Co-opetition

OBJECTIVE

The Game of Business?

Free Wheeling & Structured Games

Background of Coopetition

Value Net

Changing the Game (PARTS)

Auto Industry Case Study

Key Learning's
The Game of Business
The Game of Business
The Game of Business
 The Game of Business

Kingfisher Chairman Vijay Mallya and his Jet Airways counterpart Naresh Goyal
shakes hand after their alliance

“You have to compete and cooperate at the same time”

 The Game of Business

 Code-sharing on both domestic and international flights

 Joint fuel management to reduce expenses
 Common ground handling
 Joint utilisation of crew and
 Sharing of similar frequent flier programmes
 INTRODUCTION
The Game of Business is about Adding Value

Free-  A player cannot take more out of a

wheeling game than his or her value added
games

 Look forward to determine the

outcomes, then reason backward to
Structured
determine the best strategy
games
 The principle is “To every action
there is a reaction (need not be
equal and opposite).
 Background: Co-opetition

Term coopetition was coined by Ray Noorda, the founder

of Novell
History
Introduced into strategy research by Brandenburger &
Stuart (1996) and Brandenburger & Nalebuff (1996)

Business is War & Peace

 Co-operation in creating value
 Competition in dividing it up
Insight  Simultaneously War & Peace
“Need to compete and co-operate at the same time”

Hence, co-opetition
 Free-wheeling Games

Co-opetition Combines Cooperation and Competition

Cooperation Competition
affects the size affects the
of the pie market share
--size of the
slice

Profit is the product of the size

of the pie and the market share
Management Development Institute - Gurgaon
Game Theory

Value Net
 THE VALUE NET

Coke and Pepsi

A player is your substitutor
with respect to customers if
customers value your product
less when they have the other
player’s product as well
A player is your complementor
with respect to customers if
customers value your product
Customers more when they have the other
player’s product as well

Substitutors Firm Complementors

A player is your substitutor

with respect to suppliers if it
is less attractive for a supplier
to provide resources to you
when it is also supplying the
other player
A player is your complementor
with respect to suppliers if it is
Suppliers
more attractive for a supplier to
provide resources to you when it
is also supplying the other player

Coke and Tyson Foods

Source: Adam Brandenburger and Barry Nalebuff, Co-opetition

(New York: Currency Doubleday, 1996), p. 17
 CHANGING THE GAME
The Game of Business is about adding value

First Identify the players and draw the value net

Identify the elements of the game

(PARTS)
 Players
Second  Added values
 Rules
 Tactics
 Scope

Change one or more of these elements

 Multiple Roles for Players
GOVERNMENT
REGULATORS
Competitors
• Other public colleges
• Private colleges
• Corporate colleges
• Other charities
• Other gvt. units
• Free-lancing faculty
Customers
• Students, Parents
• Government Subsidizers
• Donors
• Employers
• Other colleges
The
Complementors
University
• Other colleges
• Grade & High schools
• Bookstores, Kinko's
• Employers
• Lenders (private, gvt.)
Suppliers
• Faculty, Staff, Administrators
• Publishers (books, journals, internet)
• Subcontractors (food, construction, etc.)
• Other colleges
 Added Value
What we get is based on our firm’s added value
Added value = total value with our firm (minus) total value without our firm

How Co. increases added value?

Limit your supply

DeBeers and diamonds; Nintendo & video games; Beanie
babies
Downside: Shrinks the pie today; Leaves entry opportunity
open
Raise amount consumers are willing to pay
Policies that build loyalty (frequent flier miles) increase
willingness to pay - GM / Ford credit cards; Intuit
Lower competitors’ value
Softsoap - by cornering the supply of pumps
 Rules & Tactics
Rules structure negotiations between buyers and sellers
Rules come from
 custom
 contractual arrangements
 the government

Tactics : “Perception is Reality”

 Tactics are actions taken to shape other players’ perceptions

 Manage other players’ perceptions of their business to maximize market
share, attract new customers, and raise price.
 Co-opetition: Telecom Industry
Concern: Eroded ARPU and increasing churn rates
Number of different ‘coopetition’ models that do offer potential win-win interactions

 Ranging from tower sharing to full network sharing

Network
 Cost savings through network sharing could reach as much as 40 % of
Sharing
total network expenditures.
Mobile
Number  MNP helps operators focus on consumers and buffers them somewhat to
Portability the entry of new players.
(MNP)
 Jointly creating new market segments and/or niche markets
 Taking advantage of each other’s strengths, leading to the creation
New Market
and/or winning of new market segments, which neither of the two
operators could achieve in isolation in the same time frame or at the
same level of investment.

 Cost sharing / economies of scale

 Integration for market alliances
Others  Cross endorsement
 Risk sharing
 Interconnected billing
Management Development Institute - Gurgaon
Game Theory

Changing
The Game

Auto Industry
Case Study
CHANGING THE GAME: Auto Industry
 Co-opetition Objective & Advantages
► “Freeze” agreement on March 16, 1999
► Product development
► Brand image vis-a-vis customers
► Free capital resources from non-strategic, no-core assets
► Increased investments

ADVANTAGES
► New production lines
► Improvement of manufacturing position
► Increase of capacity utilization
► $109 billion in sales, $4 billion in net profit
 Actions during the 1999-2006 period
► 22 entirely new car models
► Innovative car model produced in Brazil
► Company-wide building blocks
► Cross-functional teams
► Nomination Advisory Committee
► Producing Renault cars in Nissan plants

THEIR COOPETITION STRATEGY

 Importance to the strong ”COMMON GLUE & GOAL”

 To create the environment of genuine trust, mutual loyalty, reciprocity, and

low-risk.

 No try for alliance for equals or advancement

 Outcome of Renault-Nissan Cooptation

 LCV leader in Western Europe, 14.4% share of market

 New vehicles
 International expansion, broader brand portfolio
 Global Supply Chain Organization (GSCO) in 2008

 Global brand image

 Focuses on China and Russia, 5% market share
 New markets in India and Brazil
 Aggressive planning strategy
Other example s of Car Industry coopetition

geo t 1 07
Toyota A
ygo Peu
Citroen C1

Three brands & companies – one common platform

 Key Learning's
 Game theory preaches the importance of shifting the focus from self
(egocentric view) to others (allo-centric view).

 Allows for a better understanding of added value and what each player
is bringing to the table.

 Recognizing the value contribution of each player in the industry, helped

in changing the incentive plan with an expected response from the
market and players.

 Recognizing that we are playing the wrong game of discounts, helped in

designing a fresh strategy, which then resulted in actively reshaping the
game itself.

 The roles of players are dynamic and they keep changing as per the
requirement of the game being played.