Could co-opetition be the answer to distressed supply chain business?

competing business people arm wrestlingEarlier this month we reported on significant increases in levels of distress in the consumer supply chain business sector.

This was particularly affecting Industrial Transportation & Logistics businesses, the wholesale sector and the Food & Beverage Manufacturing sector as identified by Begbies Traynor’s Red Flag Alert research for the first three months of 2017.

Among the steps we advised such businesses to take were getting timely restructuring advice, regularly monitoring cashflow to identify opportunities for cutting fixed costs and introducing efficiencies, such as outsourcing transport or automating activities like accounting and invoicing, improving cash flow by introducing more rigorous follow-up on late payments, invoicing as soon as possible and paying close attention to credit control and collaborating with other small suppliers to deal with larger customers in getting them to pay on time.

Another option is to explore opportunities for co-opetition

What is co-opetition and how can it be used?

Co-opetition is when competing businesses are engaged in both competition and co-operation.

They are said to be in co-opetition to gain an advantage by using a careful mixture of co-operation with suppliers, customers and firms producing complementary or related products.

So, in the supply chain example above fruitful areas of co-opetition could be in the areas of cutting fixed costs by outsourcing transport or collaborating with other small suppliers to deal with larger customers in getting them to pay on time.

But there are other benefits to be found in co-opetition as long as businesses are mindful of some simple principles of what could be called moderation in all things, as outlined by V. Frank Asaro, author of A Primal Wisdom: Nature’s Unification of Co-operation and Competition, in an online article for Smart Business.

They include not being too greedy, not burning bridges by being over-competitive, never becoming complacent and keeping the balance between co-operation and competition ethical.

The idea is to use complementary strengths to fashion a situation that allows competitors to benefit from working together which in turn can lead to each party thriving and growing their own business.

An example quoted in an article in the Harvard Business Review illustrates this. LinkedIn relies on recruiters to use its platform but, as it says: “while each group would surely like a greater percentage of the recruitment pie for themselves, the pie as a whole is larger because of the involvement of both”.

Another area is marketing where apparently competing businesses have their own USP or target market that allows for joint funding of promotion and lead generation initiatives.

Examples might be logistics companies offering different solutions or supplying different routes; or food businesses with different product ranges being sold to the same customers.

Co-opetition, used effectively, can identify not only cost savings but also growth opportunities for those taking part.

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