July Paper on 'Coopetition and Business Models' by Chander Velu
Studies have shown that firms are increasingly cooperating and competing at the same time in order to create competitive advantage and, hence, deliver superior returns. Shorter product lifecycle, convergence of multiple technologies and increasing costs of conducting R&D require firms to share resources with their competitors in order to improve the delivery of existing customer value proposition or develop new propositions. Resources needed to compete effectively often do not reside within a single firm and, hence, firms in the same competitive set often cooperate in order to share such resources and then compete to divide the jointly created value. Such simultaneous collaborative and competitive activities have been termed coopetition. Business models are a key concept in providing an understanding of how firms can affect the mechanism of value creation and capture within a coopetition setting. This paper explores the relationship between business model design and coopetition-based strategies among competing firms. The reason for coopetition could be defensive or offensive depending on the relative threats and opportunities. Coopetition requires the ability of firms to design, implement and manage new business models. This paper provides an overview of case vignettes in the bond trading market, electronic book retailing and flat-screen LCD television markets to illustrate the rationale for coopetition-based business model design. The paper proposes a framework on how, when and why business model innovation is required for coopetition-based strategies in order to contribute to competitive advantage.