In these exceptional global conditions, coopetition — cooperation between competitors — will be vital as survival takes prominence over rivalry
The contagion has changed how business is conducted the world over. Firms which are unable to adapt are perishing as remote- working has become a norm. The post-pandemic world could throw up a lot of challenges and businesses need to revise their strategies in numerous ways to acclimatise themselves to the disruptions. An open organisational culture towards innovation, structured horizon planning and most importantly exceptional value proposition for customers and stakeholders will help businesses survive in these difficult times. Flexibility has also become crucial during these testing times. For example, a number of companies like Ford, Coca-Cola, 3M, Honeywell have augmented their traditional business models and their usual products to produce PPE (personal protective equipment) to fight the outbreak. In these exceptional global conditions, coopetition — cooperation between competitors — will be vital in times to come as survival takes prominence over rivalry. According to Bengttson and Kock, coopetition can be defined as a complex association between two business players, irrespective of their involvement, be it horizontal or vertical. A horizontal relationship would mean being business competitors or complementers in the same sector, producing similar products, whereas vertical business involves suppliers and customers. Research in this domain is unravelling tremendous benefits for competitors, who are forging mutually beneficial collaborations that are based on coopetition strategies where companies share resources such as equipment, funds and capabilities, like technical know-how, expertise and experience. These initiatives ensure mutually-beneficial outcomes by pursuing goals collaboratively that otherwise would be difficult to chase, which in turn improves their financial performance.
However, there is a catch here. Coopetition is not as easy as it seems, as rivals cannot suddenly collaborate, as this has to happen at all levels, top, middle and bottom. According to researchers, the degree of collaboration is inversely proportionate to the magnitude of rivalry or competition. In fact, it is a delicate balance between collaboration and rivalry. If businesses that complement each other work together, there is a potential for huge benefits. But if rivalry or competition is high, it could lead to adverse performance outcomes.
Several rival companies have taken advantage of collaboration and there are several motives to take this strategic route. First and foremost, the main motive is to effectively utilise scarce resources. Coopetition can effectively utilise scarce resources by integrating them to efficient production with lower risks. For example, in the electronics industry, Samsung Electronics and Sony worked together to develop the flat screen LED televisions by sharing R&D costs. This strategy is also used to increase the current market size or create a new market by introducing new products or services. Costs and risks are shared and companies can dominate their competitors. In the automobile industry, rivals Ford and Toyota teamed up to develop Atlas Ford F-150 hybrid pick-up truck, which went on to become the best-selling hybrid in this segment. The third motive is to augment the competitive position by increasing the market share. Protecting the current market share and increasing the same is one of the important strategies of firms. Giants like Google and Mozilla are working together with Google supporting and funding Firefox, Mozilla’s web browser, to beat the web browsers of its rivals Apple and Microsoft.
There are several other examples to show how companies benefit through coopetition. EDX is a non-profit organisation, which was founded by rivals Harvard University and MIT to provide free online education worldwide. Similar coopetition can also be seen between Amazon (Kindle) and Apple (iPad). They entered into an agreement in 2007 to deliver Amazon e-books through an iPad Kindle App which enabled Amazon to access a wider market and made iPad a complete content provider. This type of cooperation is also seen in the airline industry where competitor airlines use each other’s networks and ground staff for efficient services. One example is the Star Alliance network of competing airlines Thai Airways, Singapore Airlines, Lufthansa, Air India and many more. Its aim was to provide a seamless experience to travellers and also save on logistics, marketing and other costs. Fierce competitors in the beverage industry, Coca-Cola and Pepsi, along with Red Bull and Unilever have come together to set up a non-profit organisation to develop sustainable supply chain technologies, particularly in refrigeration, to fight global warming and ozone depletion. The phenomenon of coopetition gained popularity as a counter-intuitive strategy for a networked economy, leading to mutual benefits for both firms, like increasing their knowledge and expertise, sharing costs of new developments and R&D, improving market share and expanding into new markets. With the advent of technology, it is now easier for firms to reach out to competitors and other stakeholders. This strategy of cooperation among competitors and suppliers will be all the more useful in these exceptional times.
(The writer is Associate Professor, Amity University, Noida)