list of companies that were known to be good acquisition candidates. Desk research was used to supplement this. Only enterprises with annual revenues of more than €10 million were targeted, according to the parameters.

 An internet search turned up published reports on the European electronic components market, which detailed the market size and trends for electronic components during the previous decade. The analyses highlighted nations with a high demand for electronic components and, as a result, countries where research should be concentrated.

Within each of the nations chosen for investigation, a list of the major electronic component wholesalers was compiled with top-line revenue and personnel count data. For each organization profiled, the number of employees was always provided. Estimates were produced when there were gaps in company revenue by applying a fair revenue estimate per employee. A traffic-light system was designed after assessing distributor websites to illustrate the degree of match with the acquiring firm. 

Detailed company profiles were created for companies that were a good fit. These looked at the target organizations' various marketing channels (online, catalogues, field sales, and stores), as well as whether they cater to business to business (B2B) or business to consumer (B2C) clients (B2C). Each company was given a Dun & Bradstreet rating, which indicated the maximum credit limit as well as the companies' "failure scores" and "delinquency scores" (respectively, an estimate of each firm's chance of failure and risk of late payment).