COLLABORATING WITH

COMPETITORS

Co-opetition

Radar Screen Competitor Map

Reasons for an Alliance with Rivals

Managing the Risk of Co-opetition

Contents

COLLABORATING WITH

COMPETITOR

CO-OPETITION

Co-opetition is the process of collaborating with a competitor.

Alliances among competitors introduce considerable risks

However, 10%-30% of all alliances in year 2000 is in the form of co-opetition. WHY?

• work together in a research program to reinvent the modern

camera

• work together to sell their food products

online

• work together to share their logistic route

Kodak & FujiKodak & Fuji Kellogg, Pillsbury& Nabisco

Kellogg, Pillsbury& Nabisco

Nestle & MarsNestle & Mars

Competitors come together to expand and define a new market.

CO-OPETITION

RADAR SCREEN COMPETITOR MAP

Understanding co-opetition requires a more appropriate definition of “COMPETITOR”.

Think not in term of COMPETITOR vs NONCOMPETITOR.

Rather think in term of the degree of competitive threat.

RADAR SCREEN COMPETITOR MAP

Degree of competitive threat: Radar Screen Competitor Map (Tool help to aid the degree of competitive threat)

• Help to visualize how competitor are positioned relative to your company and each other.

• Help to identify the future strategic direction.• Help to assert the potential value of collaborating with a

rival.

REASONS FOR AN ALLIANCEWITH RIVAL

Well known reasons for collaborating among rivals:• Setting standards: risen as economy shifts from

heavy industry to high technology.• Sharing risk: sharing various risk including risk of

uncertainty when entering new market.• Entering emerging market: to access new

consumers or to secure low cost production centers.

REASONS FOR AN ALLIANCEWITH RIVAL

Emerging reasons:• Expanding product lines: offering more service/product

linesFirst Union and Charles Schwab

• Reducing cost: forming alliances to combine similar assets and reduce cost

Sony and Ericsson

REASONS FOR AN ALLIANCEWITH RIVAL

Emerging reasons:• Gaining market share: gaining market share and

generating powerful network effect DaimlerChrysler, Ford and General Motors

• Creating new business: combining complementary capabilities and creating wholly new sets of skill

NBC and Microsoft

MANAGING RISKS OF CO-OPETITION

Emerging reasons:• Technology leakage: when company’s core

technology or process falls into a competitor’s hand.

Reducing risk by controlling information Limiting the scope of alliance Drafting contract that clearly define on technologies ownership Regulate information flow within firm to guide employees on what to share and

what not to share Appointing a gate keeper where allowing only one person/ unit to have a contact

point with the partner

MANAGING RISKS OF CO-OPETITION

Emerging reasons:• Telegraphing Strategic Intention: allowing

competitor the ability to predict our future strategic plan.

Reducing the risk by better managing information flows With the help of senior management, a guidelines should be followed in sharing

strategic information

MANAGING RISKS OF CO-OPETITION

Emerging reasons:• Customer Defection: putting current or potential

competitors into contact with our customers/ increasing the risk of the partner to use its increased brand awareness, customer understanding and direct personal relationship to steal customers away at some future date.

Reducing risk by insist on a jointly interaction with customers Demanding a reciprocal access to partner’s customers Allowing partners to access our customers only when selling a jointly owned

products

MANAGING RISKS OF CO-OPETITION

Emerging reasons:• Slow Decision Making: slow decision making,

shallow cooperation or even abandonment

Reducing risk by focus efforts at different points along the value chain Agreed on who does what well and clearly divide up job description Identifying from 10 to 50 most important decision that alliance will face and pre

define which decision maker will participate in those decisions.

MANAGING RISKS OF CO-OPETITION

Emerging reasons:• Business or Asset Fire Sale: the risk of the firm

that will be forced to sell its business in the alliance below market price.

Agreeing up front on the sale price Favoring an independent joint venture structure that will reduce the complexity of

a sale and increase the interest of other buyers Small firms should avoid traditional joint venture with larger competitors

Thanks!

GROUP 7Term 1/2010