Coopetition

Coopetition occurs when competing firms cooperate in some aspects of their production and marketing in order to maximize their profits. Coopetition can be used as a green business strategy to increase the sustainability of competing businesses.

The term coopetition, created by combining the words cooperation and competition, was coined by Ray Noorda, founder of the networking software company Novell. It was popularized by Adam Brandenburger from Harvard Business School and Barry Nalebuff from Yale School of Management. Coopetition describes a fusion of these antithetical concepts, which, although it may seem paradoxical, already has a considerable history of business success.

Noteworthy examples of coopetition success involve arrangements between competing airlines in what are called “code sharing” agreements, which allow partner airlines to market seats on each others’ flights, and arrangements between motor vehicle manufacturers to share some common components in competing automobile models. A good example of complementarities in coopetiton is computer hardware and software. Faster hardware prompts customers to upgrade to more powerful software, and vice versa. The conventional wisdom of “winner take all” philosophy is gradually giving way to a realization that, in networked globalized economies, businesses must both cooperate and compete in order to create maximum value in the marketplace.

Coopetition holds promising potential for green business. In a landmark article published in Scientific American in 1989, R. Frosch and N. Gallopoulos theorized that industrial systems could be made to function like natural ecosystems with the wastes of one manufacturer being used as a resource for another, thereby avoiding the costs of waste disposal for the one, while providing raw materials for the other. Apart from the economic advantages for partners in this kind of industrial ecology, there is the added advantage of less environmental costs due to less overall resource use and less waste disposal. For these arrangements to work properly, however, a philosophy of coopetition is often required to overcome the culture of suspicion inherent in traditional competitive business practices.

This idea of cooperation between complementary firms can be applied at every stage of the supply chain, and can be facilitated by co-location of manufacturing operations of complementary firms, that is the operation of one company on the premises of another [Page 106]company. This has the added environmental advantage of not having to transport materials long distances.

In other cases, it is often in the interests of competing companies that rely on the same resources, particularly natural resources, to cooperate to ensure those resources are managed sustainably. Competing companies may also cooperate in facilitating the collection of postconsumer waste products for reuse and recycling, which may be too expensive for individual companies. For example, in the United States, carpet and fiber manufacturers have agreed to increase the reuse and recycling of waste carpets.

Perhaps the most important aspect of coopetition is the potential it has to drive the greening of a company's network of stakeholders, customers, suppliers, and complementors. Under normal competitive business conditions, there is usually a prevailing imperative placed on suppliers to provide the cheapest product. This can act as a deterrent for the suppliers to improve the sustainability of their inputs if greening them is likely to raise costs. However, coopetition introduces an opportunity either for competing suppliers, or for the companies in receipt of the inputs, or both, to put aside competitive pressures and cooperate by agreeing on the need for greener inputs and outputs. When one company asks for more sustainable practices or products from suppliers, it can easily be ignored, but when several companies demand more sustainable practices from suppliers, suppliers have little choice but to change their practices.

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