Diponegoro International Journal of Business Vol. 3, No. 1, 2020, pp. 55-60 Published by Department of , Faculty of Economics and Business, Universitas Diponegoro (p-ISSN: 2580-4987; e-ISSN: 2580-4995) DOI: https://doi.org/10.14710/dijb.3.1.2020.55-60

The effect of competitive intelligence on competitive and performance: study on cafes and restaurants in Malang, Indonesia

Asminah Rachmi1 and Diana Eka Poernamawati1

1Department of Business Administration, State Polytechnic of Malang, Indonesia

Abstract This study aims to investigate the effect of competitive intelligence to competitive strategy and performance of cafes and restaurant in Malang, Indonesia. Data analysis applying path analysis on 100 samples showed that competitive intelligence directly affects performance and indirectly through competitive strategy performance. These findings are expected to provide recommendations for development efforts in the future for cafes and restaurants in Malang, and also to help in developing the best practices in responding the market change.

Keywords competitive intelligence; competitive strategy; performance

INTRODUCTION people who like to spend their leisure time with their friends in cafes (Fimela, 2014). Today’s highly dynamic business The increase in number of cafes and environments have created risks to the restaurants in Malang has created a tight survival of any enterprise (Schmitt, 2003). competition and each of them should have Therefore, strategic planning is an essential to compete and to exist in the ingredient for enterprise business success in market (Mazda, 2019). The objective of this today’s competitive environment (Cooper, research is to provide evidence for the 2001). For large corporations that have capability of competitive intelligence to internal departments dedicated to provide influence company’s performance through the enterprise with economic data, market competitive strategy of cafes and trends and competitive intelligence, they can restaurants in Malang. manage the risks to survive and apply business strategies that increase their LITERATURE REVIEW AND performance. There is empirical research HYPOTHESES DEVELOPMENT that has shown the importance of strategic planning in providing insights into Competitive intelligence overcoming barriers and biases associated with failure of an enterprise (D. Miller, Hope, Competitive intelligence was popular in Eisenstat, Foote, & Galbraith, 2002; Perry, 1990s and becoming focus interest in 2001). (Reginald, 2000). One of the most popular business Competitive intelligence is a way in gaining strategies is competitive strategy developed and using information about event and trend by Porter (1980). The competitive strategy in the external environment (Matthews, has been confirmed determines company’s 1990). Porter (1980, 1985, 1990, 1992, performance (Julien & Ramangalahy, 2003) 2001) comprises the source of competitive and the role of competitive intelligence is intelligence into five forces that should be supporting competitive strategy by providing considered in industries analysis namely better information of external environment new entrant threat, substitution threat, (Ma, 2000) bargaining power of supplier, bargaining Cafes and restaurants businesses in power of customer and competition intensity. Malang have been developed vastly (Fitriya, To win the competition, companies collected 2015). The trigger of cafe business all information related to external development caused by the changing of environment such as competitors, customer, society’s life style especially for young suppliers and market. That information

 Correspondence to : Received: 27th February 2020 th [email protected] Revised: 20 June 2020 Accepted: 23rd June 2020 55

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showed the changing in the environment (Matthews, 1990). There is evidence that and finally determined strategies to respond competitive intelligence support competitive those changing. strategy (Ma, 2000).

Competitive strategy H1: Competitive intelligence has positive effect on competitive strategy. Porter (1980) defined competitive strategy as a combined target searched by Previous research showed that companies and policies to find a way to competitive intelligence has direct on arrive there. This strategy focused on company performance. Tahmasebifard competitive positioning that differentiate it (2018) argues that firms may achieve from other competitors and added value superior market performance via exploiting through combined activities that were differ Competitive Intelligence activities. Adidam, from competitors. Porter’s (1980) Banerjee and Shukla (2012) claim that competitive strategy based on three generic competitive intelligence has effect on strategies used by companies namely company performance. differentiation, low cost and focus. Differentiation strategy usually is adopted to H2: Competitive intelligence has positive develop a unique product that is valued and effect on company performance. searched by customers who want to be better compared or different to others. Low cost strategy targets a large market and Beside the direct impact of competitive emphasizes low production costs and with a intelligence to company performance, certain level of product quality. Cost competitive strategy can play the role as leadership is the clearest strategy with mediator between them. Ferrier (2001) limited choices in which companies sell their argues that competitive intelligence activities products at an average industry price to gain enable executive management teams to market share (Peteraf, 1993). Focus make reliable strategic decisions and strategy serves customers in narrower actions aimed for enhancing the segments to achieve cost advantage or competitiveness and overall performance of differentiation. Companies that choose a firm. Furthermore, Julien dan Focus strategy enjoy the benefits of Ramangalahy (2003) claims that competitive customers who have high loyalty, thereby strategies determine the performance of suppressing competition among competitors exporters of SMEs. (Porter, 1980, 1985, 1990, 2001). H3: Competitive Intelligence has a Company performance positive impact on competitive strategy which indirectly has a positive effect on Company performance is a function of company performance. mutual influence between the company's competitive strengths with actions taken that METHODS enable the company to adapt to the external environment(A. Miller & Dess, 1996). The In this research framework, the concept of objective approach is related to performance competitive intelligence (CI) represents five appraisal using absolute value while the variables namely X1 (the threat of new perception approach is related to the competitors), X2 (threat of substitute assessment criteria by asking respondents products), X3 (bargaining power of supplier), their expectations and satisfaction as X4 (bargaining power of customers) and X5 stakeholders. Previous studies that have (intensity of competition). Those variables used both approaches find a strong affect performance (X9) both directly and correlation between the two and have indirectly through competitive strategy (CS) concluded that it is better to use perception that represent three variables including X6 measures if objective measurements are not (differentiation strategy), X7 (low cost available (Knights & McCabe, 1997). strategy) and X8 (focus strategy). The items Most of the normative literature findings used to measure competitive intelligence conclude that the value of Competitive and competitive strategy variables are Strategy depends on the enterprise’s developed from Porter’s theory (Porter, interpretation of Competitive Intelligence 1980, 1985, 1990, 2001) and items used to

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measure performance are developed from Based on the diagram in Figure 1, there Keegan, Huemann, and Turner (2012) were 5 regression blocks with the regression This research uses quantitative method equation as below: for testing theory by examining the relationships between variables (Creswell, Regression Block-1 (black lines) 2013). The survey technique is used to get X6 = p61X1 + p62X2 + p63X3 + p64X4 + specific information quickly through p65X5 + p6R questionnaire answers from the target group (Kumar, 2005). Data analysis for this study Regression Block-2 (red lines) used Path Analysis which is a further X7 = p71X1 + p72X2 + p73X3 + p74X4 + analysis of regression analysis. Steiner p75X5 + p7S (2005) claimed that path analysis is an extension of multiple linear regression and Regression Block-3 (blue lines) which shows the analysis of complex X8 = p81X1 + p82X2 + p83X3 + p84X4 + models. p85X5 + p8T The population is cafes and restaurants in Malang. Based on data collected by Regression Block -4 (green lines) Tripadvisor (2017) there were 391 cafes and X9 = p91X1 + p92X2 + p93X3 + p94X4 + restaurants in the city of Malang. Since the p95X5 + p9U factor analysis requires a minimum of 100 data (Tabachnick & Fidell, 2007) then the Regression Block -5 (green and blue bold total sample was rounded to 100 lines) respondents. The sampling technique used X9 = p91X1 + p92X2 + p93X3 + p94X4 + was purposive sampling that needs p95X5 +p96X6 + p97X7 + p98X8 + p9U consideration (Sugiyono, 2015) The selected sample was cafes and restaurants The results of regression analysis for that had been established for at least one each block showe that in Regression Block - year so that company performance could be 1, the variables which had sig. <0.05 were measured. X4 (0.016) and X5 (0.002). In Regression Block -2, the variables which had sig. <0.05 RESULT AND DISCUSSION were X1 (0.042) and X5 (0.006). In Regression Block -3, the variables which The conceptual model developed for this had sig. <0.05 were X2 (0.032) and X5 research is shown on Figure 1 below. (0.003). In Regression Block-4, the variables which had sig. <0.05 were X1 (0.049), X2 (0.002) and X4 (0.043). In Regression Block -5, the variables which had sig. <0.05 were X4 (0.029) and X6 (0.014).

Hypothesis testing

In testing hypotheses, H0 is rejected if the p- value for the t-statistic (the significance of the above t) is less than 0.05. Rejection of H0 means the path coefficient in question is meaningful. The acceptance of hypothesis H1 was shown from Regression Block – 1 which had two significant paths (X4 and X5), Block-2 which had two significant paths (X1 and X5), and Block–3 which had two significant paths (X2 and X5). The acceptance of hypothesis H2 was

shown from Regression Block -4 which had

Figure 1. three significant paths (X1, X2 and X4). The Conceptual model acceptance of hypothesis H3 was shown from Regression Block -5 which had two significant paths (X4 and X6).

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Discussion The acceptance of H1 supports the previous research conducted by Trim and The study findings confirmed significant and Lee (2008) that gathering intelligence is positive impact of implementation of necessary for strategic planning. Following Competitive Intelligence on Competitive analysis by Porter (1980, 1985, 1990, 1992, Strategy and performance of companies in 2001), the relationship between Competitive marketplace. Intelligence and Competitive Strategy has The impact of competitive intelligence on been confirmed. competitive strategy as stated in Hypothesis The 2nd hypothesis that states 1 (H1) was shown in the results of regression competitive intelligence has positive impact block-1, block-2 and block 3. The bargaining on company performance is accepted based power of customers and the intensity of on the result of regression block 4. The competition significantly influenced threat of new competitors, the threat of differentiation strategy. The majority of substitute products, and consumer cafes and restaurants in the city of Malang bargaining significantly affected consider that a differentiation strategy needs performance. Cafe and restaurant in Malang to be done when customers have many food need to anticipate the threat of new choices at home or outside the home. competitors, the threat of substitute products Differentiation strategy is also used to and consumer bargaining to increase their anticipate the high intensity of competition in performance. According to Tahmasebifard terms of offering a variety of foods and a (2018) in the current economic recession in comfortable atmosphere for customers. which companies are wrestled down with Although this comes with a high price but by cutting their cost and performing in most targeting the upper middle-class customers efficient state, they must know which who have high taste, this strategy can be subtype of competitive intelligence that has successful. the greater impact on the performance. Components of competitive intelligence Gračanin, Kalac, and Jovanović (2015) such as the threat of new competitors and claim that companies must further explore the intensity of competition also significantly benefits emerging from Competitive influenced the low-cost strategy. Low cost Intelligence activities in order to improve strategy is applied by cafe and restaurant their business performances, entrepreneurs to anticipate the emergence The acceptance of H3 that Competitive of new competitors with the same food menu Intelligence has a positive on Competitive or maybe more varied at competitive prices. Strategies which indirectly has a positive New cafes and restaurants usually offer effect on company performance is shown on promo prices to attract consumers. The the results of the block-5 regression intensity of competition allows cafes and analysis. The bargaining power of restaurants to compete at the level of price customers seemed influenced the and variety of food. Low cost strategy can be differentiation strategy that indirectly done by reducing operational costs by influenced performance. Differentiation finding suppliers of cheap raw materials or strategy allows restaurant entrepreneurs to employing employees with lower wages. On provide a unique and interesting menu and the other hand, the threat of substitution a cozy cafe / restaurant atmosphere that will product and competition intensity make customers interested in trying food significantly influenced the focus strategy. and enjoying a comfortable atmosphere. The threat of substitute products is This result support previous research substitute food provided by cafes or other conducted by Brown and Blackmon (2005) restaurants with the same category. Cafe who claim that the implementation of a and restaurant entrepreneurs can use a competitive strategy should be linked to focus strategy by targeting consumers or market requirements to enable the firm to loyal customers. Focus strategy can also be achieve superior performance. Furthermore, used to anticipate the high intensity of the literature discussions on the process of competition. By making good strategic planning support the relationship communication and satisfying service to between CI, CS and performance (Ardekani loyal customers, this strategy allows cafes & Nystrom, 1993). and restaurants to survive in the intense competition.

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CONCLUSION in India. Journal of Business and Industrial Marketing, 27(3), 242-254. Through completion with path analysis, the Ardekani, Y. M., & Nystrom, P. C. (1993). Designs results of the block-1 to block-5 regression for Environmental Scanning System: analysis it was shown that not all Tests of Contingency Theory. Working components of competitive intelligence Paper. University of Wisconsin influenced the selection of competitive Milwaukee. strategies and performance. In relation to Brown, S., & Blackmon, K. (2005). Aligning the influence of competitive intelligence on manufacturing strategy and business- competitive strategies, it turned out that only level competitive strategy in new the bargaining power of consumers and the competitive environments: the case for intensity of competition affected the strategic resonance. Journal of selection of Differentiation strategy, while Management Studies, 42, 793-816. the threat of new competitors and the Cooper, J. (2001). Enhancing the Competitive intensity of competition affected the Success of Canadian SMEs. CMA selection of Low Cost strategy, while the Management(Jul/Aug), 16-21. threat of substitute products and the Creswell, John W. (2013). Research Design: intensity of competition affected the choice Pendekatan Kualitatif, Kuantitatif, dan of focus strategy. Furthermore, regarding Mixed (3rd Ed.). Yogyakarta: Pustaka the influence of competitive intelligence to Pelajar. performance, the results of the analysis Ferrier, W. (2001). Navigating the competitive showed that the threat of new competitors, landscape; the drivers and the threat of substitute products, and consequences of competitive consumer bargaining power significantly aggressiveness. Academy of affected performance. On the other side, the Management Journal,, 44, 858-877. indirect effect of competitive intelligence Fimela. (2014). D'Flavors Cafe & Resto Malang, through competitive strategies on Tempat Hangout Yang Beri Kesan performance was shown by the significant Klasik. Retrieved 19 June 2020, from influence of differentiation strategy to https://www.fimela.com/lifestyle- performance. relationship/read/3741030/dflavors- Competitive intelligence becomes cafe-amp-resto-malang-tempat- important for companies in the current era hangout-yang-beri-kesan-klasik because of rapid technological changes that Fitriya, Devita Triyana. (2015). Pengawasan is followed by changes in consumer tastes Dinas Pendapatan Daerah Kota Malang towards goods and services. Competitive terkait Penagihan Pajak Restoran di intelligence is to help to identify and to Kota Malang (Studi Implementasi assess business risks and opportunities so Peraturan Daerah Kota Malang Nomor that business risks can be avoided and 16 Tahun 2010 Tentang Pajak Daerah). opportunities can be taken advantage of. Artikel Ilmiah. Law Department. Companies that function competitive Universitas Brawijaya. intelligence will benefit from the competition Gračanin, Šaban , Kalac, Edin , & Jovanović, because they can use appropriate strategies Dejan (2015). Competitive Intelligence: to solve internal problems or face Importance and Application in Practice. competition and business challenges. The Review of and results of this study provide several findings Competitiveness, 1(1), 25-44. related to strategic planning and company Julien, Pierre Andre, & Ramangalahy, Charles. performance. The strategic planning (2003). Competitive Strategy and process is focused on the relationship Performance of Exporting SMEs: An between competitive intelligence, Empirical Investigation of The Impact of competitive strategy and company Their Export Information Search and Competencies. Entrepreneurship performance. Theory and Practice(spring), 227-245.

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