Co-Opetition free essay sample

In most business theories, competition is seen as one of the key force that keeps organisations innovative and lean. To be able to survive in a market, organisations have had to engage in competitive strategies. On the other hand, theorists have begun to realize that to also survive, organisation may be inclined to cooperate with their competitors. Thus, new theories of collaboration, networking, cooperating and sharing are beginning to be forecast and written on. One of the theories is of co-opetition. This article critiques, Zineldins article on Co-opetition: the organisation of the future . In his article, Zineldin claims that the organisation of the future will have to collaborate and cooperate with its competitors. Zineldin states that companies need to consider the potential benefits of collaborating, cooperating and coordinating with their competitors. He terms this strategy as co-opetition. Thus, business strategies and activities should aim for the establishment of mutually beneficial partnership relationship with other actors in the organisation’s network, including their competitors. The fundamental role for the organisation of the future will be to create and develop processes of strategic co-opetition that will enhance long-term relationships, retention and loyalty. Five main advantages for co-opetiton outlined are, sharing of knowledge, pooling of competencies, increased incentives to take risks and proactively in product development. For this co-opetition strategy to work there should be trust and commitment among players. Creating co-opetition has both a cost and value. For a company, it takes time to develop such a relationship and the time factor may after the parties’ profitability. Hence, those involved must have a common philosophy, clear goal of what they want to achieve. Zineldin identifies that individual willingness motivation, interdependence, culture fit, integration and integrity, organisational arrangement and institutinalisation criteria should be met before forming a co-opetition strategy. Zineldin furthermore identifies short benefits of these strategies. These are reduction of transaction costs, cost of joint ventures and access to vast amount of knowledge of a company’s particular market He states that many organisations today are competing through cooperation rather than just competition by establishing formal or informal strategic alliances and networks that range from exchange of technology and markets to industrial mega deals. Some examples given are Mitsubishi Volvo, IBM Volvo and Apple, IBM Motorola. Furthermore, co-opetition will lead to economies of scale, lower prices, a skilled labour force, high level of RD and so on, so forth. On the other side, this strategy can be of disadvantage to companies. For example, other costs can be created, such as time and resources used to build the relationships and return on investment can take a long time to calculate. Companies may take advantage of the more vulnerable company. ANALYSES It could be said that Zineldin wrote on a valid point. Although it is not a new concept, (first coined by Ray Noorda, the founder of Novell) he has somehow managed to summaries the concept in a simplified way. The article lacks evidences; he has not done any empirical study thus a lacking of critical evidence makes the article more of hearsay than of a positive study. It is of a normative study nature. Most research on competition has been on vertical relationship between organisation such as value added supply chain or distribution rather than horizontal relationships. Zineldin does not say which competitor to cooperate with in the organisations network. Furthermore there is not clear example and measurement of the success and this strategy Although there is insufficient amount of information and success measurement from Zineldin, there seems to be support for this strategy of coopetition. Authors such as Adam Brandenburger of the Harvard Business School and Barry Nalebuff of the Yale School of Management, who have together written on the subject in their book in titled coopetition. On their webpage, http://mayet. som. yale. edu/coopetition/index2. html. they talk of game theory which suggested that businesses can gain advantage by mixing competition and cooperation. â€Å"Cooperation with suppliers, customers and firms producing complementary or related products can lead to expansion of the market and the formation of new business relationships, perhaps even the creation of new forms of enterprise†. 19. 9. 2007) Anand Ramanathan (2007)takes the strategy further by dividing co-opetition into vertical and horizontal co-opetition. He studies co-opetition in the Indian retail market. In horizontal co-operation, he states that here, markets consist of few suppliers and a large number of intermediaries and retailers. â€Å"Horizontal co-opetition between suppliers i s limited to a co-existence philosophy where the rivals know each other, know the positions they have and do not frequently challenge each other’s position†. Anand Ramanathan (2007) Vertical Co-opetition is similar to horizontal co-opetition but co-opetition is between the supplier and their partner and is primarily driven by co-ordination objectives rather than any overarching need to collaborate and build structural linkages. The concept seems to have been taken up most enthusiastically in the computer industry, where strategic alliances are common in order to develop new products and markets, particularly between software and hardware firms. Co-opetition is frequently seen in computer and technology-oriented industries where rapid technology advances will often encourage competitors to work together due to advances by other competitive organisations. A recent example of this is between IBM and Sun Microsystems. In The New Yorks Times (2007), it was stated that two long time rivals in computing, IBM and Sun Microsystems, plan to cooperate on server technologies. This could put pressure on their big competitor Hewlett-Packard. Sun’s chief executive, Jonathan Schwartz, said in the article that the new comprehensive relationship brought a tectonic shift in the market landscape. This coopetition will enable Sun’s Solaris operating system to run on International Business Machine servers enabling it to earn more market and it also spells advantage for sun solaris customers to be ale to switch to IBM. Our view is when you make your products available on other people’s platforms, you just meet more customers, which just gives you more opportunities, Mr. Schwartz said. (2007) Another example of co-opetition would be the American car history written by Adam Brandenburger and Elizabeth Stein. The American car industry is a good example to understand how with co-opetition can help in an industry. When the earliest petrol car was established, there was no road system, petrol stations and other complimentary products and services. Thus, couldnt enter into widespread use without a constellation of complementary products and services. The demand for the car helped in the establishment of the industry. Both sparse population and the need to travel a significant distance daily, for work or for other purposes, increased the demand for automobiles. Changes in the provision of rural services, as well as the rise of the suburbs, gave the automobile and its culture a significant boost. Adam Brandenburger et. al 19. 9. 2007) As the industry began to grow, other services began to be established as a result. Petrol stations, garages, companies offering financial relieve to a customer who could not afford to buy the car. The government also stepped in helping to establish the transportations system by building roads and outlining maps. Manufacturers themselves provided complements for their industry either on their own or by co-opetition with one another or the government, when neither government nor ortune alone provided the complements they needed to get their product off the ground. For example, early in the twentieth century the auto industry realized that mass auto ownership would need financing options. Banks, which were concerned about people depleting their savings by purchasing cars, did not rush forward to provide credit to the masses. (Adam Brandenburger et. al 19. 9. 2007) The car industry as a whole, took initiatives to provide this service to their customers. The advantages reaped by the cooperating car maker and their customers were unquestionably impressive. One of the most interesting features of the automobile industry is this example it has given to the world of efficiency and co-operation. We are not surprised at efficiency in the steel business or the oil business, because they are industries conducted practically by one man power; and if autocratic rule is not efficient, its last excuse for being right might appear to have ceased to exist; but to find several hundred different manufacturers with divergent ambitions, ideals and interests benevolently engaged in co-operative competition, justifies, it would seem, the optimism which sees the world as growing better. Adam Brandenburger et. al 19. 9. It could be said that the concept of co-opetition lacks a clear empirical study, of how it works and what are the strategies to make it work. A further research would be to take an industry that is practising co-opetition and making a thorough empirical study to try and understand what the criteria for the co-opetition are, which competitor to choose and how can this strategy be divided. Zineldin’s concept of co-opetition is not new. For an organisation to succeed in its market, it would be said that organisation of the future ought to also cooperate with their rivalries to gain the advantaged that Zineldin outlined. An ancient Chinese proverb say †he who cannot agree with his enemies is controlled by them. †