At some point in the life of every business, its managers will find themselves wanting to do more. But there's only so much they can do if the required resource power does not back their yearnings.
At certain times, this resource power may be available to their competitors. And so there would be a need to close ranks for the greater good.
This is where a coopetition strategy comes in. Read on to learn about the place of coopetition as an important strategic framework.
What is it?
A coopetition strategy is a model that derives from the alliance of two or more companies (or competitors) to deliver a mutually beneficial value. The aim is to combine their strengths and competitive advantages to yield better outcomes that would've been difficult to achieve alone.
The term "coopetition is derived from two words—cooperation and competition. It involves the collaborative efforts of two ordinarily competing businesses to achieve a common goal. It is a "big picture" approach to business relationships and is defined by four players or components described below.
Customers
The customer is the central theme of any coopetition. The company aims to provide value to their customers in the way and shape they request.
Suppliers
Suppliers are strategic players in any coopetition initiative. They have the power to increase your capacity and improve your operations.
Competitors
The competitors can either become one-half of the coopetition or one of the reasons it was formed. The partners to the coopetition join hands to provide improved value and establish market dominance over their rivals.
Complementors
The Complementors are those competitors that provide value to the product of a coopetition through direct or indirect means.
When do we use it?
A coopetition strategy can be used in the following situations:
To achieve market penetration
Have you ever had to launch into a new market while knowing you're short on the reach and capacity needed to make any inroads? If you have, you can team up with experienced heads to give you a good push.
To achieve increased output
So you've just had a mass order request for your product, but you can't deliver as requested. Why not join forces with a bigger company and use their facility? You could offset your production costs and reach your production targets as well.
To share technology and improved systems
Think of Apple and Samsung partnering to deliver the ultimate screen. A coopetition can benefit from the technological advancement of both parties to create innovative solutions and much improved products.
To achieve diversification
Coopetition can provide the grounds for a company to branch into other markets or industries with which it is unfamiliar. Think of a construction firm planning to launch into the hospitality industry. It'd need some help getting in the act. And this could often mean collaborating with a known hospitality industry player.
What business questions is it helping us to answer?
A coopetition strategy answers the following questions in light of its purpose for today's businesses.
The question of strategic advantages
Unlike a competitive advantage that can be short-lived, strategic advantage can slot seamlessly into any future business shape. Coopetition allows companies to cross-fertilize viable ideas and strategies. These strategies will later position both parties for sustainable gains and future benefits.
The question of future goals
"If you want to go fast, go alone, and if you want to go far, go together." The question is, which one do you need? And this question will have to be answered at some point. A coopetition can help you with the answer, and you'll see it in its many long-term gains.
The question of shared benefits
Have you ever felt you could do much more if given a chance or the necessary resources to implement your big ideas? What if you join forces with people who can support those ideas with the relevant resources? A coopetition can do just that, and even more.
The question of value creation and capture
What can you bring to the table? To put it in clearer terms, what value can you offer? If you've ever thought about entering into a coopetition, you must have had the answers to these questions in clear and measurable terms.
How do we use it?
Here are a few outlined steps to developing a coopetitive strategy:
Identify and outline the aims and objectives of the coopetition.
Identify the company that fits into your coopetitive strategy.
Establish a point of connection between coopetitive parties.
Communicate plans, exchange ideas, reach agreements, and lay the coopetitive framework.
Lay ground rules and articles of the coopetition.
Execute the coopetition strategy.
Practical Example
One familiar use of the coopetition strategy is the alliance between Pfizer Inc and BioNTech SE during the COVID-19 pandemic. These two pharmaceutical and biotechnology powerhouses joined forces to produce hundreds of millions of COVID-19 vaccines used worldwide.
BioNTech provided the candidates and some clinical groundwork based on their mRNA research. Pfizer Inc is known to have advanced the research work and provided the bulk of the manufacturing and distribution capacities. In the end, they were both able to deliver these vaccines on short notice during a great time of need.
Advantages
It increases productivity
A Coopetition allows its participants to join forces, which can often bring about increased output. The cooperating parties pool their resources (financial, technical, etc.) together and can produce bigger yields.
It creates shared responsibilities and risk-taking
With a coopetition strategy, companies can offset the workloads and risks associated with any business venture. They can explore more challenging prospects knowing that the burden is shared.
It encourages the cross-fertilization of ideas
Coopetition involves the sharing of ideas and strategies across the board. These ideas can be refined and modified to cover more ground and produce better results when put to use.
It can build a brand reputation
You can get a leg up the corporate ladder by working with a company in a much better position. As long as you bring something to the table, you can afford to ride the wings of the bigger party.
Disadvantages
It may create conflicts and trust issues
For a coopetition to be successful, the collaborating parties must be on the same page and work as one. If one of the parties suspects the other of foul play, the whole purpose of the alliance may be defeated.
It may result in lop-sided benefits
There is a reasonable risk of one party getting the shorter end of the stick, a little shorter than expected. Hence, both parties must agree on a fair and equitable reward system to forestall such occurrences.
Unbalanced workload distribution
If one party is made to bear the bigger brunt of the workload, it may pose problems in the future. Every party must contribute their quota to ensure the success of the coopetition.
It may erode any future competitive advantages for both parties
Coopetition demands that the collaborating parties share knowledge and pool resources. And this may often mean one of the parties disclosing that "secret sauce" or competitive advantage.
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