Collaborating with competitors

INTRODUCTION

Alliance among competitors have riskOne study estimate that U.S. company lost $50 billion a year in 1995

However alliances among competition are more popular, estimated 10-30 % of alliances in 2000

INTRODUCTION

He give a new term to describe the process of collaborating with competitor

“co-opetition”

Ray Noorda, CEO of Novell

Example of alliances involving co-operation

Ten years research program to reinvent the modern camera

Example of alliances involving co-operation

To sell their food products Online

Online ServiceDatabase Business

To gain greater scale

The automotive business to business exchange

Why Co- opetition is important1. The rise of the Internet and the

concomitant need for competitors to define and expand new market

2. The blurring of industry boundaries

Not all Co-opetitions are successSuccessBecauseThey can manage the balance between co-operation and conflict

FailBecauseLack awareness of cause and challenges of co-opetition

Drivers of Co-opetition

Competitor VS Non Competitior

The degree of competitive threat in order to set strategy

Motivation for collaboration among rival

Setting standard: Shift from heavy to high technology industry

Sharing risk : Developing ne innovation such as biotechnologies

Entering emerging market : New Customer and Low

cost production

Traditional Reason

Motivation for collaboration among rival

Expanding Product Line

Reducing Cost

New Reason in 1990

Motivation for collaboration among rival Gaining Market share

Creating new business

Managing the Risks of Co-opetition

5 important risks- Technology leakage- Telegraphing Strategic Intention- Customer Defection- Slow Decision Making- Business or Asset Fire Sale

Schwinn & Giant

Risk 1: Technology Leakage Occurs when a partner use alliance

to acquire certain know-how, which is then use against you later

Solutions

Controlling information

Contact

Rules and policy

Risk 2 Telegraphing Strategic Intention

The risk is when your competitor knows your strategic plans

The direct transfer of information to partner

Solution

Managing the information for example,

1. Developing guideline for sharing information

2. Teach the manager what information is strategic

Risk 3 Customer Defection The competitor may get into contact

with your customer.

Partner might increase its brand awareness, customer understanding and direct personal relationship to steal customer away.

Solution

Never give full contact of customer to partner

Allow partner to access to customer only when selling jointly product

Risk 4: Slow Decision Making

Solution

They should make the agreement on who are responsible in which area

Focus on basic of decision making identify the most important decision that define which decision maker will participate in those decision

Risk 5 Business or asset fire sale

create the risk of a fire sale firm will be force to sell its interest in

the alliance at a below market price. After they separate then the third

party will be much less in the asset once they tied up the joint venture

Solution

Favor the independent joint venture structure, which will reduce cost and increase the interest of other buyer

Avoid Joint venture