chapter fourteen - University of North Carolina at Chapel Hill

Reminders If you choose not to participate in a team project, you need to let me know by Friday. I need your team roster and target organization by next Wednesday. Mondays class devoted to your team meeting. No case due! Competition, Cooperation, Collaboration, Coopetition, Coevolution, and Organizations

BA 152 Inter-organizational Relationships Intra-organizational relationships are established by structures, systems, and processes within an organization. Inter-organizational relationships are established across organizations in a variety of different ways for a variety of different reasons.

How might we explain these inter-organizational relationships? Explanations for Inter-organizational Relationships Organization Relationships Organization Type Dissimilar Competitive Cooperative Resource Dependence

Similar Explanations for Inter-organizational Relationships: Resource Dependence Firms attempt to minimize their dependence on others for resources They attempt to influence their environments to make resources available Explanations for Inter-organizational Relationships:

Resource Dependence Level of dependence a function of The importance of the resources The control suppliers have over resources Explanations for Inter-organizational Relationships: Resource Dependence Strategy Implications:

Reduce the firms dependence on the environment And/or exercise power over suppliers by establishing a variety of inter-organizational relationships. The presumption here is the more powerful takes advantage of the less powerful. But what has been happening in

some industries? The auto industry, for instance, has Gone from driving profits down for many, many suppliers putting some out of business . . . To building supportive and collaborative relationships with fewer suppliers. But what has been happening in some industries? Independent book sellers have

Either fought tooth and nail against each other, individually, and against the big stores, and/or Formed a collaborative effort called Explanations for Inter-organizational Relationships Organization Relationships Organization Type Dissimilar Competitive

Resource Dependence Cooperative Collaborative Network Similar Competition Typically marked by

Suspicion Price wars Limited/no information exchange Short-term contracts Conflicts resolved by legal action Managing Competitive Relationships

Parties tend to compete away the profits. Or parties try and build a bigger pie. Parties try and control access to entry with third-party assistance - trade associations, licensing boards, etc. Parties try to reduce competition via strategic alliances, mergers and/or acquisitions. Parties collude and/or develop cartels - illegal in this country. Collaboration

Typically marked by Trust Equity, fairness in exchanges Maximal information sharing Close coordination Long-term contracts Mutual resolution of conflicts Ways to Collaborate

Reputation and trust Co-optation - giving another group a stake in some activity that neutralizes their opposition Long-term contracts/Licensing Networks Minority ownership - a la keiretsu

Joint ventures/strategic alliances Mergers and/or acquisitions Why Collaborate? To reduce the cost of technological development or market entry To reduce the risk of development or market entry

To achieve economies of scale in production To reduce the time taken to develop and commercialize new products Competition vs. Collaboration Options/Strategies for developing (or not) a global MBA program at UNC Stay out of the market Go it alone

Find appropriate partners Competition vs. Collaboration - Sao Paulo, Brazil Risks with Collaboration Leakage of proprietary information Differential quality/delivery of product/service

Loss of control or ownership Divergent aims & objectives, resulting in conflict and/or dissolution Managing Successful Collaborations Collaboration must be perceived as important by all partners.

Collaboration champions must exist at the top of the partner organizations. A substantial degree of trust must exist between parties. Clear planning and task milestones must be established. Managing Successful Collaborations Frequent communication must occur between partners.

The partners must contribute as expected. Collaboration benefits must be perceived as equitably distributed. What comes after collaboration? Co-evolution or co-opetition Development of shifting/dynamic webs of relationships (inside and outside the firm)

These webs exploit fresh opportunities for organizational improvement and/or drop deteriorating ones. Collaboration and competition may well co-exist within a single firm as well as between and among multiple firms. Co-evolution Vail Ski Resorts Formed by a 1997 merger of Vail, Breckenridge,

Keystone, and Beaver Creek ski areas to take advantage of branding with the Vail name. Initially, too much collaboration. Vacationers wanted unique resort experiences, not four would-be Vail destinations. Co-evolution So now each resort adapts its image to evolving and potentially competing markets.

Beaver Creek Family skiing Breckenridge Western-motif and youth focus Keystone Meetings and conferences Vail Upscale skiing Collaboration vs. Coevolution Traditional Collaboration Coevolution Form of collaboration Frozen links among static businesses

Shifting webs among businesses Objectives Efficiency and economies of scale Growth, agility, and economies of scope Internal Dynamics Collaborate Collaborate and compete

Focus Content of collaboration Content and number of collaborative links From Eisenhardt, L. and Galunic, D., Coevolving: At Last, a Way to Make Synergies Work, Harvard Business Review, Jan-Feb 2000, pp. 91-101. Collaboration vs. Coevolution Traditional Collaboration Coevolution

Corporate Role Drive collaboration Set collaborative context Business Role Execute collaboration Drive and execute collaboration Incentives

Varied Self-interest, based on unit performance Business Metrics Against budgets or preceding year Against competitors growth, share and profits From Eisenhardt, L. and Galunic, D., Coevolving: At Last, a Way to Make Synergies Work, Harvard Business Review, Jan-Feb 2000, pp. 91-101.

Explanations for Inter-organizational Relationships Organization Relationships Organization Type Dissimilar Competitive Similar Resource Population Dependence Ecology Cooperative Collaborative

Network Explanations for Inter-organizational Relationships: Population Ecology An attempt to explain why there are so many different kinds of organizations and relationships in the world today. Uses an evolutionary approach

Variation - large numbers of firms appear Selection - only some find niches and survive Retention - a few grow large and continue to succeed To be selected in firms can adopt a specialist or a generalist approach Population Ecology Specialist

Concentrates skills in a single niche Develops core competencies Can provide better customer service and superior products, but Can be in trouble if the niche disappears or others enter. Population Ecology Generalist

Spreads skills across many niches, often via inter-organizational relationships Provides greater brand recognition Can succeed when the environment is uncertain, if risks are spread across a number of niches with multiple partners Explanations for Inter-organizational Relationships Organization Relationships Organization Type Dissimilar Competitive

Similar Resource Population Dependence Ecology Cooperative Collaborative Institutionalism Network Explanations for Inter-organizational Relationships: Institutionalism

An attempt to explain why there are so many similar organizations and relationships in the world today. Isomorphism is the answer: The process whereby entities start to resemble each other in similar environments as a way of gaining or maintaining legitimacy. Institutionalism How does isomorphism occur?

Mimetic isomorphism: Imitation is the sincerest form of flattery. Usually occurs in reaction to uncertainty. Institutionalism How does isomorphism occur? Coercive isomorphism: Do it this way, or else! Reaction to political or regulatory influence. Institutionalism

How does isomorphism occur? Normative isomorphism: Professionals do it this way. Results from common training and professionalism. Todays Take-aways 1. 2. 3. While competition is important, there is more than simply competition to the

success of todays organizations. There are a variety of ways to explain interorganizational relationships Co-evolution may be the wave of the future. Stay tuned.

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