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Co-opetition Adam Brandenburger and Barry Nalebuff

Co-opetition Adam Brandenburger and Barry Nalebuff. Limitations of the Hypercompetition Perspective. Ignores the point that competition and co-operation can co-exist. Examples include the development of Advanced Photo Film, DVD, etc.

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Co-opetition Adam Brandenburger and Barry Nalebuff

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  1. Co-opetitionAdam Brandenburger and Barry Nalebuff

  2. Limitations of the Hypercompetition Perspective • Ignores the point that competition and co-operation can co-exist. Examples include the development of Advanced Photo Film, DVD, etc. • Sometimes it may be in the best interests of players not to jump to the next level of dynamic competitive interaction but into co-operative competition - coopetition • This requires figuring out the situation the firm is facing and then looking at the firm’s valuenet

  3. What game is being played? Questions to ask yourself are: • Who are the key players? • duopoly game; oligopoly game; etc… • What options are open to the players? • pricing game; advertising game; etc. • What goals are the players pursuing • market share? profits?.. • Are goals complementary or conflicting? • issues the players agree on, sources of conflict, etc.. • What is the time structure of the game? • one shot, repeated, simultaneous, sequential, etc.. • What is the information structure of the game? • information as a source of bargaining strength

  4. How are you doing in the game? • If you find yourself in a “bad box” what do you do? • Play the existing game better • Try to get a good outcome for yourself • Change the game • Seek answers outside the “box”

  5. The ValueNet Customers Substitutors Company Complementors Suppliers

  6. Complementor • A player is a complementor if customers value your product more when they have the other player’s product than when they have your product alone. • Oscar Mayer and Coleman’s • A player is a competitor if customers value your product less when they have the other player’s product than when they have your product alone. • Pepsi and Coke

  7. Who are the complementors? • Cars Auto loans, insurance, roads • Televisions VCRs • TV shows TV guide • Fax machines Phone lines • Catalogs Delivery services • Hardware Software

  8. Valuenet for American Airlines American, United & Mesa are suppliers Customers Short Haul (NEW) British Airways, Iberia Car Rentals Mesa Air, United American Long Haul Boeing Bombardier Substitutors/ Complementors Pilots Association Airbus

  9. Intel - A Partial ValueNet Limit customer power & competitor response via Mother- board manufacture IBM manufactures AMD Customers limit dependence - alternative suppliers HP; Compaq; IBM Microsoft HP (Merced) Sun (Solaris + Merced) Compaq (Digital TV standards with M’Soft) NatSem / Cyrix AMD / IBM Microsoft INTEL Suppliers Digital CableTV Standards NetPC Standards Solaris Compatibility of NetPC design & Merced Limits Microsoft power in ValueNet

  10. Real Networks - ValueNet How can Real Networks enhance Added Value ? Boeing, Mercedes, Kodak, Lockheed, News Media Vxtreme NetShow (Microsoft) Microsoft Sun Real Networks Suppliers Microsoft has 10% stake in RN Sells competing products RN has a deal to optimize RA for Solaris

  11. How can the game be changed? • The game can be changed by changing • Players • Added value • Rules of the game • Tactics employed • Scope of the game

  12. Changing the players • Bring in customers - Increase industry demand. This helps competitors, but may be worthwhile for you. To do this… • Educate consumers about your product (Diapers in Japan;Whitening t’paste) • Pay customers (esp. early adopters) to play (Samples, Netscape) • Subsidize some customers, other full paying customers will follow (Initial discount to lower risk) • Become your own customer (Soaps and cottonseed oil / Cyrix PC) • Be Inc. & the WWW • Bring in suppliers • Holland Sweetener Co. and Coca-Cola • Compaq / AMD / Intel • Bring in complementors • Do it yourself. Nintendo - both h/w & s/w. Intel • Pay complementors to play (at least initially) • Be Inc. & IBM / Motorola / PowerComputing • Bring in competitors • License technology to make money, avoid complacency • Create a second source to encourage buyers to adopt technology

  13. Changing the added value Your value added = Size of the pie when you are in the game - Size of the pie when you are not in the game. How to increase added value? • Limit your supply • DeBeers and diamonds; Nintendo & video games; Beanie babies • Downside: Shrinks the pie today; Leaves entry opportunity open • Raise amount consumers are willing to pay • Policies that build loyalty (frequent flier miles) increase willingness to pay - GM / Ford credit cards; Intuit • Lower competitors’ value • Softsoap - by cornering the supply of pumps • Questions to ask: • What is your added value? • How can you increase value by changing supply, buyers, suppliers, complementors, or substitutors in your value net? • What is the value added by other players? Should you be increasing or decreasing their added values?

  14. Changing the rules Questions to ask are: • Which rules are helping you? Which ones are hurting you? Rules can be for pricing, advertising, product variety, satisfaction, etc. • What kinds of contracts are you willing to write with your buyers and suppliers? Do you want Match Competition Clauses? What does this do for you? • Do you have the power to change the rules? Does someone else have the power to overturn them? • Can you signal your commitment credibly (Kiwi Air)

  15. Changing tactics Questions to ask are: • How do other players perceive the game? How do these perceptions affect the play of the game? (NY Post vs. Daily News) • Which perception do you want to keep, which to change? • Do you want the game to be transparent or opaque (fee negotiation between investment banker and firm - guarantee / % fee)? When do you want to send signals that benefit you? When do you want to preserve the fog? • To establish credibility (clear the fog) • Accept a pay-for-performance contract • Offer guarantees or advertise • Ask others to demonstrate their credibility to you • To preserve the fog • Create complexity (long distance calling rates) • Bluff: Ask yourself whether you will be believed and under what circumstances • Ask what others stand to gain by preserving the fog, and what they could be bluffing about

  16. Changing tactics Appear Tough Appear Soft • Competitive stances that can be used to clear / add to the fog Top Dog Fat Cat Being Big Lean & Hungry Puppy Dog Being Small

  17. Changing the scope Questions to ask are: • What is the current scope of the game? Do you want to change it? Games are linked over time and across markets (geographic and product markets) • Do you want to link the current game to other games? • When multi-market contact could be beneficial • Do you want to delink the current game from other games?

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