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The field of strategic management has been exposed to many new challenges that are often unexpected in the recent past. And, these unexpected challenges stem from organizational strategic action as well as strategic thinking, which are coupled with the changing dynamics of business environment.
Therefore, it is important to not only adapt new interpretive strategies such as co-opetition, but also to integrate them into the existing theoretical perspective. The concept of co-opetition has been coined from two words that include competition as well as cooperation, which are essential in studying inter-firm dynamics (Brandenburger & Nalebuff, 1996, p.19).
Co-opetition as a strategic method
This concept is used in strategic management of different players that include the organization and other stakeholders such as suppliers, customers, complementors, and competitors. Essentially, coopetition defines both horizontal and vertical interdependence of a firm (Contractor & Lorange, 1988, p.26).
Focusing on horizontal interdependence, a firm can make supernormal profits when it gains advantage over its competitors in an entire industry by mobilizing resources, using them competently to produce more superior products than those of their business rivals. Therefore, co-opetition is strategically used by firms for value-creation that results into supernormal profits (Drucker, 1954, p.47).
Moreover, in vertical interdependence, a firm can strategically employ co-opetition to achieve value appropriation, which is linked to economic exchange. Under this concept, economic values created by firms are carefully shared among the stakeholders, following the allocative efficiency principle.
The concept of co-opetition strategy employed in vertical interdependence can be used to enhance value-appropriation of economic returns (Kenworthy, 1995, p. 34). Co-opetition enhances strategic interdependence, especially in value creation and cooperation among firms. Importantly, firms employ co-opetition as a strategic tool for evaluating economic benefits and competitive gains derived from cooperative approach (Axelrod, 1984, p.53).
Discussion and Conclusion
Co-opetition combines both the elements of cooperation and competition, which make it possible for businesses to achieve value creation. Therefore, co-opetitive value creation contributes immensely to strategic management of organizations because co-opetitive strategy plays a crucial role in strategic interdependence among business networks.
The concept of co-opetition as a strategic management approach does not only facilitate value creation, but also enhances value sharing that is often witnessed in the variable-positive-sum game strategy. In addition, co-opetition encourages value appropriation, promotes value creation and facilitates entrepreneurial spirit among organizations. In fact, co-opetition is more of a voice-based strategy, which is contrary to the one that is exit-based (Hirschman, 1970, p.57).
For instance, exit based models can be witnessed in arms length procurement processes that are often characterized by limited communication among businesses and their suppliers, thus barring easy transfer of information. On the other hand, the voice-based procurement model is witnessed in the Japanese procurement strategy that emphasizes on the most effective transfer of information about procedures to be followed by all the persons who are involved in the chain of supply (Kenney & Florida, 1993, p.29).
And, the voice-based procurement strategy emphasizes that transfer of information must be made in a timely manner. This strategy is important in the sense that there are both long term and stable relationships, which motivate suppliers to improve on their productivity. For example, Japanese auto-manufacturers have taken a strong lead against their competitors over the years owing to their good supplier relationships that have significantly contributed to their superiority (Porter, 1985, p.63).
In summary, the concept of co-opetition is not only important in creating economic value, but also in facilitating knowledge creation that is of sound importance in strategic business management. Besides, co-opetition as a strategic method adds more value to firms than they can gain through the traditional competitive models.
Axelrod, R. (1984). The evolution of cooperation. New York, NY: Basic Books.
Brandenburger, A.M. & Nalebuff, B.J. (1996). Co-opetition. New York, NY: Doubleday.
Contractor, F.J. & Lorange, P. (1988). Cooperative strategies in international business. Boston: Lexington Books.
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Drucker, P.F. (1954). The Practice of Management. New York, NY: Harper & Row.
Hirschman, A. (1970). Exit, voice and loyalty: Responses to decline in firms, organizations and states. Cambridge, MA: Harvard University Press.
Kenney, M. & Florida, R. (1993). Beyond mass production: The Japanese System and its transfer to the U.S. New York, NY: Oxford University Press.
Kenworthy, L. (1995). In search of national economic success: Balancing competition and cooperation. Sage: Thousand Oaks (CA).
Porter, M.E. (1985). Competitive Advantage. New York, NY: Free Press.