Collaborating with Competitors. Alliances among competitors can introduce considerable risks. in 1995, U.S. companies lost $50 billion a year for collaborating with foreign competitors Alliances among competitors are also more popular than before.
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in 1995, U.S. companies lost $50 billion a year for collaborating with foreign competitors
Alliances among competitors are also more popular than before.
Lots of companies try to collaborate with competitors gaining future benefits
Ray Noorda created a new term to describe the process of collaborating with a competitors called “co-opetition.”Introduction
Alliances involving co-opetition come in a variety forms and touch virtually all industries.
For example, by reinventing the new modern camera, Arch-rivals Eastman Kodak and Fuji Photo Film together with other companies spent a large amount of money, $1 billion into 10 years, for researching program.
Another example, Pillsbusy, Kellogg, and Nabisco, they all joined together and worked with online grocery pioneer Webvan in order to learn how to sell their food products online.Introduction (Con’t)
Reasons for Co-opetition is important and touch virtually all industries.
The rise of the Internet and the concomitant need for competitors to come together to define and expand a new market.
The industry boundaries’ blur
Drivers of Co-opetition
The speed and uncertainty of change
Company should not only think one point of view
All aspects that may affect to them including competitors, non-competitors, and the degree of competitive threat.
Drivers of Co-opetition (Con’t) and touch virtually all industries.
To identify the future strategic direction of current and new competitors, companies can use a broad radar screen to help them.
There are 3 main drivers motivate companies collaborating among rival:
Entering emerging markets
Four emerging reasons that accelerate the prevalence of co-opetition :
Expanding product lines
Gaining market share
Creating new skills.
It brings companies to form alliances co-opetition : entering a new alliance create new potential competitors
For example, First Union alliances with Charles Schwab in order to differentiate its bank from others and provide its potential customers with OneSource, a one-stop financial service provider. But Schwab was not a traditional bank, it was a broad financial service product portfolio. In addition, the partners, Schwab, may form the co-opetition and manage it in the future.1.) Expanding Product Lines
Alliances with direct competitors help reduce costs in term of assets because they use similar type of assets or raw materials.
Rises in use in the middle to late 1990s
Many of these ventures were in traditional, capital-intensive industries such as machinery, oil, gas, and chemicals.
For example, Sony and Erricson, combined their mobile handset businesses to reduce cost and also try to become more competitive against cell-phone leaders like Nokia and Motorola.
Companies formed alliance to create greater, powerful network in order to increase in market share
For example, in the multipartner joint ventures in the auto and retail industries to create online business-to-business exchanges.
The reason that direct competitors like DaimlerChrysler, Ford, and General Motors or Carrefour and Sears Roebuck have been willing to work with one another is that such alliances are the only way to attract a large number of suppliers, customers and hence create the scale and network effects needed for success.
However, they have to manage these relationships as co-opetition.
Many alliances are formed in order to combine complementary capabilities and create new sets of skills. For example, MSNBC, the joint venture between NBC and Microsoft in the online and capable news business
NBC continued contributed traditional broadcasting skills and assets to the alliance, while Microsoft added substantial online and technical expertise
As a result, they aimed to create skills in a new medium that merged TV and computing
Thus, Microsoft had been expanding into the communications business, with alliances with Comcast and AT&T, and NBC had been moving outside traditional broadcasting
Therefore, the managers need to form this alliance as a form of co-opetition
Alliances with competitors are more likely than other alliances to result in slow decision making, shallow cooperation, or even abandonment. An example case: General Electric and Rolls Royce.
To avoid slow decision making:
- focus their efforts at different points along the value chain. In simpler word “do what you are doing well” E.g. Pharmaceutical firms
- Concentrate on the basics of sound decision making
The risk of a fire sale is that the firm will be forced to sell its interest in the alliance at a below-market price.
80% of all joint ventures are acquired by one of the partners within 7 years and most likely to happen if your partner is your competitor.
To avoid falling into a fire sale:
- Follow an independent joint venture structure
- Small companies should avoid traditional joint ventures with larger companies
- Never agree on the joint venture altogether!