Case Study on "Competitive Intelligence"

Case Study 5 pages (1806 words) Sources: 5

[EXCERPT] . . . .

Competitive Intelligence

Company Overview

Avnet Inc. is a global second largest distributor of electronic components, which include connectors, semiconductors, computer products, technology solutions and embedded technology. Presently, Avnet connects the world's manufacturers of technology and more than 100,000 customers by providing the cost effective solutions. In North America, Avnet is the market leader enjoying 25% of the market shares due to the acquisition of sixth ranked Marshall Industries. However, Avnet has a primary competitor, the Arrow Electronic Inc. The German-based Electronics is another next closest competitor. Globally, Avnet has 10,000 employees scattered at 250 locations in 60 countries. Typically, Avnet is listed in the New York Stock Exchange with the sales of $60 Billion. Some years back, the company formed the global Business Information Office (BIO) called Competitive Intelligence (CI) team. Managed by Andre Gib, the CI has a big responsibility to inform the key executives about the company key competitors.

The objective of this paper is to discuss how CI tools, methods, techniques and practices helped Avnet Inc.

Competitive Intelligence

A competitive intelligence is the strategic practice used by an organization to collect, define, analyze and distributing intelligence about the competitors, customers, product and other information needed to assist executives to make a strategic decision. A competitive intelligence is an ethical business practice where an organization collects information about the external business environment, converts it into intelligence, and utilizes it to make an informed decision. (Haag, 2006).

As being revealed in the case, Avnet operates in a competitive business environment and the company top competitors are Arrow Electronics, Inc., Future Electronic and WPG Holdings Limited. Typically, Avnet is operating within the electronic industry and the United States electronic industry is a complex market that consists of many segments. The market of the U.S. electronic industry worth $1.3 Trillion and the market for the semi-conductor alone is approximately $300 Billion. However, the global market of semi-conductor is valued $298.3 Billion and will worth approximately $397.2 Billion in 2015. (National Defense University, 2011).

Analysis of the case reveals that Avnet has not yet fully applied Porter 5 forces and four corners model to mitigate the risks that the company could have used in its CI process. A brief discussion of Porters 5 forces shows the competitive environment that Avnet is operating. Avnet is operating within the 'horizontal' competitive environment (the threat of substitute, the threat of established rivals, and the threat of new entrants) and two vertical competitions include the bargaining power of customers and the bargaining power of suppliers. (Porter, 2008).

Bargaining of Power of Buyers: Buyers of electronic components, computer hardware and software have a strong bargaining of power within the industry because the industry is highly competitive. Thus, a buyer could switch from one firm to the other to make a purchase. Avnet needs to collect information on the competitor's product prices to assist the company to set the best price for its product. However, Avnet used its competitive intelligence team to track all direct competitors as well as its peripheral competitors. Moreover, the company used the competitive intelligence strategy to track competitor current and future strategy. These strategies helped the company to track the competitor's business activities and to set the best price for its product in order to create values.

Bargaining Power of Suppliers: Avnet generally depends on numerous suppliers of electronic components to meet the demand of its customers. However, the company still required its suppliers to deliver high quality products at low costs. However, Avnet was still facing challenges to achieve a bargaining of power over its suppliers because suppliers of electronic components were very few. To address the problem, Avnet will need to use its competitive intelligent team to search for suppliers globally to enjoy a superior power over its suppliers. Avnet should use the power of internet to collect information on the internal structure of the company and compared it with the competitors. Avnet should use its BIO (Business Information Office) for its planning process. By merging the BIO with the company strategic and competitive intelligence, Avnet will able to develop a streamlined relationship with industry leading suppliers that assisted the company to offer technology services as well as software and hardware solution to its numerous customers. Using its competitive intelligence solution, Avnet will be able to deliver superior solutions that span supplier line. (Cavalcanti, 2005).

Threat of Substitute: Avnet operates in the industry where there are numerous substitutes to its product. Avnet focuses on the distributing IT products however; IT distributors could easily deliver a substitute product in the market. The threat of substitute is quite low since Avnet employed competitive intelligence solution to deliver high quality products that are difficult to imitate. Avnet also used competitive intelligence to identify potential substitutes to its products, and the company implemented research and development (R&D) strategy to deliver high quality and innovative product in the market.

Threat of Established Rivals: Avnet operates in a competitive market environment, and the threats of the competitors generally affect the company market shares. Typically, competitors compete with Avnet for customer and suppliers. With medium buyer power, high supplier power, the rivalry increases in the industry. However, low threat of substitutes prevents the rivalry in the market from becoming too intense. To forestall the threat of competitors, Avnet always used competitive intelligence strategy to collect data on direct and peripheral competitors. This strategy planning assisted the company to understand the strategic move of all its competitors. With the intelligent information collected on its competitors, Avnet has been able to develop a strategic move to beat all its competitors in the industry. For example, Avnet collected information on the competitors by using internet and Electronic Manufacturing Service Industry (EMSI) channel. The information collected assisted the company to limit the forces of the competitors.

Threat of New Entrants: Barrier to the industry is high because of the required huge capital to become a successful IT distributor. Thus, the huge capital outlay to enter the industry prevents many potential entrants. Moreover, a close relationship between suppliers and distributors also discourage entrants. Despite the potentiate advantages enjoyed by Avnet within the industry, the company still used competitive intelligence strategy to track all potential entrants. For example, Avnet used EMSI, Internet Metamediaries and 3/4 PLS to track all treat of entrants. Typically, Andre, who was the head of Business Information Office, assisted the company to understand whether a new competitor has entered in the industry. The information assisted the company to change its competitive landscape making the company to enjoy high market share within the industry.

Four Corners

Four corners model assists a company to understand a competitor course of actions, competitor's capabilities and motivation.

Motivation Driver: Avnet needs to use CI tools to collect information on the competitor's tactics and goals. For example, if competitors are ready to open a new store they have not yet achieved their goals. The information will make Avnet to understand defensive action of the competitors and will assist Avnet be ahead of the competitors in the market.

Motivation: management assumptions: Using CI tools, Avnet will able to collect information about organization culture. Using CI tool, Avnet will be able to determine whether its competitors have full understood the industry.

Actions-strategy: Avnet could use CI to understand competitor's strategy and action. The information collected will make Avnet to understand when competitors have made actions on specific strategies or not. Avnet could use the information in its business to be ahead of the competitors.

Actions-capabilities: Using CI tools, Avnet could easily understand the competitor's strengths and weaknesses. The information collected will make Avnet to understand whether competitors are likely to respond to external threats. For example, an organization with extensive distribution channels and strong financial capabilities is likely to respond to external attack than a firm with weak financial resources.( Downey, 2007).

Findings

The paper identifies that Avnet uses the competitive intelligence in its planning process and the strategy assists the company to operate successfully with a competitive market environment. Typically, the data collected also assists the company to evaluate the market opportunities as well the competitive threats that the company is facing within the market. Using BIO, Avnet will be able to evaluate the core competencies of the competitors and the information assists the company to understand its competitive weakness. The data collected will also assist Avnet to understand the environmental factors that affect the company business operations. The environmental factors include:

Industry Economics,

Current and future market condition

Competitors current and future

Competitors current and future

Substitute product

Key success factor

Market opportunities

Competitive threats

Core competencies

Competitive weakness.

Typically, the competitive intelligence also assists Avnet to understand what the company must do structurally and internally to strategically compete with the competitors. Thus, the structural effectiveness of the company assisted Avnet to achieve financial and operational performances, which assist the company to maximize the shareholder value.

The Avnet competitive intelligence has four pieces:

Avnet deployed strategic planning and management system which was automated deployed through corporate… READ MORE

How to Reference "Competitive Intelligence" Case Study in a Bibliography

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