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Coopetition 101

When talking about possible relationships between organizations, we always consider competition or cooperation. The idea that two businesses can compete and cooperate simultaneously and still benefit each other seems inconceivable to us, but it is very much possible. This type of relationship is called Coopetition.

Competition is described as rivalry that develops between firms due to the structural conditions within a certain industry. Many argue that vigorous rivalry between many firms is the most valuable business interaction. On the other hand, cooperation between firms is described as the sharing of resources and knowledge to gain competitive advantage against rivaling firms in the industry. Intuitively the logics of these two business interaction conflict, but their combination is promising.

Existing theory and research on relationships among competitors focuses either on competitive or on cooperative relationships. Not many researches have been done to widen the knowledge about coopetition. Dagnino and Padula, two Italian researchers have taken action to change that. They propose a two form typology for inter-firm coopetition: Dyadic coopetition refers to the competitive and cooperative relations between two firms. “Simple dyadic coopetition” addresses the situation in which the coopetition relationship remains in on one level of the value chain, while “Complex dyadic coopetition” refers to coopetition relationship on numerous levels. Network coopetition concerns a structure of complex relationship among more than two firms. Accordingly, “simple network coopetition” refers to coopetition on one level of the value chain, while “complex network coopetition” discusses coopetition on more many levels.

They use examples from the car manufacturing industry to explain this typology more clearly. Simple dyadic coopetition happens for examples when two car manufactures create R&D alliance. That alliance is a separate legal entity which usually linked to specific project with limited time horizon. Other than this alliance the two car manufacturers are still competitors, however it may evolve into a broader cooperation or lead to a more fierce competition. Simple network coopetition manifest in the way Japanese car manufactures manage their supply chain. They use “parallel sourcing” - They each choose two or three suppliers and divided their components purchasing between them. That way they keep their supplier on their toes and eliminate quality or performance differences between suppliers. The coopetition in this structure is aimed to keep constant knowledge and material flow between members of the network.

An agreement between four huge tire manufactures demonstrates what complex network coopetition is. Michelin, Goodyear, Pirelli and Dunlop have jointly designed a new tire technology (pax system) already used in European cars. Complex dyadic coopetition is apparent if we consider a number of recent alliances in the automobile sector such as BMW-Daimler Chrysler, Honda-Isuzu, Fiat-GM and more. These agreements differ in their focus on R&D or manufacturing cooperation but each brand’s distribution remains separate and competitive.
After defining in what form coopetition manifests in the business world, Dagnino and Padula focus on the value creating power of coopetition strategy that will be discussed in my next post.

Based on: Dagnino, G.B. & Padula G.(2002). Coopetition Strategy. A New Kind of Inter-firm Dynamics for Value Creation. The European Academy of Management

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