Co-opetition refers to the use of both, competition and cooperation in business undertakings to produce beneficial results for the parties involved. It is possible that businesses can collaborate and at the same time be involved in some form of competition to create profitable ventures. It is therefore one of the business strategies that businessmen use to compete successfully in their respective industries. To understand why co-opetition is viewed as a strategic business method, it is relevant to understand how it works. The following essay explains the concept of co-opetition as a strategic method.
To succeed in business, one needs to consider it as a game that needs to be won, or a game in which there has to be a winner (Dixit, 2010). Co-opetition takes its roots from the game theory, which presupposes that there should be two players with their objectives, and, there has to emerge a winner (Nalebuff and Brandenburger, 1997). The question therefore would be how co-opetition works in the game of business as a strategy.
In today’s ever-changing business environment, it is hard for a company to be more successful working alone. The environment demands companies to come together to be successful in their respective industries (Dagnino and Padula, 2002). There need to be competitors for a company to realize that its products are more or less demanded by customers as compared to the products of a competitive company, and therefore to take an appropriate course of action. Imagine a situation where companies in the computing industry are not able to come up with software that can meet the needs of users (Yami, 2010). They then decide to come together to put their ideas into effect, but at the back of their minds, each company knows that they are only doing this to gain more ideas and add to what they have. In this case, they are being cooperative so that they come with ideas that will benefit them, however, after cooperating, each of them will wait and see which one of them will put the ideas into action and emerge as the top player in the game, and hence this is the aspect of being competitors (Bigliard et al., 2011).
In using co-opetition, companies can reach the highest levels of value creation. Value can be created through sharing ideas as was presented above. The best way that businesses can create value is if they decide to complement each other. By being complementary, companies realize that their products can only do well in the market if they are accompanied by other companies’ products. This means that their products alone will be less attractive to the customers (Nalebuff and Brandenburger, 1997). For instance, if a software company is to prove its credibility, it would have to find an equally credible hardware company so that both of them have enough market shares to enable them to continue having sustained competitive advantage.
Co-opetition through sharing of knowledge helps in cost reduction measures. A good example of companies that have used the co-opetition strategy to save on costs is the PSA Peugeot Citroen and Toyota that come together. Together they shared their technical skills, and hence their components to come up with a new car which was sold using three names, that are, the Citroen C1, the Toyota Aygo and the Peugeot 107. This enabled them to save on costs that would have been high if they both had to buy new components (Hitt et al., 2009). However, coming up with the model together enabled them to save costs and, at the same time, be competitive in other aspects (Mann and Becker, 2010).
From the information presented above, it is clear that co-opetition is important as a strategic method because it helps in creating high levels of value, cost reduction, sharing of ideas and above all in helping companies in the same industry cope with the changing business environment. It is also a strategic method because companies do not have too great levels to achieve sustained competitive advantage. The only important condition is to know how to cooperate and at the same time remain competitive.
- Bigliard, B, et al., 2011, ‘Successful Co-opetition Strategy: Evidence from an Italian Consortium’, International Journal of Business, Management and Social Sciences, Vol. 2, No. 4, 2011, pp. 1-8.
- Dagnino, G B. & Padula, G., 2002, Coopetition Strategy a New Kind of interfirm Dynamics for Value Creation. The European Academy of Management Second Annual Conference, Italy.
- Dixit, A V., 2010, The Art of Strategy: A Game theorist’s Guide to Success in Business and Life, W. W. Norton & Company, New York.
- Hitt, M. A. et al., 2009, Strategic Management: Competitiveness and Globalization: Cases, New York, SENGAGE Learning.
- Mann, M. & Becker, B., 2010, Make Millions and Make Change! John Wiley & Sons, New York.
- Nalebuff, B J., & Brandenburger, A., 1997, Co-opetition: A Revolution Mindset That Combines Competition and Cooperation: The Game Theory Strategy That’s Changing the Game of Business, Doubleday Dell Publishing Group Inc, New York.
- Yami, S., 2010, Co-opetition: Winning Strategies for the 21st Century, Cengage Learning, New York.