What is Competitive Intelligence?

Competitive Intelligence

Chances are competition for your firm’s product is already well established. Other firms can be in direct competition with you when they offer a similar product and target the same customers. They can be indirectly competing with you by offering a similar product or service, but targeting a different demographic.

Competition can come from overseas. Competition can come from another firm in the same city. Competitors are all around you whether you choose to be aware of it or not. Recognizing and dealing with competition is necessary to your business success.

What every firm is competing for are buyers or customers. Customers are the final evaluator of your product. If they prefer your product above those of competitors, you will receive their business and the sales which will keep you in business. Even a great business idea will fail unless it attracts buyers.

Competitive intelligence is the systematic collection and analysis of publicly available information about competitors. Intelligence about competitors is key to understanding the actions they are currently taking to attract buyers.

Competitive intelligence may also allow the firm to predict a competitor’s future actions and take measures to preempt or minimize the impact of those actions. The objective of a firm’s competitive intelligence is to understand its competitors.

Competing firms offer functionally interchangeable products to the same buyers. Competition occurs when competing firms attempt to attract buyers by offering products with greater perceived benefit. Common benefits include price, service, reputation, and image, but may include virtually anything else associated with a product that the buyer values.

A buyer’s perceptions of what constitutes a benefit may vary widely based on the nature of the product. Since the actions taken by one competitor to attract buyers are likely to affect the performance of other competitors, competing firms are said to be interdependent.

Example: Coke and Pepsi are interdependent. An attempt by Pepsi to attract buyers (increase sales) through an advertising campaign will decrease the sales of Coke. Coke may counter this advertising campaign with its own advertising or it may elect to take another competitive action such as a temporary reduction in the price of Coke.

How Coke chooses to react to Pepsi will be based on an analysis of how the firms have acted in past situations. The industry’s competitive dynamics is the ongoing series of competitive actions and competitive responses that take place as Coke and Pepsi compete for customers.