MANAGEMENT INFORMATION SYSTEM

Paper Assignment

“ Business Intelligence and Competitive Intelligence “

LECTURER :

Dekar Urumsah Mcom PhD CFrA

WRITTEN BY :

Vega Agnitya Eka Pangesti

(17312053)

Universities Islam Indonesia

Faculty of Economics
Accounting Department
2019
CHAPTER
I. Introduction 



1.1 The Study Background



If we talk about the development of IT now, it cannot be denied that IT is developing very
rapidly. With the rapid development of IT, of course, every organization, especially large
organizations that want to excel from their competitors, they must allocate large investments in
IT. But it must be seen again, whether this investment actually makes them superior compared
to competitors or this investment actually has no added value for their organizations. This is
often called IT as a Competitive Advantage. 



Competitive intelligence, which relates to the rivalry between different businesses should not
be confused with Business intelligence relates to the internal operation of a business.
Business intelligence is actually data processing specifically for business information. Business
intelligence has components in the form of a set of theories, methodologies, processes,
architecture, and technology that are able to transform raw data into meaningful and useful
information for business purposes. Business intelligence can handle large amounts of
information to help identify and develop new opportunities in the business world. By utilizing
business intelligence, we will be able to get new opportunities and implement effective
strategies so as to produce competitive market advantages and long-term stability. With the
help of Information Technology, business intelligence is able to provide an overview of the
history of business operations, current business conditions and predictions of future business
operations. The general function of business intelligence technology is reporting, online
analytical processing, data mining, data mining, complex information processing, business
performance management, predictive analysis and prescriptive analysis.



1.2 The Paper Purpose 



The purpose of this paper is to improve our knowledge of business intelligence and
competitive advantage and how it is implemented by evaluating, differentiating, combining
relations between those two in the current case.

II. Explanation 

2.1 Basic Concepts of Intelligence



Intelligence is the creation of new knowledge in an organization. Basically, the creation of new
knowledge cannot be separated from the process of transforming data into intelligence. 

DATA

Data is a portrait of events or facts about something that happened. Data can be reasoning for
what happens in a period of time. Data, like facts, do not yet have meaning and benefit. Then,
to provide the benefits of the data such data must undergo a process first.

INFORMATION

Information is a collection of data that has a relationship that gives meaning. Information is a
form that has provided benefits both in positive and negative terms.

KNOWLEDGE

Knowledge is information that is known to individuals; it is cognitive and can be the result of
the human processes of interpretation, reason and extrapolation. It can benefit from long term
learning and a historical perspective. An enterprise can have ‘organizational’ knowledge based
on aggregation of the individual knowledge of its members. This can result in organizational
knowledge that is not part of the knowledge of any individual.

INTELLIGENCE

New information that is derived from the analysis of a set of existing information items The
new information is intelligence, and can not be derived from any of the individual items alone.
However, intelligence can also include a piece of information that is confirmed from multiple
sources, in which case the set can be multiple instances of the same information from different
sources. 

CULTURE

The culture of an organization can be affected by both individual and organizational
knowledge. An organization can exhibit a ‘closed’ or secretive culture, both internally (between
members) and externally (to its clients). Meanwihle, an organization can exhibit an ‘open’ or
inviting culture, both internally (between members) and externally (to its clients). 



2.2 Definition of business intelligence



Business intelligence as a concept is a process of gathering many diverse and disparate items of
information, and applying an analysis process to produce intelligence that is beneficial to
business. Business intelligence relates to the internal operation of a business and should not be
confused with competitive intelligence, which relates to the rivalry between different
businesses. 



2.3 Development of Business Intelligence Management Information Systems



The first time business intelligence was used by Hans Peter, a researcher at IBM, in an article
in 1958. Business intelligence was an evolution of the Decision Support Systems (DSS)
decision support system that began in 1960 and developed in the 1980s. DSS comes from
computer-aided models created to help decision making or Executive Information Systems
(EIS) and planning. From DSS, Data Warehouse, Executive Information System (EIS), OLAP
and finally to business intelligence.



In 1989, Howard Dresner, an analyst at the Gartner Group, proposed that the term business
intelligence be used to describe concepts and methods to improve business decision making by
using a fact-based support system. In the late 1990s, Business Intelligence developed rapidly.

Often the Business Intelligence application uses data collected from a data warehouse or data
mart. A data warehouse is a copy of transactional data that facilitates decision support.
However, not all data warehouses are used for business intelligence, nor do all business
intelligence applications require data warehouses.

Now the term Business Intelligence can be defined as a set of methodologies, processes,
architectures and technologies that transform raw data into meaningful and useful information
used to enable more effective, tactical, and operational strategic insights and decision making.
When using this definition, business intelligence also includes technologies such as data
integration, data quality, data warehousing, data management masters, text and content
analysis, and many others whose markets sometimes bump into the Information management
segment.

Business intelligence can be applied for the following business purposes, in order to drive
business value:

1.) Measurement - applications / programs that are able to create a hierarchy of performance
and benchmarking metrics that inform business leaders about progress towards business goals.

2.) Analytics - applications / programs that are able to build quantitative processes for
businesses to arrive at optimal decisions and to conduct business knowledge discovery. In this
analysis process, it often involves: data mining, data processing, statistical analysis, predictive
analysis, predictive modeling, business process modeling, complex information processing and
prescriptive analysis.

3.) Reporting - applications / programs that are able to build infrastructure for strategic
reporting to serve business strategic management, not operational reporting. It often involves
data visualization, executive information systems and OLAP.

4.) Collaboration / collaboration platform - application / program that is able to get different
areas (both inside and outside the business) to work together through data sharing and
electronic data exchange.

5.) Knowledge management - applications / programs that are able to make company data
driven through strategies and practices to identify, create, represent, distribute, and enable the
adoption of insights and experiences that are true business knowledge.

In addition to the above, business intelligence can also provide a pro-active approach, such as
an alarm function to alert immediately to application users. There are many types of warnings,
for example if some business values exceed the threshold amount in a report, then business
intelligence will provide a warning and business analysts can become more alert. Sometimes
mail alerts will be sent to users too.

Business Intelligence System is a system designed to provide actual information about events,
technological trends, economic, political, legal, demographic, socio-cultural, and most
importantly is about the atmosphere of ongoing business competition.



2.4 Implementation of Business Intelligence 



A data (information) warehouse that collects information items from disparate sources and
combines them into a unified real-time store. Online analytical processing (OLAP) to extract
and view information in various ways. Data (information) mining to find patterns, groupings
and associations. Decision support tools for querying and reporting







 Performance Management

OLAP, Mining and Decision Support

Warehouse










Information Sources
BI is a strategic initiative by which organizations measure and drive the effectiveness of their
competitive strategy. BI projects go through the following phases as depicted in Fig. 1 : 



2.1. Analysis 

Every BI project should clearly justify the cost and the benefits of solving a business problem.
Requirement analysis is performed including a predefined set of the key performance
indicators (KPIs) that are required by the end users. The analysis phase produces a high level
design of the various components of the solution with the sources of relevant information.
Because of dynamic nature of BI projects, modifications in objective, people, estimate,
technology, users and sponsors can severely impact the success of the project. 

2.2. Designing 

Based on the complexity of the solution and the requirements, appropriate BI technologies are
selected. Analysis for the functional deliverables is best done through prototyping. This gives
them an opportunity to adjust their delivery requirements and their expectations. 















































2.3. Development

The full process of flow of information across the organization should be modeled. The
requirements for what type of meta data to capture and store must be documented in a meta
model. In addition, the requirements for delivering meta data to the users have to be analyzed.
If a meta data repository is purchased, it will most likely have to be extended with features that
are required by BI applications. If a meta data repository is built, the database has to be
designed based on the meta model developed during the previous step. The database design
schema must match the access requirements of the business. 

Depending on the data cleansing and data transformation requirements developed during
analysis, an ETL tool may or may not be the best solution. In either case, preprocessing the
data and writing extensions to the tool capabilities are frequently required. The real payback
for BI applications comes from the business intelligence hidden in the organization's data,
which can only be discovered with data mining tools. Developing Meta Data Repository
becomes a subproject of the overall BI project.

2.4. Deployment

Once all components of the BI application are thoroughlv tested, the aoulication is deployed to
the user ends. The success of BI project primarily lies on the quality of end user training and
support. This phase requires an interactive approach, with extensive user training and
adjustments to meet the user needs. This phase includes the development of predefined reports
and analyses for the business users, and laying the groundwork for more advanced analytics in
the future. 

2.5. Evolution 

Measuring the success of application, extending the application across the enterprise and
increasing cross-functional information sharing are the goals of evolution. 

The life cycle of BI system repeats with the methodology operating at a new level of focus
consisting analysis, re-evaluation, modification, optimization and tuning. 



2.5 Definition of Competitive Intelligence 



Competitive intelligence as a concept is the process of gathering available items of information
about a competitor and applying an analysis process to produce intelligence that is beneficial to
the business of the organization undertaking the intelligence process, and detrimental to the
business of the competitor about which the information is collected. Countering the
intelligence process, the competitor can deny access to the information being collected and/or
release information that is incorrect. Both maybe bad for the business of the competitor.

Michael Porter (1985) in Awwad (2013) states that competitive advantage is the ability
obtained through the characteristics and resources of a company to have a higher performance
than other companies in the same industry or market. The issue of competitive advantage
became very popular after Porter developed the concept. Competitive advantage comes from a
company's ability to utilize its internal strengths to respond to external environmental
opportunities while avoiding external threats and internal weaknesses (Mooney, 2017).
Competitive advantage is a dynamic process not merely seen as the final result. This is because
competitive advantage comes from the many different activities carried out by companies in
designing, producing, marketing, delivering and supporting their products. From some of the
definitions above, it can be concluded that competitive advantage is a condition of the
company which exceeds its competitors.

Hana (2013) revealed that in today's highly competitive environment, the goal of every
organization is to defeat competition and win new customers. Individuals who are holders of
knowledge to produce innovation for the company. Thanks to their personal creativity,
knowledge, skills and abilities, it is possible to generate new innovative ideas that will help
companies achieve competitive advantage. Meanwhile, according to Romero and Martinez-
Roman (2012) there are other factors that support the company's internal competitiveness,
which are motivation, financial, and support from the company's leadership in building the
company's internal competitiveness. Whereas Noruzy et.al (2013) conveys the ability in
innovation companies that are able to create the latest products and services, so that the
company's products are in demand by the market. This means that the company's
competitiveness is rooted in the company's ability to be continuously developed by internal
resources which include the support of the company's leadership, financial strength, internal
motivation to develop strength, and innovation that continues to be created and has
competitiveness in the market.

In addition, it was revealed by (Porter, 1987) in Simbolon et.al (2015) that a competitive
advantage exists if there is harmony between the competencies that differentiate a company
and the critical factors for achieving success in the industry which causes the company to have
distant achievements better than its competitors. There are two basic ways to achieve
competitive advantage. First, this advantage can be achieved when a company adopts a low
cost strategy that enables it to offer products at lower prices than its competitors. Second, with
the product differentiation strategy, so that customers consider obtaining unique benefits in
accordance with a sufficient price (premium price).



2.6 Implementation of Competitive Intelligence 

Although the main job of competitive intelligence is to support management decision making,
having a methodical competitive intelligence system in place can help the company address
many different issues. A methodical competitive intelligence program can: 

- Anticipate changes in the marketplace;

- Anticipate actions of competitors;

- Discover new or potential competitors;

- Learn from the successes and failures of others;

- Increase the range and quality of profitable target;

- Learn about new technologies, products and processes that affect the company’s business;

- Learn about political, legislative or administrative changes that can affect the company’s
business;

- Enter new businesses;

- Look at the company’s own business practices with an open mind;

- Help implement the latest management tools;


The CI process is most commonly divided into four basic stages, which make up what is
known as the CI cycle :

1. Planning: 

This means establishing the needs of the company. On one hand, the managers of the company
recognize the need for CI and, on the other hand, they define what kind of CI the company
needs. It also means what questions the managers want to answer with the CI, who else may be
using CI, and how, by whom, and when the CI will finally be used.This is also the part of the
cycle in which the competitive intelligence practitioner decides which course he should take in
fulfilling his task.

2. Gathering: 

This phase involves the actual gathering of raw information from which intelligence will be
produced. The vast majority of collection materials are public domain meaning they are
available to anyone who knows where to look. Sources include periodicals, annual reports,
books, broadcasts, speeches, databases and so on.

3. Analysis: 

This is generally considered the most difficult part of the intelligence cycle. Analysis requires
great skills and boldness because it requires the analyst to weigh information, look for patterns
and come up with different scenarios based on what he has learned. Even though analysis is
based on logic and hard information, analysts must sometimes 'fill in the blanks' and make
intelligent guesses about possible outcomes.

4. Dissemination:

This step involves distributing the intelligence product to those who requested it. It's the time
when the analysts will suggest possible courses of action based on his work. He must be able to
emphasize his recommendations and defend them with logical arguments. The resulting
intelligence will also be distributed to others in the company who can use it. The final form of
the CI, as well as its timeliness/opportuneness and security are important considerations.



2.7 CASE STUDY : Competitive Advantage through Business Intelligence for E-
Commerce 



In this paper review a framework that allows Small and Medium Enterprises (SME) to take
advantage of the information available and to adopt a set of measures supported by Business
Intelligence (BI). The adoption of BI in SMEs can create the need for organizations to adapt
the processes that support systems for decision support, and may have to adapt their systems to
the level of databases and applications. This would provide an additional perspective of
information, enabling more consistent analysis of the data in order to support the process for
prudent and agile decision making. 

Business Intelligence is a progressive method for extracting, transforming, managing and
analyzing large data through a mathematical model which gains information and knowledge to
help and make decisions in a complex situation. 

These systems are used to transform data, keen on information into decisions, and decisions
into successful actions. The term business intelligence system lacks generally accepted
definition. Elements of Business Intelligence are Data Warehouse, Data Mining and Decision
Support System. 

The major origin of business strategy for creating a competitive advantage is to understand the
data of the firm generated through its own business. Information processing has increasingly
become the foundation for achieving competitive advantage. The organization has to believe
that they encompass the right information at the right time which is available to the right
people.

According Sekaran (2006), Systems and Business Intelligence tools have a key role in the
process of decision making in organizations. They collect, store, access and analyze
organizational data in order to support and facilitate decision making. 

According A. Lönnqvist and V. Pirttimäki (2006) BI tools have a number of advantages for
businesses, with following highlights [9]: 

- The reduction of the dispersion of information; 

- Greater scope for interaction between users;

- Ease of access to information;

- The information is available in real time;

- Versatility and flexibility in adapting to the reality of the company;Useful in the process of
decision making. 

According to Guarda, BI bridges between different systems and users wishing to access
information, providing an environment that facilitates access to information needed for day to
day activities and analyzing the business performance. 

Generally deprecated software applications used by SMEs will prove to be an enabler for
essential change, since SMEs are increasingly pressured due to evolving markets and
technologies. Thus, BI systems seem to be the right choice for organizations, allowing usage of
advances in Information Technologies, deploy software applications in business processes.
This positive change is in accordance with integration of software, allowing the integration of
information flows from clients and suppliers, and redesign and formalize business processes. 

It is not guaranteed that a BI system will generate a return on investment because not every
business has been successful with BI solutions. But an adequate and integrated BI, can create
the competitive advantage necessary for SMEs be successful. It is integral to understand and
implement what type of BI solution should adopt an SME to meet its business needs. 

SMEs that have taken into consideration of the BI system quickly realized that they can
compete more effectively in the marketplace, with additional information about their
customers, patterns and more efficient financial management. 

A systematic search of online databases and research indices provide a large body of literature
detailing business intelligence systems and the impact they have on business decision-making.
The first and foremost four common components of a business intelligence system are Data
Warehousing, ETL tools, OLAP techniques, and Data Mining. The second examines how each
of the four most common components relates to the managerial decision making actions as
described. Actions reacquiring/gathering information, searching information, analyzing
information, and reporting information as shown in figure 1. The third aspect examines how
business intelligence systems can be employed at each of the three levels of management:
operational, tactical and strategic. 



! 

A business intelligence system allows managers to make decisions using real time data by
monitoring competition, carrying out constant analysis of numerous data. Considering different
variants of organization performance, data is extracted from operational databases, customer
databases, and from data collected pertaining to the competition. The business intelligence
system extracts this data from these various data sources, transforms it into specified formats.
Then BI loads the newly formatted data into specially designated data warehouses that are
available to all three levels of decision making within the organization: operational, strategic,
and tactical as shown in figure 1. 


Fig. 2.. Organizational decision flow overview 




A. Operational level decisions 

At the operational level, decisions affect or are related to the ongoing operations of an
organization as shown in figure 2. These decisions are generally based on up-to-date financial
data, sales in addition to co-operation with suppliers and customers. Data are the life of daily
operations in an organization and business intelligence takes that data to presents decision
makers the required form of information otherwise difficult by manual and verbal means.
Business intelligence systems provide information used at the operational level of an
organization to address the following specific actions : 

1. Categorize problems and deadlock.

2. Provide analysis of “best” and “worst”

3. Provide analysis of products

4. Provide analysis of employees

5. Provide analysis of metrics such as sales, costs or quantifiable results.

6. Perform ad-hoc analysis and answer questions related to departments’ ongoing operations,
up to date financial standing and sales. 

Operational level decisions are noted as being the decisions that allow an organization to run
its routine activities .The information provided by the business intelligence system is at a
summary level and the data feed into the business intelligence system from the operational
level of an organization is analysed and combined with other external information to create
direction and allow for strategic planning to emerge. 

B. Tactical level decisions 

Decisions made at the tactical level are related to planning and rely on real-time data and
forecasting to direct the future actions of marketing, sales, finance and capital management.
Tactical decisions are often used to support strategic decisions. The literature details these
related tactical decision-making activities as being supported by business intelligence
systems: 

1. Analyses of deviations from the realization of plans for particular organizational units,
individuals or indicators.

2. Decisions pertaining to the direction of marketing, sales, finance and capital management 

3. Forecasting of demand for a product or service the information derived through these
activities allows for optimizing future actions and for modifying organizational priorities time
to tiem. 

C. Strategic level decisions 

Strategic level decisions set objectives as well as ensure that those objectives are realized.
Business intelligence systems provide information in support of strategic decision related to
the development of future results based on historical results. The profitability of offers and the
effectiveness of distribution channels focus on strategic decisions in using business
information systems to create forecasts based on historical data from the past. Combining all
the above aspects to study the current performance and then to estimate how conditions will
play out in the future. Based on the literature, information provided by BI systems inform
these kinds of decisions made at the strategic level.



According to C. Mast, to develop a framework that exemplify and simplify the applicability
of the BI as a driving force for SMEs to bridge the gap between theoretical knowledge and
practical use of a tool for decision support. The exploration of the historical data of customers
 with BI tools will facilitate decision-making and planning strategies through the use of
techniques for extraction. T h e processing and visualization of data and exploitation
mechanisms of large volumes of data, enhances the analysis of unknown patterns, which
constitutes an important advantage in understanding the business processes. 



The framework is structured as shown in Figure 3. Currently, the providers of BI tools have
some BI tools priced within the reach of SMEs, some of these being available online. The
next phase, intelligence, must be taken into consideration that one of the most important
aspects of a BI project is determining what needs to be evaluated, and how to be assessed.
Thus, one should define the critical success factors of the business, and are determined for
each of these metrics appropriate for measuring assess what is running and creating the
appropriate alerts. These metrics will support the architecture of the BI solution. SMEs have
the advantage in defining the metrics, since they have a comprehensive and detailed
knowledge of the business.At last , the dissemination should in principle be the simplest
process, unless the previous phases have not been successfully performed. At this stage it is
essential that users of the system known to interpret the test results obtained. Figure 3 depicts
the layered approach of BI with layers such as presentation, performance management ,
Analytics, Data Integration and infrastructure with a logic of feedback approach.

Fig. 3. Framework for BI implementation.

The Due to the increased volume of data in the organization, the BI has become vital aspect
for any company, whatever its size, and is essential for decision making. For SMEs it is
essential to line up its strategy for growth supported on the appropriate management tools.
The use of software applications outdated by companies could be the booster for radical
change that SMEs need to face the changing markets and technologies. Due to the size and
specific characteristics, negotiation power of SMEs is limited. The choice of a suitable BI
system is strategic, allowing companies to take advantage of advances in technology. This
paper focus on how BI would be able to resolve difficult decision making exercise in
enterprises.

III. Conclusion



Business intelligence and competitive intelligence may have technically different definitions,
 but they are very closely related. Some even consider competitive intelligence to be a subset of
business intelligence, as the information gathered for competitive analysis is important for
decision-making and can add valuable insights to data collected as part of the BI process. For
example, a company experiencing a downturn in sales might look to competitive intelligence
for answers. If a competitor recently launched a new product or major marketing campaign, it
could explain the dip in sales – and the executives have a starting point for developing
solutions to increase sales.

That being said, BI and CI actually require different skill sets. Business intelligence is the more
technical of the two disciplines; practitioners have extensive knowledge in data management,
database design, and quantitative functions. Competitive intelligence, on the other hand, relies
more heavily on strategy and analysis, with less emphasis on “crunching numbers.” Still, both
functions work closely together, and serve an important purpose in today’s ever-changing and
increasingly competitive business environment.


IV. References



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2016/12/15/arsitektur-business-intelligence/. 



(2013, April 20). Intelijen Bisnis. Retrieved from http://idyncoupiez.blogspot.com/2013/04/
isnis-intelijen-bi.html. 



(2019, February 26). Competitive Advantage. Retrieved from http://bbs.binus.ac.id/
international-marketing/2019/02/competitive-advantage/. 



(2015, April 9). What is the difference between business intelligence and competitive
intelligence?. Retrieved from https://www.investopedia.com/ask/answers/040915/what-
difference-between-business-intelligence-and-competitive-intelligence.asp.



Alexandru, G. , Andreea, M. , Anca, Ş. (2015). Competitive Intelligence. Studies in Business
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T.Aditya Kumar , G.Sravanthi , Dr.D.Ratna Deepthi. (2013). Competitive Advantage through

Business Intelligence for E-Commerce. International Journal of Computer & Organization
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G R Gangadharan & Sundaravalli N Swami (2004). Business Intelligence Systems: Design and
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