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COLLABORATING WITH COMPETITORS

COLLABORATING WITH COMPETITORS. Contents. Co- opetition. Radar Screen Competitor Map. COLLABORATING WITH COMPETITOR. Reasons for an Alliance with Rivals. Managing the Risk of Co- opetition. CO-OPETITION. Co- opetition is the process of collaborating with a competitor.

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COLLABORATING WITH COMPETITORS

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  1. COLLABORATING WITH COMPETITORS

  2. Contents • Co-opetition • Radar Screen Competitor Map COLLABORATING WITH COMPETITOR • Reasons for an Alliance with Rivals • Managing the Risk of Co-opetition

  3. 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?

  4. CO-OPETITION • Competitors come together to expand and define a new market. Kodak & Fuji Kellogg, Pillsbury & Nabisco Nestle & Mars • work together in a research program to reinvent the modern camera • work together to share their logistic route • work together to sell their food products online

  5. RADARSCREEN 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.

  6. RADARSCREEN 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.

  7. REASONSFOR AN ALLIANCE WITH 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.

  8. REASONSFOR AN ALLIANCE WITH RIVAL • Emerging reasons: • Expanding product lines: offering more service/product lines • First Union and Charles Schwab • Reducing cost: forming alliances to combine similar assets and reduce cost • Sony and Ericsson

  9. REASONSFOR AN ALLIANCE WITH 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

  10. 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

  11. 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

  12. 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

  13. 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.

  14. 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 venturestructure 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

  15. Thanks! GROUP 7 Term 1/2010

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