Collaborate with

your competitors-
and winn

Ekaterina Dimitrova
Strategy Cases
MBA International Management
HfWU Nürtingen Geislingen
Prof. Dr. Erskin Blunck
 Outline
1.Collaboration between competitors is in fashion
1.1 Cooperation – a low-cost route for new competitors to gain technology & market
access
1.2 Principles of competitive collaboration

2.Why collaborate?
2.1 Reasons
2.2 Conditions under which mutual gain is possible

3.How to build secure defenses

3.1 Steps to limit transparency
3.2 Control of information flows to a partner

4.Enhance the capacity to learn

4.1 Success of collaboration depends on the willingness of employees to learn
4.2 Competitive benchmarking
4.3 Competitive collaboration provides a way of getting close to rivals
4.4 Means to diffuse the knowledge acquired

5.Conclusion
 Collaboration between competitors is
in fashion

supply

assemblage

development
 Cooperation – a low-cost route for new
competitors to gain technology & market
access

•New products development

take much money!
•New markets penetration

Few companies can go it alone!

Therefore:

ICL, the British computer company collaborate with Fujitsu

to develope its current generation of mainframes,

Motorola needs Toshiba‘s distribution capacity to break into the

Japanese semiconductor market
 Companies that benefit most from
competitive collaboration adhere to a set of
simple but powerful principles:

•Collaboration is competition in a different form

Successful companies:
•enter alliances with clear strategic objectives
•understand how their partners‘ objectives will affect their success

•Harmony is not the most important measure of success

•Cooperation has limits

Off-limits to the partner

•Learning from partners is paramount

Alliance as a window on partners‘ broad capabilities
 Why collaborate?
Reasons:

•To acquire new technologies or skills (Asian companies)

•To enhance technology & product competences

e.g. NEC a provider of IT has the leading position in telekommunications,

computers & semiconductors thanks to a series of collaborative ventures.

•To avoid investments (typical for western companies)

•To reduce the costs & risks of entering new businesses & markets

But the main objective for every company is

to emerge from an alliance more competitive than when it entered it.
 Why collaborate?
Conditions under which mutual gain is possible:

•The partners‘ strategic goals converge while their competitive goals diverge

»Each partner allows for the other‘s continued prosperity in the shared business

(e.g. Philips & Du Pont collaborate to develop & manufacture compact discs,
but neither side invades the other‘s market )

•The size & market power of both partners is modest compared with industry
leaders

•Each partner believes it can learn from the other & at the same time limit
access to proprietary skills

(e.g. JVC & Thomson both producing VCR‘s but are looking for different skills:
Thomson needs produkt technology & manufacturing prowess, JVC needs to learn
how to succeed in the fragmented European market
 How to build secure defenses
For successful collaboration each partner must contribude something distinctive:
basic research, product development skills or manufacturing capacitiy.

The challenge is to share enough skills to create advantage vis-a-vis companies

outside the alliance while preventing a wholesale transfer of cores skills to the partner.

The limitation of transparency of operations can be achieved as follows:

•selection what skills and technologies would be passed to the partners
•development of safeguards against unintended transfers of information

Steps to limit transparency:

1. to limit the scope of the formal agreement

e.g.distribution in a limited number of markets
Goal: circumscribe a partner‘s opportunities to learn
2. agreements should establish specific performance requirements
e.g. Motorola takes an incremental, incentive-based approach to technology
transfer in its venture with Toshiba. It means the greater Motorola‘s market share in the
Japanese semiconductor market, the greater Toshiba‘s access to Mororola‘s technology.
 How to build secure defenses
Technology-sharing alliance between Eropean & Japanese competitors

European company Japanese company

the partnership is a way to acquire the partnership - a window on partner‘s

a specific technology entire competences & interacts with a broad
spectrum of its partner‘s marketing & product
development staff

requests a new feature on a product asks for detailed customer & competitor
analysis

the technology acquired had a useful the competitive insights will endure longer
life of 3 to 5 years

Control of information flows to a partner!

Collegiality is a prerequisite for collaborative success, but not too much!!!

Senior management shoud debrief operating personnel to found what
information the partner is requesting & what requests are being granted.
 Enhance the capacity to learn
The collaboration success depends on the purpose of the alliance

The main purpose is the willingness of employees to learn

Learning begins at the top but

senior management operating employees

must be committed to enhancing must be well briefed on the partner‘s
their companies skills as well as strengths & weaknesses & understand
to avoiding financial risk how aquiring particular skills will bolster
their company‘s competitive position.

The dedication of employees greately enhances learning.

Also aquiring new benchmarks of a partner‘s performance is of great value.

It helps:
•to estimate & to determine where a competitor (or partner) is better, faster or cheaper
•to translate those estimates into new internal targets
•to establish the rate of improvement in a competitor‘s performance

e.g. one of Toyota‘s motivations in collaborating with GM is to gauge the

quality of GM‘s manufacturing technology
 Enhance the capacity to learn
Competitive collaboration also provides a way of getting
close enough to rivals to predict
•How does the partner respond to price changes?
•How does it measure & reward executives?
•How does it prepare to launch a new product?

what increase the chances of success in future head-to- head battles.

But knowledge acquired from a competitor-partner must be diffused

through the organization by means of e.g.

•Helding regular meetings where employees share new knowledge &

determine who was best positioned to acquire additional information

•Making the rounds of all employees involved in alliances

•Identifying what information had been collected by whom & then

passing it on appropriate departments
 Conclusion
Proceed with care - but proceed

Dependence on a foreign partner doesn‘t automatically condemn a company

to also-ran status.

Collaboration may sometimes be unavoidable.

e.g. after World War II, Japanese & Korean companies entered alliances
with Western rivals from weak positions. In the early 1960’s NEC’s computer
business was one-quarter the size of Honeywell’s, its primary foreign partner.
It took only two decades for NEC to grow larger than Honeywell.

Running away from collaboration is no answer. Even the largest western companies
can no longer outspend their global rivals.

Competitive renewal depends on building new process capabilities & winning

new product & technology battles.

Collaboration can be a low-cost strategy for doing both.

Thank you for your attention!
(& collaboration!)