Cooperative antagonism in the marketplace

Citation

Ali, A.J. (2013), "Cooperative antagonism in the marketplace", International Journal of Commerce and Management, Vol. 23 No. 2. https://doi.org/10.1108/ijcoma.2013.34823baa.001

Cooperative antagonism in the marketplace

Article Type: Editorial From: International Journal of Commerce and Management, Volume 23, Issue 2

Introduction

Over centuries, in the business world, rivals have cooperated over a wide range of market issues. Various forms of cooperation have evolved over the years. These have either been driven by market necessities or political and social imperatives. Irrespective of the drivers of cooperation, considerations have varied and often gone beyond mere survival. As in politics, business cooperation can either be tactical or strategic. Though both can be pursued simultaneously and energetically, the reasons for each are determined by factors inside and outside the organizations. Executives ponder these factors in light of organizational capabilities, limitations, and opportunities. Moreover, it is not unusual for firms to face contradictory options. The task of senior executives is to sort out these challenges and envision certain approaches that will optimally serve the goals of the organizations. The adequacy of the responses is a measure of the senior executives’ foresight and ability to map the future. When organizational activities were mostly localized and competition was forgiven, executives felt at ease in predicting the outcome of any cooperative initiatives. Not only were relationships among rivals personal, but their capabilities, directions, and counter actions were known. This is no longer the case in a globalized world; competition is unforgiving and competitors are scattered and their next moves are difficult to anticipate with a reasonable degree of accuracy.

For this particular reason, rivals have to explore both tactical and strategic initiatives. Tactical cooperative actions often indicate that senior executives believe favorable conditions may emerge that will enable a firm to leap forward and take initiative to strategically position itself in the marketplace. Likewise, senior executives may engage in tactical initiatives for other reasons, including overcoming temporary deficiencies or if the venture is not strategically important. That is, cooperative projects with rivals serve major strategic initiatives.

The ascendency of globalization has pushed strategic cooperative initiatives to a new level. While the marketplace is experiencing remarkable qualitative and quantitative shifts in alliances, firms have found themselves facing competition on various fronts and market dynamism and associated risks have accelerated the need for rapid response to customer demands and expectations. This development has accentuated the need, on the part of firms, to consider various possibilities to maintain market vitality and sharpen their competitive edge. That is, strategic cooperative has increasingly taken on a new shape that can be termed cooperative antagonism. This rising phenomena differs both in scope and depth from other types of cooperative ventures. Primarily, it implies that corporations forge alliances not only over matters that are secondary and or are relevant to products that are not the immediate subject of competition, but also cooperate on products that are critical for their market dominance. This, however, does not mean the erosion of the traditional strategic cooperative model. The model is still valid and has wide range applications.

Two models stand out as an example of cooperative operation among firms within the same industry or among industries. Inzerilli (1990) presented an Italian model common in the central northeast of Italy where economic relationships have the characteristic of trust-based exchanges and significantly exclude opportunistic behavior and the resulting outcome of transaction costs. Inzerilli has documented that the model has resulted in growth of industrial output, employment, and productivity. Furthermore, the author argues that variations of the model are found in specific areas in Denmark, Sweden, Spain, and Germany. Similarly, Peng (2000) highlighted how Japanese-based companies through their cooperative approach in East Asia managed to link together the disparate economies of Asia, integrating them with one another. These Japanese-based companies, like their current Chinese counterparts, have cooperated with both national firms and host country-based firms to transform the region into a giant economic block.

Emerging cooperative form

In recent years, strategic cooperative ventures and partnerships among rivals have become highly sophisticated, making it impossible to differentiate among the competing interest of the partners. This development may differ from former strategic cooperation initiatives. First, the most recent cooperation arrangements have taken place in the IT sector; a sector that is characterized by rapid change, market volatility, a competitive environment, high rates of new entrants and startups, high concentration and involvement of venture capitalists, and demanding customers. Second, partners of a cooperative arrangement are more likely to undertake this initiative to weaken the dominant position of a common competitor. For example, the Wall Street Journal (Efrati, 2013) reported that Samsung and Google have stemmed Apple’s dominance in smartphones. Third, cooperative arrangements constitute either direct competition with partners or a threat to their market position. Efrati (2013) reported that Google was approaching other companies in the industry hoping that their Android devices would keep Samsung’s leverage in check by providing legitimate competition. Fourth, the partners understand that the cooperative arrangements will indeed fuel competition among them but that they are needed to cope with market challenges. For example, Motorola, which was acquired by Google in 2012, engaged in developing sophisticated handsets that compete directly with Samsung. The latter, with the help of Google, has become the No. 1 smartphone maker. Google has co-developed devices with Samsung and given it early access to new versions of Android software (Efrati, 2012). The development of the new handset is going to disturb relationships with Samsung.

Lastly, the strengths and weakness of partners are in fact complementary. Apple and Samsung, for example, have different strategies. In addition, Apple dominates the market in the industrial world, while Samsung is relatively more popular in the developing economies. These differences, along with formidable strengths, have rendered quiet cooperation a better strategy than all-out war for some time to come This relationship of simultaneous direct competition and cooperation has been termed “frenemies” (Gupta et al., 2013). Recently, in high tech and other industries this new form has found a wide acceptance.

Does this new type of relationship, “frenemies”, among partners survive for life as Gupta et al. have projected? In a world where market actors engage in various strategic activities and where market competition and conditions are in constant change, alliances shift accordingly. Cooperative ventures among firms are a natural evolution. It is in this context that cooperative antagonism should be understood. This type of cooperation, like other forms, is either subject to failure and dissolution or progressive evolution. The latter can evolve into mergers and acquisitions or it can degenerate, leaving partners with a bitter experience. The measure for its success is not whether it has a lasting impact, but rather if the goal of the cooperation is met. Firms have different objectives and goals and cooperative antagonism is no different from other strategic initiatives that corporations undertake to ease achievement of goals.

Indeed, the emergence of cooperative antagonism demonstrates that firms that are archenemies in certain segments can cooperate intimately in the same areas or other segments. This trend promotes competition and encourages innovation and productivity. Subsequently, it contributes to enhancing customer welfare. At the same time, cooperative antagonism may accelerate/prevent the demise of existing firms or induce the emergence of new firms. The point is that firms are integral actors in society and, to sustain their market vitality, they are always in race with time to demonstrate their relevance and importance. Initiating cooperative antagonism is a manifestation of firms’ renewal and their ability to seize on opportunities of historical significance. Nevertheless, cooperative antagonism is just a new but not the last form of market cooperation.

Abbas J. Ali