Case Scenario: Strategic Focus ~ Competitive Intelligence and the Internet
Class, the Internet is an excellent technology for distributing information to current and prospective customers. The tool appears to be effective, in that for many companies, customers are becoming increasingly comfortable with the practice of buying products through electronic commerce.
Interested in being recognized for the superiority of their Web sites, as well as selling to current customers and attracting new ones, a growing number of companies are offering a "digital cache of press releases and executive bios, job postings and research papers, price lists and details on strategic alliances," among other types of information, via their Web sites. For firms competing through e-commerce only, it is vital that they develop an effective Web site, because it is their single distribution channel. For example, started by Louis H. Borders, who also founded Borders Books & Music, Webvan sells groceries, meat and fish, and nonprescription drugs over the Internet. Strictly a Web-based business, Webvan has no operations from a "bricks and mortar" facility. The company is attractive to investors, and its stock price surged 66 percent on the day of its initial public offering. With a resulting market capitalization of $8 billion, Webvan immediately had one-half the capitalization of Safeway, Inc., and Kroger Co., the industry's traditional leaders. Webvan's competitors continue to increase, however, as the entry barriers to this type of business are low. In Dallas, Texas, GroceryWorks.com https://shop.safeway.com/superstore/default.asp?brandid=1&page=corphome uses part of its Web site to emphasize, in an attractive manner, the superior freshness of its perishable items relative to those available through on-line competitors.
Providing competitive intelligence to competitors that historically was difficult for them to obtain is a downside to comprehensive Web sites. The seriousness of this problem is highlighted by the fact that the entry barriers to starting a Web-based business are very low. Commenting about the issue of providing intelligence to competitors through one's Web site, an analyst suggested that "Boeing's Web site is a gold mine for a competitor that would like to hire away staff who come with lots of sensitive information. And you know who[m] to talk to about each person. You can call their boss, work your way up the organizational chart and find out information about an executive, his background, how he is to work for." Other companies study the backgrounds of competitors' CEOs and top management teams. Knowing the functional backgrounds of a competitor's key decision makers yields valuable insights. For example, knowing that a CEO is from a marketing rather than, say, a finance background allows a firm to predict how the CEO "views the world" and the issues that likely have major effects on his or her strategic decisions. Corporations are well aware that others are studying their Web sites to develop competitor intelligence. One company official observed that "we know our competitors check out our Web site... And, of course, we do the same to them."
Another indicator of the value of competitor intelligence that is available from another firm's Web site is highlighted by the fact that new ventures have surfaced to provide what is called "Web-spying services." The need these companies satisfy is to help firms deal with "infoglut"-a term used to describe the vast amount of intelligence to which firms can gain access to study competitors. Called corporate intelligence firms, the charges for these firms' services can be over $1 million for a large project. One firm studied competitors' Web sites (and other publicly available information) to help Dow Chemical determine if there was a market for a promising new heat-resistant, superstrong composite of clay and plastic that it had developed (the answer was "yes") and if any of Dow's competitors were too far ahead in producing and distributing a competing product (the answer from the corporate intelligence firm was "maybe").
What should the firm do about Web spying? An obvious action is for the company to exercise caution about the type and level of information that is included on its Web site. The level of scrutiny devoted to assessing what is to be featured on a Web site should parallel the scrutiny an annual report undergoes before being published. The firm might also wish to verify, if it chooses to study competitors' sites, that any information included on a competing company's site about its own firm is accurate. According to a business writer, one firm has become "quite adept at spreading myths through its Web site" about the raw materials used to manufacture a competitor's product. Thus, if a firm chooses to study a competitor's Web site, it may also want to assess the accuracy of any information on that site that the competitor is providing about it.
Required to do:
Question 1. What are some of the opportunities the Internet has provided to help companies attain a competitive advantage?
Question 2. What are some of the threats the Internet poses to a company's survival?