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From competitive to collaborative strategy
Prof John Nicholson University of Huddersfield 2017
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Key questions for today
We have covered competition as a firm versus firm phenomena But can we collaborate to compete, or simultaneously collaborate and compete with the same firm We have discussed directions, methods and modes of entry How can we use collaboration as a mode of entry?
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Classic market relationships
The classic dyad- the relationship between the supplier and the customer The classic triad- the drama of the customer-supplier- competitor triangle Buyer-supplier-supplier supplier development The classic network Gummesson, Evert (1999), "Total relationship marketing : from the 4Ps -- product, price, promotion, place -- of traditional marketing management to the 30Rs -- the thirty relationships -- of the new marketing paradigm," CIM (Ed.). Oxford ; Boston: Butterworth-Heinemann.
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Integrating perspectives
Dynamic capabilities Opportunity development capability Internationalization capability Networking capability Operational capabilities Dynamic capabilities Opportunity development capability Internationalization capability Networking capability Operational capabilities Commitment decisions Reconfiguration Change of coordination Commitment decisions Reconfiguration Change of coordination Commitment decisions Reconfiguration Change of coordination Commitment decisions Reconfiguration Change of coordination Commitment decisions Reconfiguration Change of coordination Commitment decisions Reconfiguration Change of coordination Inter-organizational processes Learning Creating Trust building Inter-organizational processes Learning Creating Trust building Inter-organizational processes Learning Creating Trust building Inter-organizational processes Learning Creating Trust building Inter-organizational processes Learning Creating Trust building Network position Inter-organizational network position Intra-organizational network position Network power Network position Inter-organizational network position Intra-organizational network position Network power Network position Inter-organizational network position Intra-organizational network position Network power Network position Inter-organizational network position Intra-organizational network position Network power Network position Inter-organizational network position Intra-organizational network position Network power Network position Inter-organizational network position Intra-organizational network position Network power Network position Inter-organizational network position Intra-organizational network position Network power Vahlne, J.-E., & Johanson, J. (2013). The Uppsala model on evolution of the multinational business enterprise – from internalization to coordination of networks. International Marketing Review, 30(3),
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Networks “Sets of connected relationships between firms.”
Cook, Karen S. and Richard M. Emerson (1978), "Power, equity and commitment in exchange networks," American Sociological Review, 43 (4), Business networks can be regarded as sets of connected firms Connected means the extent to which "exchange in one relation is contingent upon exchange (or non- exchange) in the other relation" Miles, Raymond E. and Charles C. Snow (1992), "Causes of failure in network organisations," California Management Review, 34 (3),
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Network Embeddedness ‘The network approach views any company's business context in a holistic rather than fragmented way. It pays particular attention to the connectedness of business relationships and the borderless nature of the network in which each company is embedded.’ Halinen, Aino, Asta Salmi, and Viripi Havila (1999), "From dyadic change to changing business networks: An analytical framework," Journal of Management Studies, 36 (6),
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Liability of outsidership
Outsidership can be a greater constraint than being foreign The power of being an insider… the asset of insidership. Is it possible for a foreign insider to have a greater asset in a foreign markets than a local outsider? Johanson, J., & Vahlne, J.-E. (2009). The Uppsala internationalization process model revisted: from liability of foreigness to liability of outsidership. Journal of International Business Studies, 40(9),
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The Uppsala model David Teece on dynamic capabilities
Opportunity development capability Internationalization capability Networking capability Operational capabilities Dynamic capabilities Opportunity development capability Internationalization capability Networking capability Operational capabilities Commitment decisions Reconfiguration Change of coordination Commitment decisions Reconfiguration Change of coordination Commitment decisions Reconfiguration Change of coordination Commitment decisions Reconfiguration Change of coordination Commitment decisions Reconfiguration Change of coordination Commitment decisions Reconfiguration Change of coordination Inter-organizational processes Learning Creating Trust building Inter-organizational processes Learning Creating Trust building Inter-organizational processes Learning Creating Trust building Inter-organizational processes Learning Creating Trust building Inter-organizational processes Learning Creating Trust building Network position Inter-organizational network position Intra-organizational network position Network power Network position Inter-organizational network position Intra-organizational network position Network power Network position Inter-organizational network position Intra-organizational network position Network power Network position Inter-organizational network position Intra-organizational network position Network power Network position Inter-organizational network position Intra-organizational network position Network power Network position Inter-organizational network position Intra-organizational network position Network power Network position Inter-organizational network position Intra-organizational network position Network power Vahlne, J.-E., & Johanson, J. (2013). The Uppsala model on evolution of the multinational business enterprise – from internalization to coordination of networks. International Marketing Review, 30(3),
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“To capture the enemy’s entire army is better than to destroy it; to take intact a regiment, a company, or a squad is better than to destroy them. For to win one hundred victories in one hundred battles is not the supreme of excellence. To subdue the enemy without fighting is the supreme excellence.” SUN TZU
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Collaborative strategy
Collaboration as a complement to strategy implies a “positive, purposive relationship between organisations that retain autonomy, integrity and distinct identity, and thus, the potential to withdraw from the relationship” Cropper, S. (1996) Collaboratve working and the issue of sustainability. in Huxham, C. (Ed.) Creating collaborative advantage. London, Sage Burton (1995) however proposes that “neither a totally adversarial stance on all fronts or an entirely collaborative approach should be necessary.” Choosing the correct blend of collaboration and competition he deems a ‘composite strategy’. Burton, J. (1995) Composite Strategy: the combination of collaboration and competition. Journal of General Management, 21 (1), 1-23.
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Modes of international market entry
Wholly-owned subsidiary/acquisition High Control and foreign market presence Joint venture Franchising E-platforms Licensing Direct Exporting Indirect Exporting Low Production in home market Production abroad Low Resource deployment High
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Informal alliances Strategic alliance (check term, significant differences in the use of the term exists. I use the term strategic alliance as informal (not all strategists do). Non contractual Founded on relational governance Trust based
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Strategic Alliance 1+1 = 3 Firm A Firm B Resources Capabilities
Core Competencies Resources Capabilities Core Competencies Combined Resources Capabilities Core Competencies Mutual interests in designing, manufacturing, or distributing goods or services
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Typical Company Value Chain
Gary Gereffi on global value chains Distribution And Outbound Logistics Operations Purchased Supplies and Inbound Sales and Marketing Service Profit Margin Product R&D, Technology, Systems Development Human Resources Management General Administration Primary Activities and Costs Support Activities and Costs
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Collaboration possibilities in the value chain
1 & are Y coalitions indicates X coalitions 2 3 Research and development Production Marketing Sales and services Upstream Downstream 3 1 2 Upstream Downstream Research and development Production Marketing Sales and services Source: Source: Adapted from Lorange and Roos, 1995, p. 16.
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Scope of interfirm formal alliances
Contractual arrangements Equity arrangements Traditional contracts Traditional contracts Traditional contracts Traditional contracts Traditional contracts Traditional contracts Traditional contracts Traditional contracts Non--traditional contracts No creation of new firm Creation of separate entity Creation of separate entity Dissolution of entity Dissolution of entity Dissolution of entity Dissolution of entity Joint R&D, manufacturing marketing Merger or acquisition Merger or acquisition Merger or acquisition Merger or acquisition Merger or acquisition Arrangements to access mutually complementary skills or assets Arrangements to access mutually complementary skills or assets Arrangements to access mutually complementary skills or assets Arrangements to access mutually complementary skills or assets Arrangements to access mutually complementary skills or assets Arrangements to access mutually complementary skills or assets Arrangements to access mutually complementary skills or assets Joint venture Joint venture Joint venture Joint venture Joint venture WOS WOS Standard setting or R&D consortia Standard setting or R&D consortia Standard setting or R&D consortia Standard setting or R&D consortia Standard setting or R&D consortia Standard setting or R&D consortia Standard setting or R&D consortia Standard setting or R&D consortia Unequal JV Unequal JV Unequal JV Unequal JV Equal JV Arms-length buy-sell contracts Arms-length buy-sell contracts Arms-length buy-sell contracts Arms-length buy-sell contracts Arms-length buy-sell contracts Arms-length buy-sell contracts Arms-length buy-sell contracts Arms-length buy-sell contracts Arms-length buy-sell contracts Arms-length buy-sell contracts Arms-length buy-sell contracts Arms-length buy-sell contracts Arms-length buy-sell contracts Arms-length buy-sell contracts Minority equity arrangement Minority equity arrangement Minority equity arrangement Franchising Franchising Franchising Franchising Franchising Franchising Franchising Franchising Franchising Franchising Franchising Franchising Licensing Licensing Licensing Licensing Licensing Licensing Licensing Licensing Licensing Licensing Cross licensing Cross licensing Cross licensing Cross licensing Cross licensing Cross licensing Cross licensing Cross licensing Equity swaps Equity swaps Kale, P., & Singh, H. (2009). Managing strategic alliances: what do we know now, and where do we go from here. Academy of Management Perspectives, 23(3),
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Partner to partner relationships in Joint Ventures
FIRM A Weightings of factors leading Firm A to cooperate and value of strengths giving Firm A bargaining power FIRM B Weightings of factors leading Firm B to cooperate and value of strengths giving Firm B bargaining power Partner to partner relationship The bargaining agreement Parent-child relationship Parent-child relationship The competitive environment of the child Joint Venture The Child
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The Value Chain System for an Entire Industry
A Company’s Own Value Chain Supplier Value Chains Forward Channel Value Chains Buyer or End User Value Chains Activities, Costs, & Margins of Suppliers Activities, Costs, & Margins of Forward Channel Allies & Strategic Partners Internally Performed Activities, Costs, & Margins
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Incremental internationalization
Dynamic capabilities Opportunity development capability Internationalization capability Networking capability Operational capabilities Dynamic capabilities Opportunity development capability Internationalization capability Networking capability Operational capabilities Commitment decisions Reconfiguration Change of coordination Commitment decisions Reconfiguration Change of coordination Commitment decisions Reconfiguration Change of coordination Commitment decisions Reconfiguration Change of coordination Commitment decisions Reconfiguration Change of coordination Commitment decisions Reconfiguration Change of coordination Inter-organizational processes Learning Creating Trust building Inter-organizational processes Learning Creating Trust building Inter-organizational processes Learning Creating Trust building Inter-organizational processes Learning Creating Trust building Inter-organizational processes Learning Creating Trust building Network position Inter-organizational network position Intra-organizational network position Network power Network position Inter-organizational network position Intra-organizational network position Network power Network position Inter-organizational network position Intra-organizational network position Network power Network position Inter-organizational network position Intra-organizational network position Network power Network position Inter-organizational network position Intra-organizational network position Network power Network position Inter-organizational network position Intra-organizational network position Network power Network position Inter-organizational network position Intra-organizational network position Network power Vahlne, J.-E., & Johanson, J. (2013). The Uppsala model on evolution of the multinational business enterprise – from internalization to coordination of networks. International Marketing Review, 30(3),
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Network relationships in the environment
De Wit, Bob and Ron Meyer (2004), Strategy. Process, content, context. An international perspective (3rd ed.). London: Thomson.
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Porterian 5 forces? Michael Porter on 5 forces. Threat of New entrants
Industry competitors Intensity of rivalry Bargaining power of suppliers Bargaining power of buyers Substitutes University of Huddersfield 2017
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Complementors A player is a complementor if customers value your product more when they have the other player’s product than when they have the product alone A player is your competitor if customers value your product less when they have the other players product than when they have your product alone. For instance, Coca-Cola’s relationship with Pepsi-Cola is essentially competitive The relationship between Intel and Microsoft in primarily complementary Grant, R.M. (2016). Contemporary strategy analysis: Text and cases edition: John Wiley & Sons.
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Bargaining power of buyers
A Sixth Force? Threat of New entrants Complimentors Industry competitors Intensity of rivalry Bargaining power of suppliers Bargaining power of buyers Substitutes Grant, R. M. (2002) Contemporary strategy analysis: Concepts, techniques, applications, (4th ed.), Malden Mass., Blackwell.
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Complementors An applied value-net Customers Competitors Complementors
Students, parents, Governments, companies, Donors, sponsors An applied value-net Competitors Other universities, other employers of staff in the same sectors, others competing for school leavers commitment Huddersfield University Complementors Schools, computer software manufacturers, local housing, transport, hotels, cultural activities, employers, shops Suppliers Faculty, staff, administrators, publishers, online journals Adapted from Brandenburger, A. M. & Nalebuff, B. J. (1996) Co-opetition, New York, Doubleday.
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Competitive mindset Think collaborator as well as competitor!!!
The bias: Customers and suppliers have to choose between opportunities with us and with others We’re taught to think in terms of constraints, trade-offs, substitution Firms increasingly are developing a ‘co-opetitive’ mindset Think collaborator as well as competitor!!! Pattinson, S., Nicholson, J., & Lindgreen, A. (2017). Emergent coopetition from a sensemaking perspective: A multi-level analysis. Industrial Marketing Management.
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Coopetitive strategy Coopetition involves the simultaneous strategic management of the opposing forces of competition and collaboration between two or more firms. May in international terms mean competing in some markets, collaborating in others Fernandez, A.-S., Le Roy, F., & Gnyawali, D. R. (2014). Sources and management of tension in co-opetition case evidence from telecommunications satellites manufacturing in Europe. Industrial Marketing Management IN PRESS
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Coopetition One definition Simultaneous competition and cooperation
Can be that they have a Y coalition in one stage of the value chain and compete in another Might be that they collaborate in all upstream areas and compete in different geographic markets. e.g. the example of BA Defence and Boeing.
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Amazon Question Why does it allow third party small book-shops to sell their books through its on-line platform? Why not exclude them and sell all its books direct?
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Coopetition Problems The principle of separation: It is difficult for two people in two firms to both compete and collaborate at the same time Firms can do so by separating the competing and collaborating roles between different people Hence there is a strong practice element in strategic coopetition…. Often discussed as sensemaking. Coopetitive and competitive mindsets. Born coopetitive firms?
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Coopetition as an emergent process
Pattinson, S., Nicholson, J., & Lindgreen, A. (2017). Emergent coopetition from a sensemaking perspective: A multi-level analysis. Industrial Marketing Management.
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Summary It’s not just about one firm beating another firm… winning is more nuanced Its possible to compete and collaborate simultaneously Increasingly advantage can be gained by cooperation The existence of competitors may be also complimentory Alliances may speed up the process in any direction/ particularly when entering new ‘international’ markets.
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Exam focus Don’t try and think one lecture one question. See connections between lectures and beyond!!!! Is good competitive strategy just about defeating the opposition? Can firms simultaneously collaborative and compete? What is the distinction between business model innovation and product/process innovation? Has the concept environment been superseded or complimented by the concept of ecosystem? What are the key decisions in moving from domestic to international strategy? Does strategic planning complement or contradict innovation? Will a well planned strategy always work in practice? Can an organization be strategic without leadership? How are the boundaries of strategic analysis changing? How do contemporary firms create and capture value?
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