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Coopetition As a Business Strategy That Changes the Market Structures

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Coopetition As a Business Strategy That Changes the Market Structures SILESIAN UNIVERSITY OF TECHNOLOGY PUBLISHING HOUSE SCIENTIFIC PAPERS OF SILESIAN UNIVERSITY OF TECHNOLOGY 2021 ORGANIZATION AND MANAGEMENT SERIES NO. 151 1 COOPETITION AS A BUSINESS STRATEGY THAT CHANGES 2 THE MARKET STRUCTURES: THE CASE OF LONG-DISTANCE 3 PASSENGER TRANSPORT MARKETS IN POLAND 4 Andrzej PESTKOWSKI 5 Wrocław University of Economics and Business, Faculty of Management, Computer Science and Finance; 6 [email protected], ORCID: 0000-0002-5778-8420 7 Purpose: This paper concerns the phenomenon of two-way causality effect between market 8 structures and coopetition occurrence. It is assumed that certain characteristics of an existing 9 market structure implicate the decision to deploy the strategy of coopetition by companies. 10 Moreover, the opposite effect might be expected, that is coopetition between market rivals 11 changes the market structure on which it was implemented in the first place. In the paper various 12 aspects and approaches of the abovementioned phenomena have been considered. 13 Design/methodology/approach: The author investigates the events, motives and values that 14 lead companies to deploy the coopetition strategy. Furthermore, the theoretical and conceptual 15 bases for the effect of the coopetition impacting the change of market structures have been 16 provided. A wide analysis of managers’ decision resulting from the occurrence of certain 17 strategic events has been conducted with the use of comparison matrixes. Finally, in the last 18 part of the study the author’s empirical research on two passenger transport relevant markets 19 has been presented. 20 Findings: Certain market strategies characteristics affected companies to deploy the 21 coopetition strategy and the other way round, the strategy changed the market structure in the 22 result of competitors’ decision. Taking into consideration all of the theoretical, conceptual and 23 empirical aspects raised throughout the course of the research, both hypotheses have been 24 confirmed. 25 Research limitations/implications: The author has used mostly qualitative methods such as 26 observation, conceptualization or cause and effect analysis in which the natural existence of 27 errors might occur. To test the hypotheses the researcher had to create assumptions and models 28 that represent what should happen if every aspects successfully appear. It might be expected 29 that some other variables affected the market structures during the research that the author was 30 not aware of. Thus, one should interpret the results with the inclusion of the ceteris paribus. 31 Practical implications: Instead of applying the high cost strategies such as price wars or 32 demand seeking, one might use the coopetition to create added values with little or even zero 33 cost. What is more, this strategy may result in higher pricing power, higher market size or better 34 level of innovation. 35 Originality/value: The publication discusses the coopetition phenomenon from the innovative 36 perspective of two-way causality (influence) between market structures and coopetition itself 37 while most of the studies concern only one-way cause and effect between those variables. 38 Conclusions drawn from this paper can be useful for entrepreneurs and their decision making 39 process. http://dx.doi.org/10.29119/1641-3466.2021.151.38 http://managementpapers.polsl.pl/ 554 A. Pestkowski 1 Keywords: coopetition, market structure, business strategy, competitive strategy, passenger 2 transport. 3 Category of the paper: Research paper, Viewpoint. 4 1. Introduction 5 The main purpose of management science is to provide entrepreneurs with information on 6 how to run their companies or firms they are in the lead of more effectively (Drucker, 1955). 7 One of the most useful concepts from the business owners perspective is business strategy 8 (Jarzabkowski, 2005, pp. 29-31). Much research has been carried out in this area with the effect 9 of at least dozens of different business strategies (Chrisman et al., 1988; Peng, 2000, 10 pp. 15-20). Yet over the years, the most recognizable competitive strategies have been narrowed 11 down into three main approaches. One approach has been established on the basis of price or 12 non-price competition which result in corresponding competitive advantages (Belleflamme, 13 2010, pp. 31-34). Another popular theory was advanced by Porter (1998) with his groups of 14 generic strategies that include: differentiation, overall cost leadership and focus strategy. 15 On the other hand one might observe the group of strategies based on the pressure of each 16 competitor on the level of competition rivalry (Grimm et al., 2006, pp. 44-47). More precisely, 17 companies might act in three different ways depending on the competitive intensity. Firstly, 18 firms can compete in full manner in almost every possible way. Secondly, they might create 19 reciprocity cooperation in some parts of the business and maintain competition in the other 20 ones. Finally, a company’s strategy can be settled on full cooperation switching the competitive 21 rivalry to the partnership agreements. This paper concerns the last two of the abovementioned 22 approaches and in the final section it analyses them on the example of long-distance passenger 23 transport markets in Poland. It investigates the case when companies decide to sign cooperation 24 agreements in the fields that are normally within the scope of rivalry. Resulting from these 25 decisions the specific business strategies of coopetition might be observed. Firms decide to 26 cooperate instead of compete to achieve both-sides added value especially when it comes to the 27 customers perception of their products (Fernandez et al., 2014). Due to the possible risks of 28 cooperation with market rivals the strategy of coopetition seems to be a rather rare choice of 29 business strategy. In this paper an attempt is made to shed a new light on that approach by 30 examining the real markets evidence of using this kind of strategy despite the risk it might 31 entail. It is also of key importance to determine the possible results of adopting this strategy 32 especially for the market structure and the intensity of the competition. The coopetition concept 33 shall be dealt with in more details in two sections: the theoretical one with an emphasis on the 34 comparison of business strategies as well as the empirical one in which the research outcomes 35 concerning competitive strategies within long-distance passenger transport markets will be 36 demonstrated. Coopetiton as a business strategy… 555 1 2. Theoretical background and hypotheses 2 This section will broaden the deliberations about business strategies presented in the 3 introduction. The focus shall be put on the theoretical issues that might bring the better 4 understanding of the coopetition examples which are included in the empirical part. Firstly, 5 it is necessary to properly characterize the concept of coopetition, which is why various 6 approaches and definitions will be presented. The author also concentrates on the coopetition 7 comparison to the similar strategies based on the partial cooperation. Basic characteristics and 8 conditions to apply coopetition on determined markets shall be presented as well. In this section 9 the author of this paper puts forward an innovative conceptualization of two-way causality 10 between market structures and coopetition where both phenomena affect each other before and 11 after each of them occurs. 12 2.1. To rival or to cooperate: coopetition among the partnership forms of company 13 competition 14 Constantly changing business environments with high intensity of industry rivalry has led 15 the strategy and management scholars to establish within the years a completely new business 16 strategy of coopetition. However, due to the high popularity of this concept on the real markets, 17 much discrepancy in the definitions, characteristics, conditions and models has been observed. 18 The first well-known evidence of business usage of coopetition as well as the first coining 19 of the term are assigned to Ray Noorda when he was working for Novell company in the 1980s 20 (Walley, 2007). He has described the cooperation between Novell and 3Com as an alliance 21 among two technology competitors that develops common standards to grow the overall market 22 for their products (Bouncken et al., 2015). Through several years the concept has evolved in 23 the domain of game theory. Consequently, Brandenburger and Nalebuff (1996) have presented 24 groundbreaking research on coopetition that led to their best-selling book and widely cited 25 publications. Their view on the coopetition is based on value-net game theory where players 26 aim to create a larger market size by cooperating to increase benefits for all players involved in 27 the partnership and subsequently divide the larger market among the players by competing. 28 Thus, rivals decide to cooperate in the part of increasing demand volume and at the same time 29 they compete in the part of dividing the supply understood as sales value. The abovementioned 30 theory has been recognized as the actor school of thought due to the much focus on players 31 (actors), rather than on acts. Yet another approach was presented by Bengtsson and Cock (2000) 32 who proposed the refreshed research on coopetition which is known as the activity school of 33 thought. In their understanding coopetition is a dyadic and one to one relationship between 34 a pair of firms, meaning that firms cooperate in activities far from their customers, while 35 simultaneously competing in activities close to the customers. Furthermore, various discussions 36 appeared from both schools’ perspective resulting in at least twenty new definitions and 556 A. Pestkowski 1 hundreds of empirical evidences (Bengtsson and Raza-Ullah, 2016; Gnyawali and Charleton, 2 2018; Ritala, 2012). For the purpose of this paper the author uses these definitions of coopetition 3 that focus on the business use case and strategic management.
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