Competitive intelligence, Competitive advantage in the success business organizations

Available online at www.behaviorsciences.com Reef Resources Assessment and Management Technical Paper ISSN: 1607-7393 RRAMT 2013- Vol. 38(2), 2013, 5 Competitive intelligence, Competitive advantage in the success business organizations Aliakbar Shahri Mejarshin a * a Department of Management,Gowgan Branch,Islamic Azad University,Gowgan,Iran. Abstract This descriptive study aimed to investigate, define and describe aspects of competitive intelligence as a competitive advantage in the challenge and success of commercial activity is carried out. Given that the business environment is constantly changing and the change is rapid and continuous. There is a better indicator of the competitive strength and separates the continuity and survival of business organizations seem to be necessary in such a situation. Companies and business organizations against their rivals for a competitive advantage to provide greater value and service in the field, the need for useful information. The data are considered an important tool for strategic and competitive power. Competitive intelligence, strategic management tool and one of the most diverse and fastest growing business areas in the organization's success. As well as competitive intelligence, is considered one of the most important techniques to create competitive advantage. Competitive intelligence is the process of legal and ethical practices for the discovery, development and delivery of timely information is needed deciders who want to increase their business competitiveness. 2013 Published by RRAMT France Ltd. Keywords: Intelligence, Competitive Intelligence, Competitive Advantage, Strategic Management; 1. Introduction Competition among business and economic organizations and corporations is increasing rapidly. In order to survive in the highly competitive environment, organizations need information and new tools for decision making and planning. Management based on facts is one of the central principles in management excellence. Fact- based management can be accomplished through access to information. In all of the competitive organizations, there exists a need for quick access to strategic information. Established by this need, different tools are utilized in different organizations. Competitive intelligence is the art of gathering, processing and saving information which is available for the whole company and every individual at different organizational levels can have access to it based on their own needs. Competitive intelligence helps people to form their future and it protects them against competitive threats. The concept of competitive intelligence is growing fast in universally among companies and it is developing as a criterion for business directors and leaders in making bright decisions. Strategic and competitive intelligence professionals (SCIP) defined competitive intelligence as a "systemic and ethical program in gathering, analysis and management of out of-company information that influences the decisions, plans and actions of the company". In fact, competitive intelligence (CI) includes legal gathering of competitors and

market's information. The knowledge obtained from this information can be used in improving the quality of competition and creating a kind of advantage in the company. Thus, competitive intelligence can be considered as a subdivision of knowledge management including managing information from external environment of the company (Fathiyan, et al. 2009). Competitive intelligence helps organizations to make sensible decisions about the company's marketing, investment, market expansion, product development, research and improvement and business approaches. Competitive intelligence needs to be legal and it must respect morality. This intelligence transfers knowledge to the company from outside by using specific rules. Therefore, another definition for competitive intelligence can be "gathering information related to environment and competitors in order to create and retain competitive intelligence". Competitive intelligence is a systematic process to ensure updating the precise and related information of competitors (McGonagall and Walla, 1999). Nowadays survival of many organizations lies in the fact that whether they can detect and exploit the effective and beneficial opportunities in external environment or not. The organizations that recognize competitive intelligence properly, can gain a stable competitive advantage and superiority in competition with other competitors. This new competitive advantage can create an opportunity for the organizations (David, 2000). Competitive advantage is one of the basic concepts in international business that determines the competitive position of the organization and enables the organization to establish a defensive position against other competitors. An organization reaches competitive advantage when it can create high value for its costumers comparing to the other competitive groups. In fact, distinctive advantage means nothing significant differences in products, services and organization itself by the costumers compared to other companies. Competitive advantage is a factor or group of factors that make the companies to act successfully in the competitive environment and it prevents easy imitation by other competitors. Collection and evaluation of information about competing companies play a vital role in strategy development. The more information a company gains about other competing companies, the more possibility it may have to develop and implement successful and effective strategies (David, 2000). This descriptive survey tries to discuss the importance and usefulness of competitive intelligence among companies and business organizations. The present research also attempts to reveal that competitive intelligence can lead to a competitive advantage and this may eventually create an opportunity for the organizations in the external business environments. 2. Review of the related literature Nowadays, technological development and growth of universal business means that the business environment is changing and developing rapidly and constantly. The mangers cannot rely on illumination and intuition in making significant and strategic decisions. Most of the times, the consequences of a wrong decision are not deniable. Companies and organizations need information to offer higher value and provide customer satisfaction. They need to have extra information about competing companies, mediators and other forces and factors that are active in the market. The information and data are regarded as part of critical strategic properties and marketing tools (Cather & Armstrong, 2000). Competitive intelligence concentrates on decision making, it has broader domain which includes research on various issues such as capabilities of competitors, analyzing alliance and joint investing with competitors, future plans of the competitors, market strategies or specific production lines, reasons of the alterations in the company and strategies in business sectors. Currently, not only big companies, but also small business sectors are profiting from the advantages of competitive intelligence. Most of these companies use competitive intelligence to achieve market share and the share of unknown competitors (David, 2000). Rezaiyan (2010) mentioned that due to the growth of competitive intelligence organizations can analyze the information about their surrounding environment more quickly and precisely and therefore they can save the obtained findings and offer them to decision makers when it is necessary. This accelerates the exchange of data, information and knowledge in the organization and improves the efficiency of thinking and decision making. 406

Competitive intelligence is like radar that explores new opportunities and threats, so it enables the company to recognize its environment more rapidly and accurately. An intelligent company understands the competitors' strategies better and fast and learns from their failure and success; it also enables company directors to make strategic decisions more thoughtfully and attentively with organized observation. Generating and achieving information about competing companies play a basic role planning and strategy development. If a company can gain more information related to competing companies, it will be more possible for this company to develop and execute effective and successful strategies. Thus, detection, understanding and responding to competitors are specific aspects in marketing and it is necessary for the companies to administer an effective plan of competitive intelligence (David, 2000). Competitive intelligence is a device for strategic management and one of the business fields that provides quick growth and improvement in the world (Devious, 2004). Receiving information from external business environments influences the competitive position of a company. He further mentioned that 90% of the information which a company needs for making vital decisions can be accomplished through competitive intelligence (Fold, 1995). The result of a study conducted by Rezaiee DolatAbadi, et al. (2011) titled "studying the role of competitive intelligence in creating competitive advantage" revealed that competitive intelligence is a key factor in attaining competitive advantage among the companies in the scientific district of Esfahan. Nuka and Francis (2009) in their research "competitive intelligence and its relationship with marketing efficiency among large companies of Nigeria" proposed five variables for competitive intelligence (market opportunities, threats of competitors, dangers of competitors, basic hypothesis, key vulnerability) and five variables for marketing efficiency (customer satisfaction, marketing information, integrated marketing activities, strategic direction and operative productivity). In this study 108 large stock companies of Nigeria were participated. The results showed that there is a positive and significant relationship between competitive intelligence and marketing efficiency in large companies. In a research titled "competitive intelligence and strategic decision making" Rezaiyan et al. concluded that it is necessary to recognize the status of competitive intelligence systems application. Analytical tools cannot be substituted by analyst and thinking technique cannot be accomplished without a thinker. It is important to accept strategic decision making with all of its complexities. 3. Conceptual model of the research Competitive intelligence in the organizations leads to the emergence of stable competitive advantage which can reduces external threats and creates an opportunity for success in business sectors. The present article attempts to propose a conceptual model to investigate the effect of competitive intelligence process in creation of competitive advantage and also providing an appropriate opportunity in external environment of the organizations. Figure 1. Conceptual research model 407

Definition of competitive intelligence concept Competitive intelligence is a process to increase competing ability of the market by recognizing competitors and competition environment. Moreover, competitive intelligence includes gathering and analyzing the information related to the capabilities, weaknesses and intentions of competitors by using databases and free resources which are done legally and ethically. Competitive intelligence enables company leaders and managers to make decision based on knowledge about market information, research and development division, investment tactics and so on. Competitive intelligence is inseparable part of emerging phenomenon "knowledge Economy". According to Leonardo Fold (1998) competitive intelligence includes warning signals about threats and opportunities. According to a management faculty in France, competitive intelligence includes the art of searching, gathering, processing and storing information, so that employees from different organizational levels can have access to the information and use it. This can form the future of the organization and protect its position against competing threats (Najafi, 2004). Competitive intelligence is a diagnostic process for gathering information related to the competitors' movements and changing it to a purposeful and strategic knowledge that can grow into a competitive advantage by administers attentive decision making. In this process legal and moral techniques and tools are used to gather the information. Furthermore, he believed that competitive intelligence is not necessarily output from databases and complicated reports. We cannot call it burglary or spying (Fold, 1995). Mentioned that competitive intelligence is the art of exploration, collection, processing and storing the information for shaping the future and struggle against the competitors' threats (Roach, 2001). Cahaner (1996) believed that we must distinguish information from intelligence; information is related to facts and realities. Numbers, statistics, classified data about different matters are analyzed information. Competitive intelligence concentrates on external events and occasions. One of the basic aims of competitive intelligence is prompt warning that allows decision makers to set a kind of goals that can generate and maintain established competitive advantage and create opportunities for them. In general, it can be argued that competitive intelligence is the process of presenting and clarifying competition environment. It a process for gathering data and information about competition environment and competitors' movements and also transforming it to a strategic and purposeful intelligence which can help managers in making strategic and significant decisions. In this process the information gathered legally and ethically. Exploration and recognition of competition environment are done with the aim of making strategic decisions. Competitive intelligence enables the company leaders to base their decisions according to examined and rational information. Intelligent strategic decision making leads to high completion among companies. Competitive intelligence is inseparable part of the emerging phenomenon "knowledge Economy"(Rezaiyan, 2010). Figure 2. Competitive intelligence: Receive data from the environment, the impact on competitiveness 408

4. Competitive intelligence process Reef Resources Assessment and Management Technical Paper/ Vol. 38(2), 2013, 5, pp. 405-413 Competitive intelligence process includes six stages. Competitive intelligence specialist believed that this effective process moves around a permanent cycle called competitive intelligence cycle. These stages are presented here: (Bout hillier, 2003). Figure 3. Competitive intelligence cycle 4.1. Planning and Direction This stage is very important for every competitive intelligence performance. According to Bern Harden the necessary background information for this step includes: why intelligence is necessary and for whom? What are tactical and strategic concepts and statements? What are the attempts of policy makers in making special decisions? What is unknown? What topics are in priority? This phase will help to improve strategies based on available resources, time and budget limitation. 4.2. Collection and Research order This stage embraces gathering of internal information from different available resources such as annual and periodical reports, books, media, speeches, interviews, databases and internet. Creativity is so important in this phase; a person who is smart and intelligent can collect more and better information legally and justly. Individual skills like different methods to extract information in interviews and conversations are more important than human intelligence. This stage includes accumulating raw data to be used in intelligent system. According to different authors, information can be classified into three types: 4.2.1. White information (unlocked data): they are generally available in public databases, newspapers, internet and etc. 4.2.2. Gray information: they are more private data that can be collected from business fairs or publications that have been neglected by competitors. A salesperson can achieve great information from the competing company by visiting it. 4.2.3. Black information: they are collected illegally; like wiretapping and hacking. Usually 80% of the information is white and only 20% is gray or black. 409

4.3. Process and Storage This stage includes recognition and understanding of the achieved data. It reveals weak points that can be fulfilled by collecting more information. In storage part proliferation of same information from other projects is prevented. In this phase a framework is provided for intelligent plan in the organization. 4.4. Analysis and Inference Analysis is one of the advantages of competitive intelligence in organization. In this phase the richness of information is increased and the information is transferred to intelligence. Information analysis is done about the content of information, basic predictions and suggestions based on available evidence. 4.5. Publication and Transference This very important and necessary stage responds to main and critical questions which is done by written or verbal report or both. 4.6. Reassessment In this stage new and important issues and aims are evaluated and it shows whether the project has been successful or not and how it can progress in the future. 5. Different kinds of competitive intelligence Decamps and Nyack (1995) identified three kinds of competitive intelligence: 5.1. Market intelligence It includes representation of the current and future needs, customer preferences, new markets, creative division opportunities in market, important changes and movements in marketing and distribution. This intelligence collects and analyzes information about customers, suppliers, buyers and distributors. 5.2. Competitor intelligence It represents competitive strategy development during time with considering changes in competitors' structure, replacement of new products and newcomers to the industry. It also concentrates on pricing policies, Substitute products and competitors' developmental policies. 5.3. Technological intelligence It evaluates current and new technologies and predicts future technological advancements. It deals with basic and practical researches, patents and etc. According to other viewpoint, social and strategic intelligence can be added to this list. Social and strategic intelligence includes rules, tax and financial affairs, political and economic domain and human resources. Fourth of competitive intelligence, this intelligence examines social behaviors. It is worth noting that all these intelligences are interrelated. Competitive intelligence purposes The aims of competitive intelligence are categorized in the following part: 1) General understanding of an industry and competing companies. 2) Identification of vulnerable points and assessment of the effects of strategic actions on competing companies. 3) Detection of potential movements of competing companies that may endanger the position and status of the company in the market (David, 2000). 410

Gilead (1996) mentioned that generally, the aim of competitive intelligence is to enable us to predict movements of competitors, customers, government and so on. The main purpose of competitive intelligence is access to important and critical information and data about environment, competitors and market status. Therefore, effective competitive intelligence requires information about other competitors and also information about environmental requirements like industry, legal, observational and international needs, and information about economic, political and technological changes. The product of competitive intelligence is evaluated information. Proper, timely, planned and aimed use of this information can lead to competitive advantage in the challenging competition among organizations. Making organizational divisions for competitive intelligence The concept of competitive intelligence is not an unprofessional action; it needs certain skills and features. That is why many companies have a special organizational section for competitive intelligence. In Unite States of America most of companies include these titles in their organizational charts: competition analysis manager, competitive strategic manager, and informational service manager and competition evaluation assistant. This shows the importance of competition investigation for these companies. The best way is to start by the smallest group. An experienced small group is always better than an inexperienced large group. There is no need to work full-time in competition analysis section. In competitive intelligence division one person is assigned as a connector of this section with the members of organizational information section (David, 2000). Using competitive intelligence against competitors An effective competitive intelligence process leads to the collection of four different but interconnected knowledge about competitors and competition environment. a) Competitors knowledge: personal information of competitors b) Comparative knowledge: information about similarities and differences of various competitors c) Market knowledge: market information like customers, suppliers, technology d) Personal knowledge: information about inside of the organization. Figure 4. Types of CI and how to contribute to advantage and strategies 411

These four groups offer a general picture of business environment. Accurate decision can be made by perfect understanding of the position of the organization in the market. The final part in the process of competitive intelligence joins the collected intelligence with organizational decisions and strategic planning procedure. These programs must include progress observation stages and evaluation of the effects of occurred movements. These procedures need collection of more information and the learned lessons must be used as input for future programs. Therefore, the main purpose of effective competitive intelligence is to enable organizations in making strategies (John, 1999). Competitive intelligence and creating competitive advantage in organization Competitive intelligence gives competitive advantage to the organization through desirable performance and high quality. Lessen (1996) concluded that organizations have advanced systems to observe the competitors actions which create high quality and competitive advantage for them. Piers et al. (1998) regarded that organizations have intelligent employees who make competitive advantage for them. This advantage leads to high quality, low expense in the business process and public insight improvement. The improvement of public insight by using timely and appropriate information facilitates competitive intelligence process which has a positive and direct relationship with competitive advantage. It also helps managers in making better decisions. Milo (2007) believed that competitive intelligence is a strategic tool that permits company directors to improve competitive advantage of the organization by focusing on external environment and to predict the future direction of the market. 6. Conclusion and Discussion The critical and basic purpose of competitive intelligence is to keep organizations in a proper informational situation and also to prepare them against challenges. Therefore, the organizations can maintain their productivity by using competitive intelligence. Nowadays the organizations which have a better understanding and evaluation of their movements and also have more competitive advantages are the winners in competition environment. Intelligence deals with power and it can generate power. Every organization that has competitive intelligence will have power and distinctive force in competition environment, as well. Companies and organizations can use the power of competitive intelligence to access beneficial and valuable findings and information through analysis of the competitors' conditions and situations, market status, assessment of the current and new technologies and also considering strategic social behaviors. Proper and accurate use of these findings and information in the challenging and perplexing competition domain, leads to the emergence of a constant competitive advantage for the companies. Furthermore, having competitive advantage cause innovation of the products, offering distinctive services, increase the quality of products, appropriate responding to the costumers and increase efficiency and productivity of the organization. This fact can finally decline threats and create an opportunity in external environment of the organization. The results of this study revealed that although competitive intelligence focus mainly on external environment, organizations can reach stable competitive advantage by using competitive intelligence. This stable competitive advantage and force can reduce threats and create opportunities for the organizations. By using competitive intelligence and establishing it in the organizations and even small business sectors, we can make correct decisions based on the correct information in the altering and complicated situations. As a result, environmental threats become an opportunity or at least they become less dangerous. The created opportunities can be used in a best way. In fact, competitive intelligence can be mentioned as a competitive advantage and power point of commercial organizations. 412

References Bout hillier, F., & Shearer, K. (2003). Assessing Competitive Intelligence Software, a Guide to Evaluating Competitive Intelligence Technology (pp. 281-304). New Jersey. Cahaner, L. (1996). Competitive Intelligence: From Black Ops to Boardrooms How Businesses Gather, Analyze, and Use Information to Succeed in the Global Marketplace, New York. Cutler, P., Armstrong, G. (1379). Principles of Marketing. Tehran: Publication Adabestan. David, F. R. (2000). Strategic Management. Tehran: Office for Cultural Research. Davis, M. (2004). Using business intelligence for competitive advance at: www.knowledgepoint.com.au/business intelligence/article. Decamps, J., Nyack, P. R. (1995). Product Juggernauts How Companies Mobilize to Generate a Stream of Market Winners, Harvard University, and Cambridge: Travelling. Fathian, M., Akhavan, P., & Momeni. A. (2009). Competitive Intelligence in the competitors market: How we collect and use information about your competitors. Proceedings of the International Conference on Technology Management and Innovation Payam Noor University, Garmsar: payam publication. Fold, L. (1995). The new competitor intelligence, New York: Basic Books. Fold, L. (1998). Monitoring the Competition: finding out what is really going over there, New York. USA. Gilead, B. (1996). Business blind sports, Chicago: Probes Publishing Company. Lessen, M. D. (1996). Strategic assets and firm performance: an empirical study of the resource based views. (Doctoral Thesis). Kent State University, USA. McGonagall, J. J. & Walla, C. M. (1999). The intelligence age of competitive group, Inc, Westport, ct. Milo, M., & Medeiros, D. (2007). A model for analyzing the competitive strategy of health plan insurers using a system of competitive intelligence, The TQM Magazine, 19(3), 206-216. Najafi, J. (1983). Competitive intelligence. Journal of tadbir, 154, 11-15. Piers, N. F., Kalka, A. & Kats keas, C. S. (1998). Source of competitive advantage in high performance exporting companies, Journal of World Business, 33(4), 93-378. Rezaiyan, A., lashkarblpki, M. (2010). Competitive intelligence and strategic decision making. Journal of Landscape business administration, 35, 43-65. Roach, D. Santa, P. (2001), Competitive Intelligence Ads Value: Five Intelligence Attitudes, European Management Journal, 1, 552-559. Wiley, J. (1999). Competitors: outwitting, outmanoeuvring and outperforming, (pp. 40-46). 413