Strategic Thought Transformation - The IIPM Think Tank

E D I T O R I A L
Competing to death!
W
ell, that’s the heading for
one of the benchmark research
papers written in this issue
of Strategic Innovators. As
quoted in even other papers in
this journal, the world is viewing
a dramatic shift in competitive
dynamics from straightforward
competition to rampant co-opetition!
The term co-opetition refers
to a situation where diehard
competitors start collaborating, legally of
course, to maximise shareholders’ value, profits,
revenues etc, and to minimise consequent
costs and expenses by optimal utilization of
joint operations, products, services et al.
One of the most compelling reasons for
competitors to turn co-opetitors is the focus
on maximizing returns from core competencies.
When two competitors realize that they
are stuck in a “prisoner’s dilemma” situation,
where competing against each other actually
ends up giving them lesser returns, a logical
methodology of operating becomes co-opetition.
Examples are in abundance. Instead of
competing, Disney and Pixar Animation went
the co-opetition way, where Pixar provided
the graphics content for movies like Finding
Nemo, Toy Story, Monsters Inc, The Incredibles,
Bug’s Life etc, while Disney went ahead
and distributed these hugely successful films
all over the globe. Or where companies like
Hindustan Motors and Mahindra & Mahindra
have supplied engines and other auto components
to companies like General Motors
and Ford (and now to Renault too). Where
HLL still distributes the Dalda brand – that it
sold off to top competitor Bunge – through its
own channels. Where Honda of Japan would
continue selling various automobiles through
its joint venture with the Hero group in India,
and at the same time, continue selling scooters
through another arm unrelated to Hero, and
generators through another.
Co-opetition, and not straightforward competition,
is becoming the rule, especially in
industries that have typically high competitive
pressures, and – if one can mention
– intelligent competitors.
Perhaps the biggest, the most
successful, and one of the oldest
of all co-opetition examples
can be found in OPEC, a cartel
legally formed by oil producing
countries ostensibly to ensure
that there is no over supply of
oil, as that would – again ostensibly
– result in crashing of
prices, consequently placing all oil producing
countries in losses. Though the OPEC was
initially unsuccessful, with time, countries
accepted quotas for production, which contributed
to the huge success of OPEC and its
member countries; a fact that can be seen
from the high and rising per capita incomes
of the OPEC nations.
Truly so, infrastructure industries are perfect
spaces for co-opetition to flourish. Steel
is one such example. In recent news has been
the ongoing hostile takeover bid by Mittal
Steel (the world’s largest steel producer) for
Arcelor (the world’s largest steel corporation
in terms of revenues and profits). Whether
the takeover bid goes through or not completely
depends on the European Commission’s
approval; especially given the fact that
the CEO of Arcelor, Guy Dolle, and the French
& Luxembourg governments, have illogically
shouted their throats hoarse about national
security (and employment) being at stake! In
the end, Mittal might have to churn out a price
that is higher than the actual worth of Arcelor,
just to cash in on the distribution channels,
and high production quality of Arcelor steel.
Could the answer to Mittal optimising his
company’s returns have been in co-opetition
with Arcelor Well, one just might actually
see that happening in this takeover bid, if
Mittal finally refuses to pay the higher price,
or if the European Commission bends to fears
of national security being compromised! As
I mentioned, competing
to death never was recommended;
or was it
An IIPM Intelligence Unit Publication STRATEGIC INNOVATORS 5