The Research Of The Co-opetiton Effect Based On Isolation Mechanism

Currently, the coopetition relationship in between enterprises consists in their contracts. However, from the perspective of isolation mechanism, the paper tries to recertify the coopetition relationships beyond the limits of traditional coopetition theory, and lays special attentions to the process in which coopetition benefits generate. Beyond the traditional coopetition theories, there is a kind of coopetition phenomenon that is the simple competition between rivalries would generate a coopetition effect of cooperation accompanied by coopetition benefits. This special coopetition effect is reaped through the isolation mechanism between rivalry enterprises. That’s the reason why this paper is titled as "Coopetition Benefits Based on Isolation Mechanism".Theoretically speaking, the coopetition benefits of isolation mechanism root in the "Distinction Advantages (DA)" of the enterprises that are inimitable to their rivalries. DA is the key concept put forward and defined in the research, which also served as the theoretical foundation of the research. DA originates from the unique core resources and competence (especially the concealed/tacit knowledge) of the enterprise. Different from the economic concepts "absolute advantage" or "competitive advantage", DA is a management term which emphasizes maturity of operation, inimitability and respective effectiveness (evaluation index). The coopetition benefit is, in essence, the isolation mechanism effect based on DA:to achieve coopetition benefit (of isolation mechanism) through the actual coopetition effect generated by competition activities. The approach of this effect is "core resource and competenceâ†'DAâ†'isolation mechanismâ†'coopetition effectâ†'consolidating and upgrading of the core resource and competence". Therefore, it is not only a logic chain that is linked through isolation mechanism while theoretically based on DA, but also a dynamically evolving cycle system. It is necessary to emphasize that the introduction of the theoretical notion is on the basis of summarizing and refining the competition practices between NIKE and ADIDAS (Chapter3), not just theoretical deduction without any factual evidence.In terms of practical cases,6pairs of enterprises, which are the major rivalry of each other and meanwhile holding their respective DA, are chosen as the sample cases, in order to verify the authenticity and universality of the isolation mechanism effect. According to the theory-rooted3-level coding technology, the case study will gradually deduct out the generating and developing mechanism of the effects above mentioned as well as the specific forms of the coopetition benefits. The case study concluded that the Isolation Mechanism Effect based on DA is truly existed in enterprises’practical operations. And accordingly, the "generating mechanism model of coopetition benefits of isolative competition" is composed (Chapter4). This model breaks the limits of Porter’s "Five Forces" act on competitions in between enterprises through two dimensions: vertical competition and horizontal competition, which is a breakthrough to the traditional competition theory, from simple pursuit of benefit by individual enterprises to the coopetition coexistence of enterprise groups are in essence the value generating process of both the individual enterprise and the industry as a whole.Theoretically speaking, the generating mechanism of the Coopetition Benefit of Isolation Mechanism can be analyzed from two dimensions:horizontal and vertical competition.First of all, the generating mechanism of the Coopetition Benefit of horizontal competition is embodied in three patterns:competition thinking-oriented value war, avoid thinking-oriented strategy war and the embedded advantage based on invasion threat. First, value war can be classified into three conditions specifically:competition gaming, mutually inimitable and strategic interaction. Under the influence of isolation mechanism, value wars of these3conditions would provide more product value to the market through competition; enhance the overall well-being of the market; avoid malignant competition and eventually achieve a coopetition effect of expanded scale of the market. Second, avoid thinking-oriented strategy war, which would generate a coopetition effect of "redefining the market" or "opening up brand new markets" through innovating competition strategies, and ultimately create the coopetition benefit:obtain horizontal competition advantage while avoid head-on competition, expand and strengthen the industry and the market. Third, the embedded advantage based on invasion threats is resulted from a combination and systematic deliberation of vertical and horizontal competition, competition and cooperation thinking. The coopetition benefit involved here has two origins:one is the evolution from horizontal competition to coopetition, which accomplished an overall upgrading of the supply chain while constructing high entering barriers for horizontal competition; the other is the embedded advantage generated by high level entrants (industry leader), which drives the ensemble upgrading of the industrial chain, promotes strategic synergy on a higher level, and eventually expand and strengthen the industry and the market.Secondly, the generating mechanism of the coopetition benefit from vertical competition is:the relationship between the up and downstream of an industry evolves from competition to coopetition, taking advantage of their respective DA, coordinating rather than competing under the influence of isolation mechanism, and pursuing a coopetition effect of "Heterogeneous Symbiosis". The industrial chain of vertical competition is classified into contracted and non-contracted industrial chain. However, there are two kinds of supply chain relationship:one is closely cooperative supply chain relationship based on long-term contracts; the other is non-closely cooperative supply chain relationship based on expedient contracts. The coopetition benefits of vertical competition generates from the substitution of price war with value war:first, overcome the competition stress in the upstream of the industrial chain embodied in "resources go after value", in other words, the enterprises are locked in different value interval according to their DA without hindering the interaction and cooperation between different intervals; second, overcome the competition stress in the downstream of the industrial chain, which manifested as "resources transfer value":based on the enterprises’ DA, more value are transferred to the customers at the same price. Therefore, the coopetition benefit of vertical competition is, without damaging the profitability of any enterprises of the industrial chain, to create DA-based isolation mechanism effect——establish vertical barriers for industrial protection, form market segment isolation strip and thus avoid profit loss of the whole industry caused by malignant competition.Consequently, the coopetition benefit of isolation mechanism is theoretically concluded in three categories:establish vertical barriers for industrial protection; obtain horizontal competition advantage and embedded advantage; and expand and strengthen the industry and the market.(Expounded in Chapter5)From the perspective of coopetition effect and coopetition level, according to the extent to which the enterprises are restrained by contracts during the process of coopetition, and the different effect of the generated coopetition benefits, the coopetition in between enterprises can be differentiated into three levels:contracted, super-contracted and non-contracted coopetition. First, contracted coopetition lays emphasis on the mutual beneficial coopetition effect within the framework of traditional contract theory. It is a static coopetition process driven by external objective motives in which the contracts are passively performed. The coopetition relationship is effective only in a short-term timeframe prescribed in the contract. But the imperfection (incompleteness and rigidity of the terms) of the contract and the inclination of opportunistic behavior largely raise up the accompanied transaction cost which in turn will reduce the coopetition benefit. Second, super-contracted coopetition surpassed the traditional contract theory framework during its realization. Specifically, there are two forms of contract:"incomplete contract" or "relation contract". Coopetition of this level tries to maintain long-term and stable cooperation, and emphasizes privity, common view, trust and proactively seek out and establish cooperation. It is an internally driven and dynamic coopetition process. In the super-contracted coopetition process, the incompleteness of contracted terms can be solved by consultation and renegotiation. At the same time, the inclination for opportunistic behaviors is greatly restrained through emphasizing "reputation capital" and "relational embeddedness", which would to a large extent enhance the coopetition effect and coopetition benefit. However, too much emphasis on "relation" and "trust" would possibly lead to "lockin effect". Even though the transaction cost is reduced compared with contracted coopetition, the loss of coopetition benefit is still unavoidable. Third, the non-contracted coopetition process casts off the limits of contract framework. Its functional mechanism is the isolation mechanism effect based on DA. It is an unconscious dynamic coopetition process during which no cooperation subjectively constructed while coopetition effect is actually generated——a state that "subjectively compete while actually cooperate". Coopetition of this level doesn’t have any transaction cost and the coopetition benefit will suffer no loss, which is actually a "Pareto Improvement" of the coopetition effect. The "Coopetition benefit based on isolation mechanism" expounded in the paper is exactly a non-contracted coopetition.(Expounded in Chapter6)The research argued that competition between enterprises of DA would generate cooperative effect under the influence of isolation mechanism——coopetition benefit of isolation. Specifically, it can be manifested in three forms:establish vertical barriers for industrial protection; obtain horizontal competition advantage and embedded advantage; and expand and strengthen the industry and the market. Meanwhile, the paper divided enterprises’ coopetition into three levels:contracted coopetition, super-contracted coopetition and non-contracted coopetition. Accordingly, an analysis framework for coopetition status is established. Through this framework, the "coopetition based on isolation mechanism" expounded in the paper is defined as the optimum status of "subjectively compete while actually cooperate", which surpassed the realm of the existing coopetition theory and offered a relatively new perspective for researches on enterprises’ coopetition.