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CHAPTER II

COMPETITIVE INTELLIGENCE

II.1. Definition Competitive Intelligence & Technology Watch


We now live in a world driven by hyper-competition. The knowledge base for
managing in this hyper-competitive environment is called Competitive Intelligence.
Competitive Intelligence is a process of giving you insights into what might happen in the
near future. This process requires that we go from data to information to intelligence.
Competitive Intelligence (CI) pulls together data and information from a very large
and strategic view, allowing you to predict or forecast what is going to happen. This in turn
allows to effectively strategize in relation to

competitive environment. Therefore,

competitive intelligence allows to remain competitive by improving strategic decisions and


this leads to better performance against our competitors. In business, as in war, politics or
games, we cannot operate effectively unless we know what everyone else is doing.
There is a Chinese saying:
Know thy-self, know thy competition, and get it right almost every time.
Know thy-self, not know thy competition, and get it right about half the time.
Not know thy-self, not know thy competition, and get it wrong almost every time.
There are many expert who defined Competitive intelligence as it follows :
Hendri Dou define it as systematic programe of collecting, managing and

processing information upon the activities of the competitors, client,


technologies and general tendencies of the company activieties, in view of the
decision making processand the realization of its strategic goals.1

Hendri Dou, Gilda Massari Coelho Lenseignement de Iintelligence

Competitive

Une

experience

internationale,

Humanisme

et

Entrepraise, n05, pp. 1-23, 2001

Competitive intelligence is a systematic program for gathering and analyzing


information about your competitors' activities and general business trends to
further your own company's goals. 2
The experts define the term business activity or enterprise (company) but in
reality

Competitive

Intelligence

applications actually used

until

the

territorial development by nations. 3


Technology Watch "consists in systematically capturing, analysing, disseminating
and exploiting useful technical information for the watch and growth of a company. Watch
must be ready for any scientific or technical innovation susceptible to creating
opportunities or threats."

The main application of Technology Watch is to obtain technical information to


make decisions in a company's production department. However, the watch processes are
also applied to commercial decision making processes. In these fields, the terms
Commercial Watch, Competition Watch or Surrounding Watch are often used, even though
Technology Watch is also used, becoming the commonly used term.
Among the two disciplines, there is a key difference: while Technology Watch
emphasises on the search and capturing of relevant information to make decisions,
Competitive Intelligence refers to the same process, but with the emphasis on creating new
information, often implying the capture of new information to understand it.
In Indonesia, competitive intelligence within the enterprise or institution is still not
widely implemented thoroughly and optimal, because it is still limited to the guidelines of
strategic plans. The actual implementation also involve foreign consultants to support the
business performance of some companies. 5

(Larry Kahaner, 1997)

Intelligence Economique dan Systeme Dinformation Joelle Joachim (*), Jacky

Kister (*),
Yann Bertacchini (**) et Henri Dou (***)

http://www.upf.edu/hipertextnet/en/numero-8

CI PSMPG page 86

II.2 Method Of Competitive Intellegence


Competitive intelligence is a method, tool, or tools, or the way of thingking a
systematic program for the analysis of information sources, the strategy of information
collecting, information management, analysis of information by an expert team,
understanding information, proposal of activities for solving problems to produce strategic
information for decision makers in making or determining the policy / program. This
methodology, ranging from a clear vision so as to form a formulation of the problem. This
methodology is a cycle so that the process continues over time to achieve better results.
To develop a strategy to collect information two main areas (typologies) must be
concerned: formal information (secondary sources, scientific journals, reports, patents, )
and informal information (primary sources, human networks, meetings, etc..).

Figure II.1. The cycle of Competitive Intellegence

II.2.2 Patents
Patent is a wide field, where techniques, products, applications and legal consideration are
strongly mixed. 6
Patents can only be provided upon request and each application can only be filed for an
invention or some invention that is a unity of invention.
One unity of invention referred to is some new invention that has a close relationship
inventive step, such an invention in the form of new stationery with the new ink, stationery
and ink is used as a single unit.
Patent application and simple patent filed with the Directorate General of Intellectual
Property in the Indonesian language or the Office of the Department of Justice and human
rights throughout Indonesia to pay the application fee. Matters relating to the application
must be completed are:

date, month and year of application;


full address and address clearly Petitioner;
full name and nationality of inventors;

name and complete address of the power if the petition is filed by a special power
of attorney, in case the application is filed by;
statement can be given an application for patent;
title of invention;
claims contained in the invention;
description of the invention, which is complete, contains information on how to
implement the invention;
drawings referred to in the description necessary to clarify the invention; and
abstract.

6
Dou Hendri Jean-Marie, Manulang Sri D, Competitive Intelligence,
Technology Watch
and Regional Development, MUC Publishing, Jakarta, 2003.

When meeting these requirements will be given a filing date (filing date) or fulfill some
requirements such as letters a, b, f, i, and j. If the request is accompanied by a picture, this
is called or known by the minimum requirements (minimum requirements) but other
requirements are also required under the provisions. Furthermore, it can be seen scheme
patent application for a certificate according to the law no. 14 of 2001.

Figure II. Procedure of Granting Patent


(http://www.aj.co.id/chart_patent.html)

II.2.2.1 Matheo Patent


A new way developed by Prof. Hendri Dou, through computer software matheo
patent database as an analytical tool that allows to develop local commodities as new
products, is a way to be able to adopt technologies that can be applied to development in
the area as a local technology. Patent databases are a source of information that can provide
a reference of new products to be developed locally as a new technology. Use of matheo
patent database will provide information on commodities across the world including North
Sulawesi abstract form so that the information is important to leave to the experts in
producing new products and various kinds of correlations which consists of the title,
inventor, address, several things on keywords, summaries of research, the language used,

the type of documentation, date and country and institutional developers. There are
millions of documents that can be found in the database since 1965.

Figure II.3

Matheo Patent Software

II.2.3 Benchmarking
Definitions that can be inferred about benchmarking is essentially learning
activities, sharing information and adopting best practices to bring change to the activities
in the field. In short, benchmarking can be regarded as an attempt to change themselves by
learning activities on the efforts of others. Some definitions can be concluded the
following:

Benchmarking as a system allows a company and institution or an individual to


Some of Their activities compare with those of the best in class. Source: Hendrik
JM Dou by his paper on World Patent Information (2004) 297-309

Benchmarking is simply about making comparisons with other organizations and


then learning the lessons That those comparisons throw up. Source: The European
Benchmarking Code of Conduct
Benchmarking is the continuous process of measuring products, services and
practices against the toughest competitors or those companies Recognized as industry
leaders (best in class). Source: The Xerox Corporation

(calvin mamahit thesis

II.2.4 S.W.O.T Analisys


A SWOT analysis forces an objective analysis of a company's position via its
competitors and the marketplace. Simultaneously, an effective SWOT analysis will help
determine in which areas a company is succeeding, allowing it to allocate resources in such
a way as to maintain any dominant positions it may have. SWOT Analysis is a very
effective way of identifying your Strengths and Weaknesses, and of examining the
Opportunities and Threats you face. Carrying out an analysis using the SWOT framework
will help you to focus your activities into areas where you are strong, and where the
greatest opportunities lie.

Mamahit Calvin, OTEC DEVELOPMENT STRATEGY AS AN ALTERNATIVE


ENERGY SOURCE IN NORTH SULAWESI,Manado, 2009

Figure II.4

SWOT diagram

Environmental factors internal to the firm usually can be classified as strenghts (S)
or weakness (W), and those external to the firm can be classified as opportunities (O) or
threats (T). The analysis is based on the logic that maximizes the strengths (strengths) and
opportunities (opportunities), but simultaneously to minimize the weakness (weakness) and
threats (threats). The process of making decisions are always associated with the
development of mission, goals, strategies, and organizational policies.
The SWOT analysis provides information that is helpful in matching the firms
resources and capabilities to the competitive enviroinment in which it operates. As such, it
is instrumental in strategi formulation and selection.

Figure II.5 SWOT Matrix / Template Analysis

Here is the explanation in more detail:

Strengths
A firms strengths are its resources and capabilities that can be used as a basis for
developing a competitive advantage. Examples of such strengths include:
Patents

Strong brand names


Good reputation among customers
Cost advantages from proprietary know-how
Exclusive access to high grade natural resources
Favourable access to distribution networks

Figure II.6 Strength questions

Weaknesses
The absence of certain strengths may be viewed as a weakness. For example, each of
the following may be considered weaknesses:

Lack of patent protection


A weak brand name
Poor reputation among customers

High cost structure


Lack of access to the best natural resources
Lack of access to key distribution channels

In some cases, a weakness may be the flip side of a strength. Take the case in which a
firm has a large amount of manufacturing capacity. While this capacity may be
considered a strength that competitors do not share, it also may be considered a
weakness if the large investment in manufacturing capacity prevents the firm from
reacting quickly to changes in the strategic environment.

Figure II.7 Weakness questions

Opportunities
The external environmental analysis may reveal certain new opportunities for profit
and growth. Some examples of such opportunities include:
An unfulfilled customer need
Arrival of new technologies
Loosening of regulations
Removal of international trade barriers

Figure II.8 Opportunity questions

Threats
Changes in the external environmental also may present threats to the firm. Some
examples of such threats include :
Emergence of substitute products
New regulations
Increased trade barriers

Figure II.7 Threats questions


http://www.theaitgroup.com , Advanced Integrated Technologies Group, Inc, 2005

II.2.4

TOWS matrix

TOWS
strategies:

matrix is in use advanced tools to develop four types of

options

SO, WO, ST and WT. The key to successful use of the TOWS matrix

is to bring together the key internal and external factors to form a strategy.
The power of the TOWS matrix format is in the way it not only gives a review,
but also helps you create and summarise strategies to improve the market. Oftentimes
SWOT are put in the appendix of a report or on the shelf and do not drive action, but the
TOWs approach integrates the SWOT into the whole strategy process to help create a
plan.

Figure II.8. TOWS Matrix

SO

strategies are strategies that are made by using the company's internal strengths to

take advantage of external opportunities.


WO strategies are strategies that are made to remedy deficiencies in the internal and
external use of the opportunity. WO also showed existing opportunities within the reply
can be achieved by the company if managed to fix internal weaknesses.
ST strategy is made to anticipate external threats by using an internal power possessed.
WT strategies are possible, especially if the company is facing vulnerability factors and
threats who can not be dealt with using existing strengths and opportunities. Significantly,

the form of implementation of the WT strategy is merger, bankruptcy, restructuring, or


liquidation.

II.2.2 Porters Five Force


SWOT

analysis is an analysis

carried

out prior

to designing

strategic business plan. One of the tools used to create them is SWOT Analysis Porter
Five Forces analysis, which gives an idea of how to position our business in an industry.
Porter's Five Forces Analysis provides a powerful illustration of how the level of
competition from an industry, be it from the side of the supply chain (suppliers and
customers) and market (new entrants

and substitutes). Fourth of forces (push) it

contributes to the competitive rivalry or competition in the industry


Understanding the nature of each of these forces gives organizations the necessary
insights to enable them to formulate the appropriate strategies to be successful in their
market. 8
Porters Model is considered an important part of planning tool set. When we clear
about where the power lies, you can take advantage of your strengths and can improve the
weaknesses and can compete efficiently and effectively.

These five competitive forces identified by the Michael Porter are:


1.
2.
3.
4.
5.

Competitive Rivalry
Threats of New Entrants
Threats of Susbstitutes
Power of Buyer
Power Supplier

8 Thurlby B (1998), Competitive forces are also subject to change, London, 2008

Figure II.9. Porters Five Force diagram

1. Competitive Rivalry
Rivals are competitors within an industry. Rivalry in the industry can be weak, with
few competitors that dont compete very aggressively. Or it can be intense, with
many competitors fighting in a cut-throat environment.
Factors affecting the intensity of rivalry are:

Number of firms more firms will lead to increased competition.

Fixed costs with high fixed costs as a percentage of total cost, companies
must sell more products to cover those costs, increasing market competition.

Product differentiation Products that are relatively the same will compete
based on price. Brand identification can reduce rivalry.

2. Threats of New Entrants


One of the defining characteristics of competitive advantage is the industrys
barrier to entry. Industries with high barriers to entry are usually too expensive for
new firms to enter. Industries with low barriers to entry, are relatively cheap for new
firms to enter.
The threat of new entrants rises as the barrier to entry is reduced in a
marketplace. As more firms enter a market, you will see rivalry increase, and
profitability will fall (theoretically) to the point where there is no incentive for new
firms to enter the industry. Here are some common barriers to entry:

Patents patented technology can be a huge barrier preventing other firms


from joining the market.

High cost of entry the more it will cost to get started in an industry, the higher
the barrier to entry.

Brand loyalty when brand loyalty is strong within an industry, it can be


difficult and expensive to enter the market with a new product.

3. Threats of Susbstitutes
This is probably the most overlooked, and therefore most damaging, element of
strategic decision making. Its imperative that business owners (us) not only look at
what the companys direct competitors are doing, but what other types of products
people could buy instead.
When switching costs (the costs a customer incurs to switch to a new product)
are low the threat of substitutes is high. As is the case when dealing with new
entrants, companies may aggressively price their products to keep people from
switching. When the threat of substitutes is high, profit margins will tend to be low.
4. Power of Buyer
There are two types of buyer power. The first is related to the customers price
sensitivity. If each brand of a product is similar to all the others, then the buyer will
base the purchase decision mainly on price. This will increase the competitive
rivalry, resulting in lower prices, and lower profitability.
The other type of buyer power relates to negotiating power. Larger buyers tend to
have more leverage with the firm, and can negotiate lower prices. When there are
many small buyers of a product, all other things remaining equal, the company
supplying the product will have higher prices and higher margins. Conversely, if a
company sells to a few large buyers, those buyers will have significant leverage to
negotiate better pricing.
Some factors affecting buyer power are:

Size of buyer larger buyers will have more power over suppliers.

Number of buyers when there are a small number of buyers, they will
tend to have more power over suppliers. The Department of Defense is
an example of a single buyer with a lot of power over suppliers.

Purchase quantity When a customer purchases a large quantity of a


suppliers output, it will exercise more power over the supplier.

5. Power Supplier
Buyer power looks at the relative power a companys customers has over it.
When multiple suppliers are producing a commoditized product, the company will
make its purchase decision based mainly on price, which tends to lower costs. On the
other hand, if a single supplier is producing something the company has to have, the
company will have little leverage to negotiate a better price.
Size plays a factor here as well. If the company is much larger than its
suppliers, and purchases in large quantities, then the supplier will have very little
power to negotiate.
A few factors that determine supplier power include:

Supplier concentration The fewer the number of suppliers for a given


product, the more power they will have over the company.

Switching costs suppliers become more powerful as the cost to change


to another supplier increases.

Uniqueness of product suppliers that produce products specifically for


a company will have more power than commodity suppliers.

Sun Tzu telah memberikan salah satu petuahnya yang sangat terkenal, yakni:
Kenalilah musuhmu dan kenalilah dirimu, niscaya kamu akan berjaya dalam
100 pertempuran. Bila kita telisik, ini artinya setiap pelaku (perang) bisnis
harus mengenali dirinya sendiri (baik kekuatan maupun kelemahan) dan
medan/lingkungannya. Mengenali medannya adalah mengetahui bagaimana
posisinya di pasar secara komprehensif dan dalam konteks kompetisi, serta
apa dan siapa pelanggannya.