When globalisation ushered in a new era of international competition a few decades ago companies from industrialised countries suddenly found themselves rivaling in an unprecedented price war. Simultaneously, rapid developments in the field of information and communication technology could be observed. Result of these trends is a significant change in consumer behaviour: Today’s customers are increasingly knowledgeable and tech-savvy, demanding not only cheaper but also more sophisticated products.

In order to stay competitive companies need to offer innovative products. And they need to offer them fast – product life cycles are becoming shorter and shorter. Many small and medium-sized enterprises (SMEs), but also global players, are often unable to keep up the pace on their own due to lacking capacity, knowledge, or budget.

Coopetition – the idea

One alternative way for companies to deal with the new situation is called “Coopetition” (= wordplay of “cooperation” and “competition”). The term describes the phenomenon of two (or more) companies cooperating on some level of their value chains while simultaneously being in direct competition with each other. Aim of the collaboration is of course a mutual benefit. We know this sounds contradictory at first, so how does it work out in practice?

A prime example for Coopetition is that of Germany’s Volkswagen Group and American car producer Ford: between 1991 and 1998 the two companies operated the joint venture “Autoeuropa Automóveis Ltda.” in Quinta do Anjo, Portugal. Based on the one single car body which was produced at this plant they manufactured their models Sharan (Volkswagen), Galaxy (Ford), and Alhambra (Seat/Volkswagen). The cooperation enabled Volkswagen and Ford to share production costs and benefit from each other’s expertise in design and technology. Even though the companies sold their cars, also known as the SGA [1] -models, on the market concurrently it is assumed they could reach higher market shares than they would have without the cooperation – and this is the principle of Coopetition.

Naturally, such partnerships hold many difficulties. Here are some aspects that should be clarified well in advance in order for Coopetition to function:
How are risks shared in the partnership? Who exercises control and assumes responsibility for which steps of the cooperation? How can mutual trust between the involved parties be built up? For how long / which steps exactly is the partnership being held? What will happen after the cooperation?

Coopetition vs. Open Innovation

Coopetition describes processes in which rivaling companies cooperate temporarily at any given stage of the value chain in order to achieve a certain benefit. As the name suggests, Open Innovation focusses on the innovation phase only. However, cooperation partners do not have to be direct competitors here, but can also be (and frequently are) customers, suppliers, research institutions, or other external actors. If Coopetition takes place during the innovation phase it can thus be seen as variation of Open Innovation.

[1] Sharan/Galaxy/Alhambra

via OpenAlps

Friend or foe? – The challenge with Coopetition

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