In the fast-paced world of business, staying ahead of the competition is paramount for sustained success. Companies constantly seek ways to innovate, improve, and overtake rivals. One powerful tool in their arsenal is due diligence. While typically associated with mergers, acquisitions, or investments, due diligence also serves as a potent means for companies to glean valuable insights from their competitors.

 

UNDERSTANDING DUE DILIGENCE

Due diligence is a comprehensive investigation and analysis process conducted by companies before engaging in significant transactions, such as mergers, acquisitions, or investments. It involves scrutinizing various aspects of a target company's operations, finances, legal status, and overall viability. 

However, beyond its traditional applications, due diligence can be effectively employed by companies to study their competitors.

 

WHY IS DUE DILIGENCE CRUCIAL AS A LEARNING TOOL?

  • Deep Dive into Competitor Operations 

Conducting due diligence on competitors provides an unparalleled opportunity to gain a comprehensive understanding of their strategies, business models, market positioning, and operational processes. This insight goes beyond surface-level observations, offering a nuanced view of how competitors operate and compete in the market.

  • Identifying Strengths and Weaknesses 

Through meticulous examination, companies can identify their competitors' strengths and weaknesses. Understanding what sets competitors apart and where they fall short enables companies to capitalize on their own strengths and exploit competitor weaknesses to gain a competitive edge.

  • Anticipating Market Moves

By closely scrutinizing competitors, companies can anticipate their next moves and strategic initiatives. Whether it's launching new products, entering new markets, or adjusting pricing strategies, insights gained through due diligence empower companies to proactively respond to market dynamics and competitor actions.

  • Discovering Untapped Opportunities

In the process of analyzing competitors, companies may uncover untapped market opportunities or areas where competitors are underperforming. 

  • Mitigating Risks 

Through due diligence, companies can identify and mitigate potential risks associated with engaging with competitors. Whether it's legal liabilities, financial instability, or reputational risks, thorough due diligence enables companies to make informed    decisions and safeguard their interests.

 

STEPS TO CONDUCT DUE DILIGENCE ON COMPETITORS

  • Define Objectives: determine what specific information you aim to uncover about your competitors.
  • Gather Intelligence: collect data from various sources, including public filings, industry reports, news articles, social media, and networking events. 
  • Analyze Findings: analyze the gathered data to extract meaningful insights and patterns. 
  • Benchmark Performance: compare competitors' performance metrics against industry benchmarks and your own company's performance. 
  • Develop Actionable Strategies: based on the insights gained from due diligence, develop actionable strategies to enhance your competitive position. 
  • Monitor Competitor Activity: due diligence is an   ongoing process. Continuously monitor competitors' activities, market trends, and industry developments to stay abreast of changes and adapt your strategies accordingly.   

 

STRATEGIC DATA

In carrying out due diligence, usually acquiring parties will request strategic data that includes:

  1. List of Customer Details, for the top 10 to 20 Customers that cover majority of customers for the last 3 to 5 years in the form of:
  • Customer name, address, contact persons
  • The area where each customer is served
  • Types of goods/services provided to each customer
  • Number of units and in Rupiah for goods/ services provided to customer 
  1. List of Supplier Details, for the top 10 to 20 Suppliers for the last 3 to 5 years in the form of:
  • Supplier name, address, contact person 
  • The region where each supplier is obtained
  • Types of goods/services provided to each      supplier
  • Number of units and in Rupiah for goods/services provided to the supplier 
  1. Company Strategy, Processes, Policy, System and Procedures for:
  • Purchasing 
  • Production 
  • Storage and warehousing 
  • Sales and marketing
  • Human resources
  • Recording/accounting 
  1. List of Key Personnel, consisting of 
  • Key personnel names
  • Curriculum Vitae of key personnel
  • Addresses and contact numbers 
  • Compensation and benefit given 
  1. Another relevant factor that are important

 

CONCLUSION

In conclusion, due diligence serves as a powerful tool for companies to learn from their competitors and gain a competitive advantage in the market. By conducting thorough investigations, companies can uncover valuable insights, anticipate market moves, identify opportunities, and mitigate risks. Incorporating due diligence into strategic decision-making processes enables companies to stay ahead  of the curve, adapt to changing market conditions, and drive long-term success. In today's hypercompetitive business environment, leveraging due diligence as a tool for competitive intelligence is not just advantageous - it's essential for survival and growth.

 

By Syahrizal Musa, Consulting Practice