DEFINITION of 'Coopetition'

Coopetition is the act of cooperation between competing companies; businesses that engage in both competition and cooperation are said to be in coopetition.

Certain businesses gain an advantage by using a judicious mixture of cooperation with suppliers, customers and firms producing complementary or related products. Coopetition is a form of strategic alliance and is common particularly in the computer industry between software and hardware firms.

BREAKING DOWN 'Coopetition'

Coopetition is a business ideology taken directly from insights gained from game theory. Coopetition games are statistical models that consider the ways in which synergy can be created by partnering with competitors. This tactic is thought to be a good business practice between two businesses because it can lead to the expansion of the market and the formation of new business relationships. In this capacity, agreements on standards and developing products across an industry or between two competitors is necessary to implement coopetition.

The Coopetition Model

The statistical model determines the benefits of coopetition and also looks at the allocation of market share between competitors to maximize the market share of leading companies. The model is initially drafted using a diamond shape, with customers, suppliers, competitors and complementors in each corner. The aim of coopetition, and the model itself, is to move the market from a zero-sum game, where a single winner takes all, to an environment in which the end result benefits the whole and makes competitors alike more profitable.

The linchpin of the model is understanding the input variables that will influence the players within the diamond to compete or cooperate. This understanding leads to knowing which forces will make the players compete and which forces will make them cooperate, and to what capacity. Professors from Harvard and Yale, Adam M. Brandenburger and Barry J. Nalebuf, pioneered the idea of coopetition.

Reasons Why Companies Conduct Coopetition

The most common sector that acts in coopetition is the technology industry. Cooperation between competitors allows for hardware and software synergies. Many startups, especially in the technology industry, are competing in a similar market but have unique advantages. Two competitors may have complementary strengths, and a coopetition agreement can be formed to share in common gains. Coopetition between two tech companies can increase the chance of user growth within each company through cross-channel promotion. Often in the startup space and the tech industry, two or more competitors are fighting a larger competitor, and tech companies can integrate together to form coopetition against a larger foe. Coopetition in the tech industry is prevalent since it's common for two competitors to become acquired or merge, forming a stronger entity.

  1. Financial Cooperative

    A Financial Cooperative is a financial institution that is owned ...
  2. Banks For Cooperatives

    Established by the Farm Credit Act of 1933, these regional, privately-owned ...
  3. Core Competency

    A narrowly defined field or task at which a company excels. A ...
  4. European Community - EC

    The European Community is one of the three pillars of the European ...
  5. Business Model

    A business model is a company's plan for generating revenues ...
  6. Business Ecosystem

    A business ecosystem is the network of organizations involved ...
Related Articles
  1. Small Business

    How To Make $1 Million In Your Small Business

    Make your dream a reality. Find out what you can do to reach this financial goal.
  2. Small Business

    The Top 10 Hidden Factors Affecting Software Stocks

    Want to invest in software? Here are the most important factors affecting profits, revenues, and stock price of software companies
  3. Investing

    Mergers Put Money In Shareholders' Pockets

    Learn the five ways mergers and acquisitions can increase a company's value.
  4. Investing

    CFA: Big Cable Overcharges by $60B/Year

    AT&T, Verizon, Comcast and Charter are a greedy oligopoly, according to a 2016 Consumer Federation of America report.
  5. Insights

    International Leaders React to Trump's Victory

    After the unexpected result of the presidential elections 2016 in the Unites States, global leaders reacted by extending diplomatic greetings to the president-elect.
  6. Tech

    #1 Country For Tech Start-Ups: U.S.A

    U.S. tech companies are receiving increased levels of investor funding. In 2014, the number of mega-deals for such ventures doubled over the previous year.
  7. Small Business

    Why Successful Business Owners Sell Out

    Learn the motives that drive companies into the arms of an acquirer.
  1. How do I determine my company's competitive advantage?

    Find out how to determine if your company has a competitive advantage and, if so, learn how to figure out how to make it ... Read Answer >>
  2. In which industries are mergers and acquisitions most common?

    Learn the reasons why the health care, technology, financial services and retail sectors typically involve a high level of ... Read Answer >>
  3. Should a small business test the substitution effect on its products before launch?

    Explore the substitution effect and find out how small businesses may evaluate how this principle impacts their own products. ... Read Answer >>
  4. Why do companies merge with or acquire other companies?

    The reasons for company mergers and acquisitions include synergy, diversification, growth, improving competition, and supply ... Read Answer >>
Hot Definitions
  1. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
  2. Standard Deviation

    A measure of the dispersion of a set of data from its mean, calculated as the square root of the variance. The more spread ...
  3. Entrepreneur

    An entrepreneur is an individual who founds and runs a small business and assumes all the risk and reward of the venture.
  4. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
  5. Perfect Competition

    Pure or perfect competition is a theoretical market structure in which a number of criteria such as perfect information and ...
  6. Compound Interest

    Compound Interest is interest calculated on the initial principal and also on the accumulated interest of previous periods ...
Trading Center