Coopetition strategy in an imbalanced competitive environment

Abstract

ABSTRACT This study examines a firm's strategic choices of self-development or cooperation with (wholesaling from) its stronger rival. Both choices can improve the efficiency and competitive strength. We develop a benchmark of a full competition model, coopetition strategy, self-development strategy and hybrid strategy to investigate the effect of coopetition and self-development on firms who sell substitutive products in the end market. We show that both coopetition and self-development can benefit the high-cost firm. While the low-cost firm prefers the coopetition strategy. And in the hybrid strategy, the high-cost firm just utilises the self-development ability as a threat to enjoy a lower wholesale price. Interestingly, our research indicates that the mixed cooperation and competition relationship varies low-cost firm's attitudes towards product differentiation. On the one hand, the low-cost firm wants to produce homogeneous products to compete with rivals. On the other hand, he also wants to provide heterogenous products to alleviate competition in the coopetition strategy. The result provides company managers with a certain meaning in the complicated cooperative and competitive market environment.