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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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limitations of the hypercompetition perspective
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
what game is being played
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
how are you doing in the game
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”
slide5

The ValueNet

Customers

Substitutors

Company

Complementors

Suppliers

complementor
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
who are the complementors
Who are the complementors?
  • Cars Auto loans, insurance, roads
  • Televisions VCRs
  • TV shows TV guide
  • Fax machines Phone lines
  • Catalogs Delivery services
  • Hardware Software
valuenet for american airlines
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

intel a partial valuenet
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

real networks valuenet
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

slide11

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
changing the players
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
changing the added value
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?
changing the rules
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)
changing tactics
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
changing tactics1
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

changing the scope
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?