Presentation on theme: "Co-opetition Adam Brandenburger and Barry Nalebuff."— Presentation transcript:
Co-opetition Adam Brandenburger and Barry Nalebuff
Limitations of the Hypercompetition Perspective Ignores the point that competition and co-operation can co- exist. Examples include the development of Advanced Photo Film, DVD, etc. Sometimes it may be in the best interests of players not to jump to the next level of dynamic competitive interaction but into co-operative competition - coopetition This requires figuring out the situation the firm is facing and then looking at the firm’s valuenet
What game is being played? Questions to ask yourself are: Who are the key players? duopoly game; oligopoly game; etc… What options are open to the players? pricing game; advertising game; etc. What goals are the players pursuing market share? profits?.. Are goals complementary or conflicting? issues the players agree on, sources of conflict, etc.. What is the time structure of the game? one shot, repeated, simultaneous, sequential, etc.. What is the information structure of the game? information as a source of bargaining strength
How are you doing in the game? If you find yourself in a “bad box” what do you do? Play the existing game better Try to get a good outcome for yourself Change the game Seek answers outside the “box”
The ValueNet Customers Company Suppliers ComplementorsSubstitutors
Complementor A player is a complementor if customers value your product more when they have the other player’s product than when they have your product alone. –Oscar Mayer and Coleman’s A player is a competitor if customers value your product less when they have the other player’s product than when they have your product alone. –Pepsi and Coke
Who are the complementors? CarsAuto loans, insurance, roads Televisions VCRs TV showsTV guide Fax machines Phone lines CatalogsDelivery services HardwareSoftware
Valuenet for American Airlines Customers American Boeing Bombardier British Airways, Iberia Car Rentals Mesa Air, United Long Haul Short Haul (NEW) American, United & Mesa are suppliers Substitutors/ Complementors Pilots Association Airbus
Intel - A Partial ValueNet HP; Compaq; IBM INTEL Suppliers Microsoft HP (Merced) Sun (Solaris + Merced) Compaq (Digital TV standards with M’Soft) NatSem / Cyrix AMD / IBM Microsoft IBM manufactures AMD Digital CableTV Standards NetPC Standards Solaris Compatibility of NetPC design & Merced Limits Microsoft power in ValueNet Limit customer power & competitor response via Mother- board manufacture Customers limit dependence - alternative suppliers
Real Networks - ValueNet Boeing, Mercedes, Kodak, Lockheed, News Media Real Networks Suppliers Microsoft Sun Vxtreme NetShow (Microsoft) Microsoft has 10% stake in RN Sells competing products RN has a deal to optimize RA for Solaris How can Real Networks enhance Added Value ?
How can the game be changed? The game can be changed by changing Players Added value Rules of the game Tactics employed Scope of the game
Changing the players Bring in customers - Increase industry demand. This helps competitors, but may be worthwhile for you. To do this… Educate consumers about your product (Diapers in Japan;Whitening t’paste) Pay customers (esp. early adopters) to play (Samples, Netscape) Subsidize some customers, other full paying customers will follow (Initial discount to lower risk) Become your own customer (Soaps and cottonseed oil / Cyrix PC) Be Inc. & the WWW Bring in suppliers Holland Sweetener Co. and Coca-Cola Compaq / AMD / Intel Bring in complementors Do it yourself. Nintendo - both h/w & s/w. Intel Pay complementors to play (at least initially) Be Inc. & IBM / Motorola / PowerComputing Bring in competitors License technology to make money, avoid complacency Create a second source to encourage buyers to adopt technology
Changing the added value Your value added = Size of the pie when you are in the game - Size of the pie when you are not in the game. How to increase 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 Questions to ask: What is your added value? How can you increase value by changing supply, buyers, suppliers, complementors, or substitutors in your value net? What is the value added by other players? Should you be increasing or decreasing their added values?
Changing the rules Questions to ask are: Which rules are helping you? Which ones are hurting you? Rules can be for pricing, advertising, product variety, satisfaction, etc. What kinds of contracts are you willing to write with your buyers and suppliers? Do you want Match Competition Clauses? What does this do for you? Do you have the power to change the rules? Does someone else have the power to overturn them? Can you signal your commitment credibly (Kiwi Air)
Changing tactics Questions to ask are: How do other players perceive the game? How do these perceptions affect the play of the game? (NY Post vs. Daily News) Which perception do you want to keep, which to change? Do you want the game to be transparent or opaque (fee negotiation between investment banker and firm - guarantee / % fee)? When do you want to send signals that benefit you? When do you want to preserve the fog? To establish credibility (clear the fog) –Accept a pay-for-performance contract –Offer guarantees or advertise –Ask others to demonstrate their credibility to you To preserve the fog –Create complexity (long distance calling rates) –Bluff: Ask yourself whether you will be believed and under what circumstances –Ask what others stand to gain by preserving the fog, and what they could be bluffing about
Changing tactics Competitive stances that can be used to clear / add to the fog Top DogFat Cat Puppy Dog Lean & Hungry Being Big Being Small Appear Tough Appear Soft
Changing the scope Questions to ask are: What is the current scope of the game? Do you want to change it? Games are linked over time and across markets (geographic and product markets) Do you want to link the current game to other games? When multi-market contact could be beneficial Do you want to delink the current game from other games?