Journal of Business & Industrial Marketing

Emerald Article: Competitive intelligence and firm's performance in emerging markets: an exploratory study in India Phani Tej Adidam, Madhumita Banerjee, Paurav Shukla

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To cite this document: Phani Tej Adidam, Madhumita Banerjee, Paurav Shukla, (2012),"Competitive intelligence and firm's performance in emerging markets: an exploratory study in India", Journal of Business & Industrial Marketing, Vol. 27 Iss: 3 pp. 242 - 254 Permanent link to this document: http://dx.doi.org/10.1108/08858621211207252 Downloaded on: 10-04-2012 References: This document contains references to 76 other documents To copy this document: permissions@emeraldinsight.com This document has been downloaded 72 times.

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Research Notes & Commentaries

Competitive intelligence and rms performance in emerging markets: an exploratory study in India
Phani Tej Adidam
Department of Marketing and Management, College of Business Administration, University of Nebraska at Omaha, Omaha, Nebraska, USA

Madhumita Banerjee
Warwick Business School, University of Warwick, Coventry, UK, and

Paurav Shukla
Brighton Business School, University of Brighton, Brighton, UK
Abstract Purpose This paper aims to explore the impact of competitive intelligence (CI) practices on the rms performance in the emerging market context of India. The paper seeks to answer the following questions: do CI activities have an impact on the market performance of Indian rms? If so, what are the macro and micro environmental drivers of CI for Indian rms? How are CI activities organized within Indian rms? How is the usage and dissemination of CI taking place within Indian rms? Design/methodology/approach The study used a stratied sample developed from a variety of mailing lists focusing on Indian rms. The study employed a cross-sectional, survey-based methodology. Findings The study identies two key aspects: Indian rms that exhibit higher levels of CI activities indeed achieve better nancial performance results; and the current level of CI activities in Indian rms is at a moderate level, thereby suggesting an opportunity for using and implementing more sophisticated CI techniques. Practical implications The ndings of this study should assist local and foreign managers in having a more informed understanding of CI activities in the Indian marketplace. Additionally, these ndings provide directives to managers regarding the untapped opportunities and potential that CI can offer in a highly volatile and rapidly changing market scenario. Originality/value This is the rst study that empirically investigates the relationship between the level of CI activities and rm performance in an emerging market context. It is also the rst study of its kind that explores the current state of CI practices in the Indian market. Keywords Competitive intelligence, Firm performance, Emerging markets, India, Business performance, Competitive strategy Paper type Research paper

An executive summary for managers and executive readers can be found at the end of this article.

Introduction
This paper explores the relationship between competitive intelligence (CI) practices and the rms performance in the emerging market context of India. CI is a continuously evolving process that involves discovering, analyzing and
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using intelligence regarding competitors and general business environment from publicly available, non-proprietary information sources and converting it into knowledge on a continuing basis (Blenkhorn and Fleisher, 2005). CI professionals emphasize that if the intelligence gathered is not usable (or actionable), then it is not intelligence (Calof and Skinner, 1998). This, in turn, assists companies in their strategic planning activities (Calof and Wright, 2008; Prescott, 1989). Furthermore, as intelligence is developed in a systematic and formal basis, it allows top managers to make better informed decisions regarding future events (Dishman and Calof, 2008; Gilad, 2004). Despite the increasing interest in the application of CI to the strategy process, two critical gaps emerge in the literature. First, there is little empirical
Received: June 2010 Revised: November 2010; February 2011 Accepted: April 2011

Journal of Business & Industrial Marketing 27/3 (2012) 242 254 q Emerald Group Publishing Limited [ISSN 0885-8624] [DOI 10.1108/08858621211207252]

242

Competitive intelligence and rms performance in emerging markets Phani Tej Adidam, Madhumita Banerjee and Paurav Shukla

Journal of Business & Industrial Marketing Volume 27 Number 3 2012 242 254

work linking the impact of a rms CI activities on a rms performance (Hughes, 2005). Most literature addressing this issue has been either anecdotal and/or case-based research in the context of the developed markets of the USA and Europe (Pirttimaki, 2007; Smith and Kossou, 2008; Subramanian and IsHak, 1998). Thus, as one of the rst studies of its kind, this study explores the relationship between CI activities and rm performance in an emerging market context. Second, while recent research has examined CI practices in emerging markets such as China (Bao et al., 1998; Tao and Prescott, 2000), Russia (Flint, 2002), Lithuania (Stankeviciute et al., 2004), Latin America (Price, 2000), and South Africa (De Pelsmacker et al., 2005; Muller, 1999), studies on CI practices in India are still lacking. Thus, this study presents the rst ever research ndings on the state of CI practices in one of the fastest growing emerging markets, i.e. India. This paper thereby makes a contribution in the two aforementioned aspects. As Indias role in the global economy grows (Johnson and Tellis, 2008; Sheth, 2008), in terms of both inward and outward internationalization (Contractor et al., 2007), much remains unknown as to how this market will evolve in future (Ablett et al., 2007). In such an uncertain scenario, CI becomes a vital tool for strategic planning and competitive advantage. Therefore, it is imperative that we understand two critical things. First, are those Indian rms that are practicing CI also performing well in the marketplace? Second, how are Indian rms practicing CI, as this can assist local and foreign rms compete against each other in the Indian as well as international markets? In order to answer the above issues, this study addresses the following questions: . Do CI activities have a relationship with market performance of Indian rms? . If so, what are the macro and micro environmental drivers of CI for Indian rms? . How are CI activities organized within Indian rms? . How is the usage and dissemination of CI taking place within Indian rms? The contribution of this paper is as follows: First, our study extends the current literature on CI practices by relating the measures of CI activities to rm performance. Second, we shed light on the practice of CI among Indian rms and the extent of its usage for developing a competitive advantage in a rapidly growing economy. In doing so, our study not only lls a gap in the literature where other emerging markets have been studied except India but also identies practical implications for both local as well as foreign managers. Our study clearly identies that rms that deploy CI practices are achieving better performance in the market. By understanding how rms are conducting CI in the Indian marketplace, local managers can improve their CI outlook and benet from it. At the same time, foreign managers can identify the nature of CI practices in India and can use them to collaborate and compete with their local counterparts. This paper is organized as follows: First, we present a conceptual explication of CI. Next, the research methodology followed for this study is outlined, followed by a discussion of the ndings. The paper then identies the limitations and future research directions. The paper concludes by drawing together the key issues emerging in this study. 243

Conceptual background
Competitive intelligence The concept of CI has strong underpinnings in military science and has a rich history dating back more than 5,000 years (Tao and Prescott, 2000). In recent history, especially in the eld of management, the concept has been studied for considerable time under different titles. For example, Aguilar (1967) and Fahey and King (1977) coined the phrase environmental scanning, which focused on how executives scan their organizations environment. Similarly, over time, other labels have been used in prior studies to describe competitive intelligence. These include: . business intelligence (Cleland and King, 1975; Pearce, 1976); . competitor analysis (Ghoshal and Westney, 1991); and . market intelligence (Maltz and Kohli, 1996). CI evolved as a specialized activity under market research. However, CI developed as a distinct eld, and the activities involved have come to serve all business functions. In other words, while market research tends to serve mostly the marketing function of an organization, CI has become a more generalized discipline that concurrently serves several business functions. Market research provides information based on primary data or hard facts, while CI also depends on a number of various independent observations based on inference and intuition (Fleisher, 2001). In most organizations, CI is regarded as a system of environmental scanning that integrates the knowledge of all organizational members and encompasses marketing, structural, strategic and other organizational elements (Calof and Wright, 2008). Rouach and Santi (2001) state that CI is used in tracking the activity of direct and indirect competitors including their general business activities, tactics and strategies relating to various important issues such as market penetration, product development, patent registrations and so on. Thus, if we were to compare environmental scanning and CI, we can conclude that the former is a method of gathering information. CI takes this information, and converts it into knowledge of ones competitors or a group of competitors which is used by various departments within an organization to make strategic decisions. In other words, environmental scanning is considered as the rst step in CI (Hambrick, 1981). Researchers (Ghoshal and Westney, 1991; Trim and Lee, 2008) and analysts (Courtney et al., 2009) agree that gathering intelligence is necessary for strategic planning. It helps and directs organizations in spotting new opportunities or avert disasters as well as empowers the rm in monitoring its own development cycles (Porter, 1985; Rouach and Santi, 2001). The existing literature on CI provides a sound basis for understanding the drivers of CI, how organizations structure the CI process as well as use the CI activities. The vast majority of the conceptual development of the CI literature is from the developed market perspective. These include studies on USA (Subramanian and IsHak, 1998; Tao and Prescott, 2000), Canada (Brouard, 2004; Calof and Brouard, 2004; Tanev and Bailetti, 2008), Australia (Bensoussan and Densham, 2004), New Zealand (Hawkins, 2004), Japan (Sugasawa, 2004), Korea (Kim and Kim, 2004), and Europe (Hedin, 2004; Hirvensalo, 2004; Michaeli, 2004; Millan and Comai, 2004; Pirttimaki, 2007; Smith and Kossou, 2008;

Competitive intelligence and rms performance in emerging markets Phani Tej Adidam, Madhumita Banerjee and Paurav Shukla

Journal of Business & Industrial Marketing Volume 27 Number 3 2012 242 254

Wright et al., 2004). Additionally, empirical research from other developing and emerging markets, such as the studies on China (Bao et al., 1998; Tao and Prescott, 2000), Russia (Flint, 2002), Lithuania (Stankeviciute et al., 2004), Israel (Belkine, 2004), the Middle East (Feiler, 1999), Latin America (Price, 2000), and South Africa (De Pelsmacker et al., 2005; Muller, 1999) have started to identify the country-specic differences in CI practices. While the existing literature provides a good understanding of the drivers of CI activities, their organization, usage and dissemination within rms, we know little in terms of the outcomes of CI activities as to whether collectively these CI practices have any relationship with rms market performance. Thus, we investigate the overall research question: Do CI activities have a relationship with the market performance of rms? In order to better comprehend this issue, it is imperative to investigate the range of CI activities undertaken by a rm. More specically, we need to understand three aspects: 1 the macro- and micro-environmental drivers of CI activities; 2 the organization of CI activities within a rm; and 3 the usage and dissemination of CI activities. In order to gain a better understanding of all these issues, we investigated the current practices of CI in the emerging market of India. We now present the methodology of our exploratory research.

Research methodology
Questionnaire development and measures In prior studies on CI, Tao and Prescott (2000) and Subramanian and IsHak (1998) developed questionnaires to examine CI practices in China and the USA, respectively. For the purpose of this study, we adapted the questionnaires by Tao and Prescott (2000) and Subramanian and IsHak (1998) in order to assess the Indian market. In addition, we also draw upon other literature sources, as illustrated in Table I. Procedure and sample characteristics We developed a stratied sample from a variety of mailing lists procured from the Confederation of Indian Industries (CII) and the Federation of Indian Chambers of Commerce and Industry (FICCI) based on industry, ownership structure, and size. The questionnaire was then mailed, along with a covering letter, to 500 rms. Prior to mailing the questionnaire, every effort was made to identify the appropriate individual in an organization with the overall responsibility for CI activities and sending the questionnaire. Where no clear individual or department was identied, the questionnaire and the cover letter were mailed to the CEOs ofce with a request to forward it to the person responsible for CI. We received 202 responses, of which 145 were usable, for a response rate of 29 percent, which is similar to other CI surveys (Wright et al., 2002; Subramanian and IsHak, 1998). We used early-late response analysis to check for possible sources of bias and found no signicant differences. Further, in order to ensure data validity, we employed a 10 percent callback to collate data on respondent job titles and position within organizations. The questionnaires were completed by CI executives from across a mix of departments and variety of levels across the organizations. It is also interesting to note that only 3.6 percent of the rms mentioned that they were 244

not aware of competitive intelligence, and therefore did not practice such activities. The respondents represented a diverse set of industries in India and represented a cross-section of the Indian manufacturing and service sector. Eight key industry groups emerged in our study, including consumer products (consumer non-durables and durables, 16 percent), chemicals and plastics (14 percent), software consulting (13 percent), consulting (10 percent), pharmaceuticals (10 percent), nance/banking (9 percent), computers (9 percent), and retailing (6 percent). The rms were mainly local privately held rms (30 percent), while the remaining were publicly listed rms (24 percent), foreignowned subsidiaries (20 percent), international joint ventures (18 percent), and public sector enterprises (8 percent). The size of the rms varied with sales of 34 percent of rms exceeding $100million. In terms of employees, 24 percent of rms had between 5,001 and 10,000 employees, and 21 percent between 10,001 and 20,000 employees. Table II presents a summary of the size of and number of employees in the sample rms. Next, we examined the performance of rms using the return on assets (ROA) measure. This data was collected from the annual reports of rms either published on the organizations website or available as a paper copy report. In order to control for industry effects, the nal sample of 145 rms with the completed questionnaires was divided into eight industry groups as stated above. If a rms ROA was above the mean ROA of the industry group, it was classied as high ROA, while the remaining rms were classied as low ROA. Some of the rms had reported the ROA data on the questionnaire. This data was then corroborated against the annual reports to check for accuracy. In our sample, 87 rms were classied as high ROA rms, while the remaining 58 were classied as low ROA rms.

Discussion of ndings
Outcomes of CI Activities The normative view emerging from the literature on the overall outcome of CI can be identied along two main paths. These are: 1 the perceived benets of CI in assessing markets and competitors moves; and 2 the relationship between CI activities and the rms market performance. Perceived benets of CI activities The objective and mission of CI is to better prepare the user to identify opportunities and pre-empt threats in the external environment. If CI demands heavy investments in terms of human and nancial resources, its benets must also be very clear to the rm. CI can help the rm in numerous ways, such as, providing intelligent estimates, assessments, briengs and foresights about markets, competitors and rms own actions (Dishman and Calof, 2008; Tanev and Bailetti, 2008; Tao and Prescott, 2000). In a study of British businesses, Wright et al. (2002) observed that senior management viewed CI activities as of good use for the companys situation, as a crucial and integral part of company success, and as a longterm investment of increasing importance. However, the fourth most common response concerning top management was that they dont understand but give support and show interest. Thus the above ndings from Wright et al. (2002)

Competitive intelligence and rms performance in emerging markets Phani Tej Adidam, Madhumita Banerjee and Paurav Shukla

Journal of Business & Industrial Marketing Volume 27 Number 3 2012 242 254

Table I Scale items

Number of items

Construct

Scale items

Source Tao and Prescott (2000) Prescott and Smith (1989), Trim and Lee (2008), Tao and Prescott (2000), Calof and Wright (2008), Fuld (2006), Pepper (1999)

Macro and micro environmental drivers Environment perceptions 8 Customers, competitors, international, economic, technological, suppliers, regulatory, socio-cultural Objectives of CI programs 3 General understanding of industry and competitors, areas of competitors vulnerability and rms actions on its competitors, identifying potential moves by competitors Organization of CI activities Location of CI function

CI Personnel and budget allocation Frequency of CI analysis and supply

Location of CI function within rm: corporate planning, IT, marketing/market research, R&D, sales, separate dedicated department Personnel involved in CI function Total budget allocated to CI Frequency of CI analysis Frequency of CI demand

Fuld (1991), Craft et al. (1990), Subramanian and IsHak (1998) Tao and Prescott (2000) Blenkhorn and Fleisher (2005), Fuld (1988)

Usage and dissemination of CI Sources of CI 17

Use of CI analytical techniques

31

Users of CI Dissemination of CI

1 13

Personal contact, use of sales force, review articles in trade press, analyze nancial reports, analyze competitors advertising and promotion strategy execution, obtain stockbrokers report, search online, third-party computer databases, attend trade fairs and competitors exhibits, stating who you are, obtain stock-offering prospectuses, review competitors employee-hiring advertisements, customers, distributors, hire consultants from major rms enquiring as to the method they would use, clipping services, debrief former employees of competitors, focus groups, government documents, conduct patent searches An open-ended question was asked as to: What type of information do you collect with regard to competitive intelligence? Benchmarking, business process reengineering, competitor proling, core competence analysis, critical success factor analysis, customer satisfaction surveys, divestment analysis, experience curves, nancial statement analysis, ve forces industry model, industry scenarios, industry segmentation, issue analysis, management proles, market signaling, merger and acquisition analysis, multipoint competition analysis, PIMS analysis, political and country risk analysis, portfolio analysis, reverse engineering, stakeholder analysis and assumption, surfacing and testing, case studies, strategic alliance, strategic group analysis, strengths and weaknesses, synergy analysis, technological assessment, value chain analysis Open-ended question asking which departments within the rm were using the CI related information Oral briengs, memos, formal written reports, electronic mail, written or custom-designed reports for end users, newsletters, bulletin boards, presentation to end users, computerized databases, regular meeting, special retreats, competitor les in a central location, CI training seminars

Cronin et al. (1994), Gordon (1989)

Fleisher and Bensoussen (2002)

Subramanian and IsHak (1998) Subramanian and IsHak (1998)

Outcomes of CI Perceived benets of CI

Better serve customer needs, anticipate new business opportunities, exploit competitors weaknesses, improve current market standing, increased revenues and/or prots

Trim and Lee (2008), Calof and Wright (2008)

245

Competitive intelligence and rms performance in emerging markets Phani Tej Adidam, Madhumita Banerjee and Paurav Shukla

Journal of Business & Industrial Marketing Volume 27 Number 3 2012 242 254

Table II Sample rms size and number of employees

Percentage Frequency 26 25 45 49 145

Size (sales) Less than $1m $1m-$10m $11m-$100m Greater than $100m Totals Employees Less than 1,000 1,001-5,000 5,001-10,000 10,001-20,000 More than 20,000 Totals

18 17 31 34 100

18 18 24 21 19 100

26 26 35 31 27 145

show a wide variety of responses which, in turn, demonstrates the use of CI in operational, tactical and strategic decision making. In this spirit, we asked the respondents to rate some of the positive benets to the rm. Those rms that had higher CI budgets, more dedicated staff, and request CI more frequently had a higher perceived benet of CI than others. Also, it is not surprising that those rms that collected information from a variety of sources and used a variety of sophisticated analytical techniques found more benet of CI. The two most popular benets of CI in Indian rms are the ability to better serve customer needs (64 percent) and anticipation of new business opportunities (57 percent). Some rms felt that they were able to exploit competitors weaknesses (33 percent), and improve their market positions (31 percent) due to CI. However, the majority (63 percent) of rms were not too sure whether CI led to increased revenues and/or prots. This is an interesting nding, and we next investigate whether there is any relationship between CI activities and rm performance in the Indian market. Firm performance and level of CI activities Historically, analysts and researchers agree that better CI will improve rms overall performance in the marketplace (Glueck and Jauch, 1994). Several prior studies have identied a positive relationship between CI and rm performance (Daft et al., 1988; Gordon, 1989; Teo and Choo, 2001). In their study of 85 US rms, Subramanian and IsHak (1998) found that rms having advanced systems to monitor market trends exhibited great protability. The positive relationship between CI and rm performance is empirically tested in the Western developed markets context. However, Tao and Prescott (2000) suggest the need for testing the link in emerging markets due to the high level of uncertainty involved and differing cultural contexts. For our study, we followed the typology provided by Wright et al. (2002) and Subramanian and IsHak (1998) and classied our sample of Indian rms on the basis of four key indicators: 1 dedicated CI staff; 2 frequency of CI requests; 3 number of CI sources; and 4 variety of sophisticated analytical techniques used. 246

As illustrated in Table III, in our sample, 85 (59 percent) rms exhibited primitive levels of CI activities, while 54 (37 percent) rms exhibited intermediate levels, and six (4 percent) rms exhibited advanced levels of CI activities. A x2 test of independence was used to test the relationship between rms performance (as measured by ROA) and levels of CI activities. The results (x2 18:17, p , 0:05) indicate that those Indian rms with high levels of CI activities do perform better, thus indicating a positive linkage (not causal) between a rms performance and level of CI activities. With 59 percent of Indian rms exhibiting primitive levels of CI activities, it is not surprising to note that 63 percent of Indian rms (as mentioned in the previous section) were unsure whether CI activities led to any increased revenues and/or prots. However, there is clear evidence that those rms that are exhibiting higher levels of CI activities are indeed achieving better nancial performance results. We are hopeful that these results would motivate more Indian rms to invest more in CI activities and programs. We now examine in greater detail the current state of CI practice in Indian rms. Macro- and micro-environmental drivers Environmental perceptions In any strategy tool research, it is important to study the rms perceived environmental uncertainty (Miller, 1987; Eisenhardt, 1989). Further, Hambrick (1981) suggests that environmental scanning is one of the rst steps in building CI. However, due to the abundance of information in todays environment, rms have to be highly selective regarding which environmental aspect to focus on. Tao and Prescott (2000) identied eight environmental dimensions that have an impact on organizational decision making. These include: 1 customers; 2 competitors; 3 international; 4 economic; 5 technological; 6 suppliers; 7 regulatory; and 8 socio-cultural dimensions. Therefore, we asked respondents to rank these eight environmental dimensions (Table IV) on their perceived level of impact on the organization, and their perceived level of strategic uncertainty. As stated earlier, focusing on each of these dimensions simultaneously for decision-making may not be feasible or advisable for any rm. Therefore, rms will have to prioritize which dimensions to focus on. In their study of Chinese rms, Tao and Prescott (2000) found that these rms ranked economic, customer and technological dimensions more above others. Ablett et al. (2007) state that while both India and China are growing rapidly on various environmental fronts, the manner of growth for both countries is dramatically different. Therefore, it is not Table III Firm performance and level of CI activities
Return on assets (ROA) Low High Primitive 48 37 Level of CI activities Intermediate Advanced 10 44 0 6

Competitive intelligence and rms performance in emerging markets Phani Tej Adidam, Madhumita Banerjee and Paurav Shukla

Journal of Business & Industrial Marketing Volume 27 Number 3 2012 242 254

Table IV Perceived strategic uncertainty in Indias market environment

Impact on the organization Level of uncertainty Environment dimension Rank Top box score Rank Top box score Customers Competitors International Economic Technological Suppliers Regulatory Socio-cultural 1 2 3 4 5 6 7 8 64a 61 55 42 40 23 21 17 1 4 2 3 5 8 6 7 44a 35 41 38 23 11 20 16

Note: aTop box score percentage of responses indicating 6 or 7 on a seven-point scale

surprising to see that Indian and Chinese rms differed on the ranking of dimensions of environmental scanning. We nd that respondent rms perceive that customers and competitors have a high impact on their organizations, which is not surprising, given the immense growth of competition in the Indian market. At the same time, these rms are experiencing the maximum level of uncertainty with their customers, international environment, and economic environment (Table IV). Given that CI can immensely assist managers in reducing environmental uncertainty by understanding the competitive environment as well as customer trends, our ndings clearly suggest a critical need for a CI function in Indian rms. Objectives of CI programs Researchers have identied three major objectives of CI programs. These include: 1 to maintain a general understanding of their industry and competitors (Prescott and Smith, 1989; Trim and Lee, 2008); 2 to identify areas of vulnerability of competitors (Tao and Prescott, 2000; Calof and Wright, 2008); and 3 accessing rms own actions on competitive reactions and vice versa (Fuld, 2006; Pepper, 1999). Most Indian rms (61 percent) believe that the key role of developing a CI program is to maintain a general understanding of their industry and competitors. However, it is interesting to note that very few Indian rms are adopting the other two critical objectives for their CI programs. Thus, Indian rms are yet to leverage the full impact of CI programs for their rms benet. While Indian rms are experiencing maximum uncertainty with respect to their customers (Table IV), it is interesting to note that most Indian rms believe that the key role of developing a CI program is to maintain a general understanding of their industry and competitors. We would suggest that Indian rms adopt a consumer-based focus (Babbar and Rai, 1993) in order to increase the effectiveness of their CI programs. Furthermore, as competitors are perceived to have the second most impact on a rm (Table IV), Indian rms must aggressively identify areas in which their competitors are vulnerable, as well as develop early warning signals regarding competitive actions in order to proactively exploit them in a better manner (Hughes, 2005). 247

Organization of CI activities Location of CI function, CI personnel and budget allocation In the context of Western developed markets, CI has been an important function within some rms (Tanev and Bailetti, 2008). For example, rms such as General Motors have formal and well-organized CI units that enable managers in making informed decisions about critical business issues (Chen et al., 2002). However, several researchers have observed the need for increased CI within most rms. For example, Gilad (2004) reported the need for increasing formal intelligence practices in most major rms. In his study, Gilad (2004) found that 97 percent of rms lacked an early warning system that can assist them in strategic competitive actions. The extant research has suggested that the location of the CI function is very important for a rm to fully leverage its effectiveness (Fuld, 1991). The location inuences the budget, type of projects undertaken, and the reporting relationships (Craft et al., 1990). As CI requires collecting, analyzing and communicating the results to management (Wright and Calof, 2006), in most rms CI is left to the junior cadre of management. In their study, Tao and Prescott (2000) found that 55 percent of rms had centralized CI units. However, they found these units lacking strategic orientation and having little interaction with the senior management. One of the important aspects of CI is communicating critical information to senior management that assists them in strategic decision-making. Therefore, the location of CI within the rm and its importance within the rm are critical. In our sample, only three rms have a separate dedicated CI department. As we see in Table V, it is encouraging to see that several rms (37 percent) have integrated their CI activities with their corporate planning process. However, an overwhelming majority (61 percent) of rms have integrated their CI functions in departments outside corporate planning. Thus, there is concern that in most Indian rms, CI might be used more for tactical as opposed to strategic purposes (Babbar and Rai, 1993). This clearly suggests that Indian rms could leverage the full potential of CI activities in a much better manner. Another interesting observation relates to those rms that have located their CI function in their marketing/market research (23 rms) or sales (14 rms) departments (Table V). All these 37 rms had mentioned that customers had the highest impact on their rm (Table IV). Thirty-four of these rms had also mentioned customers as the source of maximum strategic uncertainty. Also, the majority (65 percent) of the 31 rms that located CI in their IT department expressed technological environment as having a Table V Location of CI function in Indian rms
Location of CI function Corporate planning IT Marketing/market research R&D Sales Separate dedicated department Totals Percentage 37 21 16 14 10 2 100 Frequency 54 31 23 20 14 3 145

Competitive intelligence and rms performance in emerging markets Phani Tej Adidam, Madhumita Banerjee and Paurav Shukla

Journal of Business & Industrial Marketing Volume 27 Number 3 2012 242 254

major impact on their rm. Thus there seems to be a clear relationship between environmental impact and location of CI activities in Indian rms. Regarding CI personnel and budget allocation issues, almost half of our sample rms have ve or less people involved in CI activities, and one-third of the rms do not have any specic dedicated personnel. Table VI describes the number of personnel involved in CI, while a list of common job titles of CI personnel in Indian rms is provided in the Appendix. From anecdotal evidence, we found that several CI professionals are also involved in other strategic and marketing functions of the rm, thereby rendering it difcult to assign a specic business function to them. This ambiguity in CI roles is also reected in the budgetary allocation to CI activities, wherein most companies (65 percent) do not have any specic line item budget for CI activities. The median budget allocated among the remaining rms is approximately $23,000, with only 9 percent of the sample rms budgeting more than $50,000. However, the encouraging news is that approximately 72 percent of these rms are committed to increasing their CI budget in the next three years. Frequency of CI analysis and supply In a highly competitive marketplace, strategic windows of opportunity are very small, and therefore rms must constantly scan the environment in order to capitalize on such opportunities (Fuld, 1988). Traditionally, CI has relied upon competitors press releases, annual reports and other such publicly available information (Dishman et al., 2003; Fleisher et al., 2003). This meant CI was conducted in many rms only occasionally (i.e. quarterly, bi-annually or annually). However, strategy experts suggest that CI must be conducted and used on a continuous basis for greatest benets (Blenkhorn and Fleisher, 2005). In recent years, due to the technological advances and the penetration of the internet, rms are increasingly relying on this new medium for CI gathering (Chen et al., 2002). While the internet provides abundance of information about competitive marketplace, it also creates challenges for the assimilation of information. Moreover, researchers agree that strategic opportunity identication becomes difcult with information overload (Fuld, 1988; Menon et al., 1999). Therefore, rms have to optimize their CI gathering resources. In our sample, only 58 percent of Indian rms conduct competitive intelligence on a regular (i.e. continuous) basis while the remaining 42 percent conduct the same on a periodical (i.e. monthly, quarterly, or annual) basis. Further, CI outputs are supplied mostly on request or on a monthly basis, as illustrated in Table VII). In order to maximally leverage the advantages of CI activities, rms and users must seek CI analysis on an ongoing basis, rather than on a Table VI Number of people involved in CI activities in Indian rms
Number of people involved in CI 1-5 6-10 11-15 More than 15 No dedicated set of people Totals Percentage 46 15 6 4 29 100 Frequency 66 22 9 6 42 145

Table VII Frequency of supply of CI to users

Frequency of supply of CI to user Daily Weekly Monthly On request Totals Percentage 2 8 26 64 100 Frequency 3 11 38 93 145

periodical basis (Blenkhorn and Fleisher, 2005). Hence, once again, this study demonstrates that Indian rms denitely could be leveraging CI analysis in a more robust manner. Usage and dissemination of CI Sources of CI In a study of 175 CI executives, Gordon (1989) identied several sources of CI (see Table VIII). Researchers in the area of CI agree that most of the information required to gain competitive insights is available publicly (Calof and Wright, 2008). According to Cronin et al. (1994), open sources account for up to 95 percent of all CI information, and are available at little or no cost. As mentioned before, technological changes and increasing penetration and reliance on the internet has made the internet a major source of CI (Chen et al., 2002). Cronin et al. (1994) observe that at times the best intelligence is gathered through informal human contacts, including utilizing the information within the rms own supply chain, competition and other industry experts (Marin and Poulter, 2004). However, in their multicultural CI study, Adidam et al. (2009) suggest caution in conducting face-to-face interviews in the European context. As India is a highly collective society (Hofstede and Hofstede, 2004), it is not surprising that most of the CI is collected through human intelligence sources, which are relationship-based. One of the key sources of CI in approximately 45 percent of the rms is the industry expert. Quite a few companies (39 percent) also use their personal Table VIII Sources of CI
Source Review articles in trade press Analyze nancial reports Analyze competitors advertising strategy, execution, targeting Obtain stockbrokers report Search online, third-party computer databases Attend trade fairs and competitors exhibits, stating who you are Obtain stock-offering prospectuses Review competitors employee-hiring advertisements Hire consultants from major rms, enquiring as to the method they would use Debrief former employees of competitors Conduct patent searches Percentage who would use 99 98 95 88 88 88 86 85 85 71 68

Source: Derived from Cronin et al. (1994), Gordon (1989) and Powell (1992)

248

Competitive intelligence and rms performance in emerging markets Phani Tej Adidam, Madhumita Banerjee and Paurav Shukla

Journal of Business & Industrial Marketing Volume 27 Number 3 2012 242 254

contacts and sales force to collect information about their competitors products and services. Other prominent sources are trade journals, competitors promotional materials and seminars, the internet (of course), and trade shows. Interestingly enough, trade organizations, distributors, and customers are used very moderately by Indian rms. Use of online databases and nancial reports, when available, are also used by large companies and public sector enterprises on an intermittent basis. Clipping services, focus groups, government documents, suppliers, and product evaluations were not mentioned by any rm, which is very revealing. This indicates that there are several sources still available that could be tapped for collecting better and more robust intelligence. Most industrial rms collected information on competitors prices, marketing strategies, new product development plans, and sales data. In contrast, most consumer rms collected information on prices, advertising and sales promotion activities, sales data, market expansion strategies, and distribution strategies. For most of the rms, production costs, marketing costs, and net income margins by each product were the most difcult to collect. It is surprising that Indian rms are not collecting several valuable information items such as customer trends, nancing practices, acquisition/merger prospects, and management styles, which would enhance CI benets. Uses of CI analytical techniques One of the most challenging tasks of a CI professional is to analyze the information, and convert it into intelligence. Dishman and Calof (2008) observe that analysis is critical to CI as it generates right kind of intelligence for the rm. In their ve-step cross-cultural CI program framework, Adidam et al. (2009) state that once the information is collected, the critical part of CI process is the analysis and dissemination of intelligence to relevant users. Therefore, the quality of analysis is highly important for effective decision-making at the rm level, as the more sophisticated the analytical technique, the better will be the intelligence output (Dishman and Calof, 2008). We asked the respondents to rate 31 common analytical techniques in terms of their use, as suggested by Fleisher and Bensoussan (2002) and as detailed in Table I. We found that a majority of the rms (73 percent) used less than ve techniques on a regular basis. Foreign-owned subsidiaries and international joint ventures were the most sophisticated in using a variety of techniques (on an average more than ten were used on a regular basis). Privately held smaller rms were the next most sophisticated companies in terms of analytical techniques used. The ve most common analytical techniques being used by our sample were critical success factor analysis (58 percent), strengths and weaknesses analysis (46 percent), benchmarking (39 percent), Porters ve forces industry analysis (37 percent), and customer satisfaction surveys (34 percent). This provides us with an indication that there are tremendous prospects for global CI consultants in the Indian market, who can bring in more sophisticated analytical techniques to their potential clients. Due to their roots and local knowledge, local rms have a better understanding of the Indian market (Bhattacharya and Michael, 2008), and thus tend to use fewer analytical techniques. However, when foreign companies enter the 249

hyper competitive Indian market, they need to unleash all their sophisticated CI tools and techniques in order to gain a much better understanding of the local market. Thus, in many ways, it is perhaps not surprising that locally owned rms are not using as many analytical techniques as foreignowned subsidiaries and international joint ventures. Users of CI As mentioned before, CI is a critical tool in strategic planning (Calof and Wright, 2008; Prescott, 1989). As intelligence is developed in a systematic and formal basis, it allows top managers to make better informed decisions regarding future events (Dishman and Calof, 2008; Gilad, 2004; Hughes, 2005). Thus, in order to leverage CIs full potential, it is critical that all managers involved in high-level strategic planning and decision making use CI on a regular basis. In most developed markets, CI is used by both top-level as well as middle-level (SBU) managers (Smith and Kossou, 2008; Sugasawa, 2004; Wright and Calof, 2006). In some emerging markets, CI is the exclusive domain of the top managers (Bao et al., 1998; De Pelsmacker et al., 2005). In India, approximately 20 percent of the respondents have indicated that their corporate planning department is the primary user of CI, while 14 percent have mentioned that CI is exclusively used by the marketing department. However, in the majority of the rms (58 percent), CI is collectively used by their corporate planning and marketing departments as well as other senior executives. This pattern of CI use in India is very similar to that of USA (Subramanian and IsHak, 1998). Dissemination of CI Brod (1999) suggests that successful strategic decisionmaking in organizational setting is highly dependent on timely and relevant information. Therefore, once the information is gathered and analyzed, it must reach the right users for effective decision-making. Researchers observe that disseminating intelligence across the rm is one of the most critical components of effective competitive intelligence (Maltz and Kohli, 1996; Lackman et al., 2000). However, Marin and Poulter (2004) observe a lack of research with regard to organizational CI dissemination methods. Thus, we asked the respondents to rate 13 methods of dissemination (see Table I) regarding the users perceived effectiveness. The ve most often used modes of dissemination are memos (81 percent), formal written reports (67 percent), oral briengs (59 percent), regularly scheduled presentations (52 percent), and e-mails (44 percent). A majority of respondents used two or more dissemination methods, which is quite common across the globe (Adidam et al., 2009).

Limitations and directions for future research

Our study on the relationship between CI practices and market performance of rms has been one of the rst of its kind. The ndings in this study have not only investigated the difference in market performance of rms using CI practices but also shed light on the overall usage of CI in the emerging market of India. While these exploratory ndings are a useful rst step to gain an initial understanding, they also highlight the need for future research in this area. However, we must also acknowledge some limitations and difculties in conducting this study.

Competitive intelligence and rms performance in emerging markets Phani Tej Adidam, Madhumita Banerjee and Paurav Shukla

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One of the key limitations in this study is its exploratory nature. Collecting data relating to rm performance is a daunting task in emerging markets. Moreover, as mentioned earlier, most of the companies surveyed for this research were local privately held rms (30 percent), and they were reluctant to share any information with us beyond ROA. As a result, we were unable to measure many other pertinent issues relating to rm performance such as market capitalization and product-level market share. Future researchers will need to overcome this issue by perhaps focusing on a sample of companies who are willing to offer more information regarding their nancial performance. Another limitation relates to the cross-sectional method of data collection. As environmental turbulence and competition increases, more and more companies will either commence or increase their CI activities. It would be desirable to collect longitudinal data in which we could track the level of CI activities with that of rm performance. Going forward, several interesting avenues for research can be identied that merit further attention. With some early ndings on the positive relationship between CI practices and rms market performance, there is an opportunity to undertake further investigation of the same across other emerging markets as well as a comparative analysis with developed markets. This initiative, in itself would be a substantive area for future investigation and deepening an understanding of the link between CI practices and market performance. As rms in emerging markets evolve and gain maturity, there is an opportunity to undertake longitudinal research to investigate the organizational experience and level of maturity in the adoption and use of CI practices for strategic and tactical pursuits. Such a research initiative would answer the call by Dishman and Calof (2008, p. 780). The authors suggest undertaking case study based research to develop an understanding of best practices, becoming aware of accepted and successful practices and validating previously held assumptions of intelligence structures and implementations. Moreover, as rms from emerging markets increase their internationalization activities, it would interesting to examine how they adopt and adapt their CI practices between the domestic and foreign markets, and in turn, what is the impact on their market performance. Finally, the most popular benet of CI in Indian rms, as mentioned in a previous section, is the ability to better serve customer needs. This can be taken as a reection of a rms customer focus, which is the central tenet of market orientation. Kohli and Jaworski (1990) state intelligence generation, dissemination and the organization-wide responsiveness as the three elements of market orientation. In this case, it would be worthwhile to examine CI practices of Indian rms and the impact of such practices on market orientation.

(Hughes, 2005; Prescott, 1989). Furthermore, as intelligence is developed in a systematic and formal basis, it allows top managers to make better-informed decisions regarding future events (Dishman and Calof, 2008; Gilad, 2004). While there has been increased research in the area of CI, we have identied two key gaps. First, while there is anecdotal and/or case-based evidence regarding the relationship between CI activities and rm performance in developed markets, ours is the rst study that investigated the relationship between these two key variables in an emerging market context. We have found that those rms that exhibit higher levels of CI activities indeed achieve better nancial performance results. A key managerial implication of this study therefore provides justied impetus to the practice of CI in the Indian marketplace. The results of our initial study would serve to encourage managers to focus on the phenomenon and practice of CI. Second, while there has been signicant research on the state of CI practices in various emerging markets such as China, Latin America, Russia, South Africa, and the Middle East, one of the most exciting emerging markets in contemporary times i.e. India has been conspicuous by its lack of research. This could have been due to the complexity and immense dynamism of the market. However, our study explores the current state of CI activities in Indian rms. While there is a diversity of results, an overwhelming conclusion could be unavoidably drawn there is an immense need for advanced CI practices in Indian rms. Several Indian rms have taken the rst step in understanding the need for conducting CI activities. From a managerial perspective, it is time to take the next leap in which more rms of varied industries and sizes could start exploiting the potential and thereby leveraging the benets of CI in a more comprehensive and strategic manner. The ndings of this study should assist local and foreign managers in having a more informed understanding of CI activities in the Indian marketplace. Such an understanding would be particularly relevant given the diversity of the rm composition in the marketplace. Indias economy has a mix of small and medium sized rms, local and multi-national rms, family-owned conglomerates, and the new emerging class of rms with multinational presence and portfolio of home grown and internally acquired brands. An understanding and use of CI practices, and their relationship with rm performance, would provide directives to managers regarding the untapped opportunities and potential that CI can offer them in a highly volatile and rapidly changing market scenario.

References
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Managerial implications and conclusions

Competitive intelligence (CI) is a continuous and evolving process by which businesses assess the behavior and capabilities of its current and potential competitors to assist in maintaining and developing a competitive advantage (Calof and Wright, 2008). It involves discovering, analyzing and using intelligence from publicly available, non-proprietary information sources and converting it into knowledge on a continuing basis (Blenkhorn and Fleisher, 2005). This, in turn, assists companies in their strategic planning activities

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Appendix. Common job titles of CI professionals in Indian rms

. . . . . . . . . . . .

Senior Business Research Analyst. Manager Market Research. Senior Industry Analyst. Corporate Information Coordinator. Strategic Market Analyst. Strategic Research Manager. Director Business Intelligence. Competitor Specialist. Product Research Executive. Information Manager. Manager R&D. Market Research Analyst.

Competitive intelligence and rms performance in emerging markets Phani Tej Adidam, Madhumita Banerjee and Paurav Shukla

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.

About the authors

Phani Tej Adidam is the Executive Management Education Professor at the University of Nebraska at Omaha. He is also the Director of International Initiatives, and the Chairman of the Marketing and Management Department. His research interests include marketing strategy, decision condence, competitive intelligence, customer relationship management (CRM), demographics of health insurance economics, and sales management. His work was awarded the Journal of Marketings Marketing Science Institute/H. Paul Root Award for most signicant contribution to the advancement of the practice of marketing for 1999. Madhumita Banerjee is Assistant Professor of Marketing at Warwick Business School. Prior to joining academia, she consulted on strategic marketing for brands across a range of industry sectors for international rms. Her research interests include customer relationship management (CRM), marketing channels for services, consumption experiences and growth in emerging markets. Her work has been published in international and national journals. Paurav Shukla is a Reader in Marketing at the Brighton Business School, University of Brighton, UK. He possesses a wide range of industry and academic experience from middle to senior level across various industries. He has been involved with various EU-funded research projects involving several nations from the EU and Asia. He has written widely in the area of consumption experiences in the cross-national context, luxury marketing and branding and SME management in internationally refereed journals including Journal of Business Research, International Marketing Review and Journal of World Business, among others. Paurav Shukla is the corresponding author and can be contacted at: p.shukla@brighton.ac.uk

accessing rms own actions on competitive reactions and vice versa.

Executive summary and implications for managers and executives

This summary has been provided to allow managers and executives a rapid appreciation of the content of the article. Those with a particular interest in the topic covered may then read the article in toto to take advantage of the more comprehensive description of the research undertaken and its results to get the full benet of the material present. Competitive intelligence, which, in a nutshell, is the practice of gathering information about everything which could affect the business competitors, products, practices, etc. evolved as a specialized activity under market research, but has developed as a distinct eld. The activities involved have come to serve all business functions. In other words, while market research tends to serve mostly the marketing function of an organization, CI has become a more generalized discipline that concurrently serves several business functions. Market research provides information based on primary data or hard facts, while CI also depends on a number of various independent observations based on inference and intuition. Researchers have identied three major objectives of CI programs. These include: . to maintain a general understanding of their industry and competitors . to identify areas of vulnerability of competitors; and 253

So how does it all work within emerging economies, particularly India? Most Indian rms (61 percent) believe that the key role of developing a CI program is to maintain a general understanding of their industry and competitors. However, it is interesting to note that very few Indian rms are adopting the other two critical objectives. Thus, Indian rms are yet to leverage the full impact of CI programs for their rms benet. While Indian rms are experiencing maximum uncertainty with respect to their customers, it is interesting to note that most Indian rms believe that the key role of developing a CI program is to maintain a general understanding of their industry and competitors. Indian rms would be well advised to adopt a consumer-based focus in order to increase the effectiveness of their CI programs. Furthermore, as competitors are perceived to have the second most impact on a rm, Indian rms must aggressively identify areas in which their competitors are vulnerable, as well as develop early warning signals regarding competitive actions in order to exploit them proactively in a better manner. In Competitive intelligence and rms performance in emerging markets: an exploratory study in India, Phani Tej Adidam et al. discover a critical need for a CI function in Indian rms. Respondent rms in the study perceive that customers and competitors have a high impact on their organizations, which is not surprising given the immense growth of competition in the Indian market. At the same time, these rms are experiencing the maximum level of uncertainty with their customers, international environment, and economic environment. CI can immensely assist managers in reducing environmental uncertainty by understanding the competitive environment as well as customer trends. As Indias role in the global economy grows in terms of both inward and outward internationalization, much remains unknown as to how this market will evolve in future. In such an uncertain scenario, CI becomes a vital tool for strategic planning and competitive advantage. Therefore, it is imperative that two critical considerations are understood: Are those Indian rms that are practicing CI also performing well in the marketplace? How are Indian rms practicing CI, as this can assist local and foreign rms compete against each other in the Indian as well as international markets? In order to provide answers, the study addresses the following questions: Do CI activities have a relationship with market performance of Indian rms? If so, what are the macro and micro environmental drivers of CI for Indian rms? How are CI activities organized within Indian rms? How is the usage and dissemination of CI taking place within Indian rms? Extant research has suggested that the location of the CI function is very important for a rm to fully leverage its effectiveness. The location inuences the budget, type of projects undertaken, and the reporting relationships. As CI requires collecting, analyzing and communicating the results to management, in most rms CI is left to the junior cadre of management. However, these units have been found lacking in strategic orientation and having little interaction with the senior management. One of the important aspects of CI is

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communicating critical information to senior management that helps them in strategic decision making. In this studys sample, only three rms had a separate dedicated CI department, It was encouraging to see that several rms (37 percent) had integrated their CI activities with their corporate planning process. However, an overwhelming majority (61 percent) had integrated their CI functions in departments outside corporate planning. Thus, there is concern that in most Indian rms, CI might be used more for tactical as opposed to strategic purposes. This

suggests that Indian rms could better leverage the full potential of CI activities. An overwhelming conclusion is the immense need for advanced CI practices in Indian rms. Several have taken the rst step in understanding the need. Now more rms of varied industries and sizes could start exploiting the potential offered. (A precis of the article Competitive intelligence and rms performance in emerging markets: an exploratory study in India. Supplied by Marketing Consultants for Emerald.)

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