Competitive Intelligence Activity among Small Firms

By Groom, Jeremy R.; David, Fred R. | SAM Advanced Management Journal, Winter 2001 | Go to article overview

Competitive Intelligence Activity among Small Firms


Groom, Jeremy R., David, Fred R., SAM Advanced Management Journal


In the 1960s and 1970s, American Companies faced little foreign competition, and a majority of the world's market was within the United States. Corporate strategy simply consisted of new product development to meet the growing affluence of American consumers. However, world growth has slowed, and many firms are finding that the only way to grow is by taking market share from the competition (Caudron, 1994). Pressures from competitors, changing customer needs, and the macroeconomy continuously confront businesses, requiring them to constantly evaluate and change their strategic goals (Hao Ma, 2000; McEvily, Das, & McCabe, 2000; Inkpen, 2000).

Evaluation of strategy includes ongoing assessment of internal strengths and weaknesses and external opportunities and threats. Scholarly researchers have found that most businesses adequately audit their internal environment, but that many lack the methodology to properly and accurately assess the external environment (Herring, 1996).

Organizations of all types usually possess some method for gathering information on competitors and the external business environment, even if it is an informal process. Many organizations however lack a formal process for collecting, assimilating, and converting competitive information into knowledge and intelligence that is useful for strategy formulation. Competitive intelligence can be quite useful in the strategic management process. Diverse types and sources of information on competitors are more readily available today via the Internet and other sources; utilizing competitive intelligence is somewhat simpler and less tedious than in years past. However, prior research suggests that most small organizations do not realize the benefits that can be obtained from competitive intelligence (Narayanan, Pinches, Kelm, & Lander).

The objective of this research is to determine the extent to which small organizations are engaging in competitor intelligence activities. Methods for gathering data in this research include personal interviews, Internet (e-mail), and fax. T-tests were conducted to determine whether statistically significant differences exist among different types and sizes of small businesses regarding competitive intelligence activities.

Findings could interest small business practitioners and academicians who ponder the need and importance of competitive intelligence in strategic management. The results may also benefit small business development centers, small business administration officials, and management consultants who assist entrepreneurs and small business owners in being more effective. Small business growth and viability is an integral part of overall economic health in the United States and abroad, so results from this study could ultimately improve, local, state, and national economies.

Literature Review

Research has shown that more and more large multinational corporations have adopted a formal process for collecting and analyzing information on the external environment, also known as competitive intelligence (Hao Ma, 2000; McEvily, Das, & McCabe, 2000; Inkpen, 2000). Businesses use intelligence to develop strategies that address opportunities and threats and allow them to gain or maintain competitive edge. However, do small businesses gather and analyze information on the external environment? Research into personality characteristics of entrepreneurs has found that many have the attitude that the owner or manager knows the market in which the business competes and does not need information or intelligence gathered in a more systematic approach (McKenna, 1996). However, it may be equally important for small businesses to have the capabilities to assess the external business environment properly.

What is competitive intelligence? Competitive intelligence, as formally defined by the Society of Competitive Intelligence Professionals (SCIP), is a systematic and ethical process for gathering and analyzing information about the competition's activities and general business trends to further a business' own goals (SCIP Web site).

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