CHAPTER NINE CREATING A COMPETITIVE ADVANTAGE USING COMPETITIVE

CHAPTER NINE CREATING A COMPETITIVE ADVANTAGE USING COMPETITIVE INTELLIGENCE Prepared by Jack Gifford Miami University (Ohio) © 2000 South-Western College Publishing 1

COMPETITIVE ADVANTAGE ã Also called a differential advantage ã 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! © 2000 South-Western College Publishing 2

COMPETITIVE ADVANTAGE ã THREE TYPES OF COMPETITIVE ADVANTAGE ã Cost leadership ã Product or service differentiation ã Niche strategies © 2000 South-Western College Publishing 3

COMPETITIVE ADVANTAGE Sources of Cost Differential Advantages ã Experience curves ã Efficient labor ã No frills goods and services ã Government subsidies ã Product design ã Reengineering ã Production innovation ã New methods of service delivery © 2000 South-Western College Publishing 4

COMPETITIVE ADVANTAGE Sources of Cost Differential Advantages 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 COSTS ã ã ã ã TIME © 2000 South-Western College Publishing 5

COMPETITIVE ADVANTAGE Sources of Cost Differential Advantages ã ã ã ã Experience curves Efficient labor No frills goods and services Government subsidies Product design Reengineering Production innovation New methods of service delivery • Pools of cheap labor • Off shore sourcing • Outsourcing • Use of temporary labor • Reduce options • Southwest Airlines © 2000 South-Western College Publishing 6

COMPETITIVE ADVANTAGE Sources of Cost Differential Advantages ã ã ã ã Experience curves Efficient labor No frills goods and services Government subsidies Product design Reengineering Production innovation New methods of service delivery • Governmental financial assistance • Reverse engineering • Cutting edge engineering technology • Downsizing by layoffs of employees • Pruning product lines • Closing factories • Renegotiating contracts © 2000 South-Western College Publishing 7

COMPETITIVE ADVANTAGE Sources of Cost Differential Advantages ã Experience curves ã Efficient labor ã No frills goods and services ã Government subsidies ã Product design ã Reengineering ã Production innovation ã New methods of service delivery • Simplified production techniques • New technology, CAD/CAM and robotics • EXAMPLES • out-patient surgery • walk-in clinics • ticketless travel © 2000 South-Western College Publishing 8

COMPETITIVE ADVANTAGE Sources of Cost Differential Advantages ã UNFORTUNATELY: ã Cost competitive advantages are rarely sustainable, because… ã Competitors copy your low cost structure ã Transferable technology ã Lower costs from alternative suppliers ã Acquisitions and mergers © 2000 South-Western College Publishing 9

COMPETITIVE ADVANTAGE Product or Service differentiation ã Common differential advantages include… ã Brand names ã Strong dealer network ã Product reliability ã Image ã Service level ã Value impressions (packaging, shape, personnel, slogans, etc. ) ã Augmented products © 2000 South-Western College Publishing 10

COMPETITIVE ADVANTAGE Niche Competition Advantage ã Seeks to target and effectively serve a single segment of the market ã May be a niche overlooked by competitors ã May be a niche too small for a competitor to effectively serve ã May 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) © 2000 South-Western College Publishing 11

COMPETITIVE INTELLIGENCE ã 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 competitor ã Intelligence is analyzed information Environmental Scanning + Competitive Intelligence Marketing Part of. . . Intelligence © 2000 South-Western College Publishing Decision Support System 12

COMPETITIVE INTELLIGENCE ã Functions of competitive intelligence include… ã Help identify a competitor’s competitive advantage ã Fewer surprises ã Predict changes in relationships ã Identify marketplace opportunities ã Guard against threats ã Forecast competitor’s strategies ã Discover potential new competitors ã Learn about new technologies, government regulations © 2000 South-Western College Publishing 13

SOURCES OF INTERNAL COMPETITIVE INTELLIGENCE ã Sales personnel, through observation or communication with customers and vendors ã Formal reports & informal feedback ã Competitive Intelligence Audit (CIA) ã ã ã ã 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 © 2000 South-Western College Publishing 14

NON-COMPUTER-BASED EXTERNAL SOURCES OF COMPETITIVE INTELLIGENCE ã Experts, such as. . . • Editors • Writers • Reporters • Functional experts • Educators • Authors © 2000 South-Western College Publishing 15

NON-COMPUTER-BASED EXTERNAL SOURCES OF COMPETITIVE INTELLIGENCE ã 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 © 2000 South-Western College Publishing 16

NON-COMPUTER-BASED EXTERNAL SOURCES OF COMPETITIVE INTELLIGENCE ã Government agencies, such as. . . • OSHA • EPA • FCC • FDA • SEC Freedom of Information Act © 2000 South-Western College Publishing 17

NON-COMPUTER-BASED EXTERNAL SOURCES OF COMPETITIVE INTELLIGENCE ã Uniform Commercial Code Filings ã Identify goods that are leased or pledged as collateral to banks or other lending institutions • Learn of additions of plant assets © 2000 South-Western College Publishing 18

NON-COMPUTER-BASED EXTERNAL SOURCES OF COMPETITIVE INTELLIGENCE ã Suppliers ã Competitors volume, new product launch dates, test markets, delivery dates, inventory levels ã Non-disclosure agreements ã Photographs © 2000 South-Western College Publishing 19

NON-COMPUTER-BASED EXTERNAL SOURCES OF COMPETITIVE INTELLIGENCE ã Newspapers and other publications ã Newspaper clipping services ã Industry and association directories ã Announcements ã Yellow pages ã Location & number of competitors ã Industry size ã Product line information © 2000 South-Western College Publishing 20

NON-COMPUTER-BASED EXTERNAL SOURCES OF COMPETITIVE INTELLIGENCE ã Trade shows ã ã ã ã New product introductions Sales literature Pricing information New technology Industry trends Industry seminars Compare competitor’s offerings © 2000 South-Western College Publishing 21

NON-COMPUTER-BASED EXTERNAL SOURCES OF COMPETITIVE INTELLIGENCE ã Speeches by competitors ã Financial community ã Employees ã Trade associations ã Neighbors to competitors ã Visit a local pub or restaurant and talk to employees ã Advisory boards ã Broad or very specific ã Internal or external © 2000 South-Western College Publishing 22

USING THE INTERNET AND DATABASES FOR COMPETITIVE INTELLIGENCE ã CI researchers can use the Internet and databases to answer these and other similar questions: ã What articles were written about this market? ã What companies are associated with the product group? ã What patents have been filed for this technology? What are the major publications in this industry? ã Industry statistics and events? ã List of leading experts in the industry? ã Can obtain both domestic and global data. ã Databases can be acquired over the Internet or on CDROMS © 2000 South-Western College Publishing 23

INDUSTRIAL ESPIONAGE ã Industrial espionage is an attempt to learn a competitor’s trade secrets by illegal or unethical means ã Theft ã Hiring away key employees ã Listening devices or communications intercept ã Video surveillance Economic Espionage Act of 1996 © 2000 South-Western College Publishing 24