Enhancing Competitiveness Through ‘Coopetition’

The benefits of collaboration and cooperation in business have been proven beyond any doubt. Several concepts like Vendor Managed Inventory, Just-in-Time inventory, Efficient Consumer Response, Collaborative Planning, Forecasting and Replenishment, Early Supplier Involvement and Collaborative Product Design etc. are based on the principles of collaboration and cooperation. The drivers for such a partnership are value-addition to both parties in the form of reduced costs, synergy, higher profits, reduced risks, enhanced competitiveness and so on and so forth. Organisations have benefitted from strategic alliances and joint ventures. However, can we adopt such collaborative approaches with our competitors too? Yes, Coopetition is a plausible answer! The word coopetition (or co-opetition) is a portmanteau combining cooperation and competition. It is believed that the term coopetition was coined in 1992 by Mr. Ray Noorda, former CEO of Novell Inc.  It refers to cooperating with a competitor to achieve a common goal or stay ahead of other competitors. The concept gained prominence when the book titled ‘Co-opetition’ by Adam M. Brandenburger and Barry J. Nalebuff was published in 1996. The principles of coopetition are derived from Game Theory. Coopetition tries to move competitors away from a zero-sum game or a win-lose scenario. There are several industry practices and cases in the recent past, which have firmly established the benefits of coopetition. Not only the competitors gained but the customers were also benefitted. A few notable cases are mentioned below:  
  • DHL offered UPS to fly their packages within the US. UPS was already offering the same service for US Postal Service. Therefore, it was profitable for UPS to rent out space on planes it was already flying. If UPS refused the offer, DHL could have approached FedEx or any other competitor. UPS accepted the offer to cooperate rather than allow other competitors take advantage of it.
 
  • Pfizer and BioNTech collaborated in the development of Covid 19 vaccine
 
  • Apple and Google cooperated on contract tracing technology for Covid 19
 
  • Despite their rivalry, Samsung supplies components, such as displays and memory chips, to Apple for its iPhones
 
  • In 2008, Google collaborated with Yahoo to provide advertisement placements
  • Toyota and Tesla collaborated to develop electric vehicle technology, although they compete in the electric vehicle market.
  The benefits of coopetition can be summarised as:
  • Save costs by avoiding duplication of efforts and resources
  • Complement each other by sharing strengths and skills
  • Promote innovation
  • Penetrate new markets
  • Team up against larger competitors
It is, however, crucial to determine when to cooperate and when to turn down an offer to cooperate, because of the possible drawbacks, which include the following:
  • Power imbalance – when one partner may gain disproportionate amount of power
  • May lead to uneven workload distribution and logistical problems
  • Antitrust issues may arise if the cooperation leads to collusion or cartels.
  • Loss of competitive advantage due to leakage of trade secrets
  • May lead to conflicts of interest if the competitors have different goals
  Today competitors are cooperating more than ever before. However, many organizations are still skeptical about it or suffer an emotional barrier in cooperating with rivals and forego the immense opportunities that it can deliver.  Let me conclude by quoting the visionary lines by Nalebuff & Brandenburger, “You have to listen to customers, work with suppliers, create teams, establish strategic partnerships – even with competitors.”

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