Research On The Co-opetition Relationship With A Competitor In The Supply Chain Alliance

With the advent of globalization and the era of knowledge economy, market circumstances changing all the time, the corporations have to face huge pressure of cost decreasing, delivery shortening, quality enhancing and customer service improving. However, as the resources are limited, the corporation only obtains the outer resources to complement each other to enhance their competition. Under such circumstance, supply chain alliance emerges. By virtue of information technology, keeping each part independence, the supply chain alliance will integrate two or more corporations existing in supply chain to reach the goal of risk sharing, complementary advantages, in order to decrease the whole cost, inventory level, improve the degree of customer response and service to generate the bigger advantage. In the fiercely competitive market circumstance, the supply chain alliance can make the members produce synergies, solve the collision of competition, learn from each other, improve the skill and the innovative ability to make corporations more suitable to the change of market circumstance. Thus, the more competitive advantage appears. The corporations in the supply chain to compete each other can form a new supply chain alliance as a contract to realize the goal of extending volume growth and improving the efficiency.Why do two competitors form an alliance yet still compete with each other in the marketplace? Consider Yahoo’s alliance with Microsoft to use its Bing search engine, yet both companies will compete with each other to sell search ads. In this paper we study dynamic alliance formation among competing firms with a multi-period model. In each period, there is a two-stage game of co-opetition. In Stage1, two competing firms decide on forming a partnership by negotiating a contractual agreement; and in Stage2, all firms in the market engage in price competition. We formulate the economic incentives and costs of the cooperation, propose the optimal contract and discuss the reasons for a temporary co-opetition and a delayed co-opetition.The results of the paper shed light on firms’ strategic decision on co-opetition and provide implications to public policy makers.