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Production Coopetition Strategies for Competing Manufacturers that Produce Partially Substitutable Products

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  • Xu Chen
  • Xiaojun Wang
  • Yusen Xia

Abstract

This study examines the strategic choices of two rival manufacturers between competition and coopetition. A complex relationship exists between these two firms, who manufacture substitutive products. In addition, each of these firms has an option to purchase (or sell) a key component from (or to) the other. We develop a benchmark competition model and two coopetition models in which the manufacturers compete for end‐customer demand while simultaneously collaborating on component production through wholesaling (wholesaling coopetition) or licensing (license coopetition). By comparing the equilibria of the competition model and two coopetition models, we find that the optimal strategy for coopetition is determined by not only the degree of product substitution but also the inter–firm power relationship in the negotiation of a cooperation contract (i.e., wholesale price and license fees) and the difference in production efficiency between the two manufacturers. Our research comprehensively examines how the external, relationship‐specific, and internal factors affect firms’ optimal strategy selection and suggests a broad set of decision outcomes. Our study provides important managerial implications that can be utilized as strategic guidance for firms to pursue coopetition in various business environments.

Suggested Citation

  • Xu Chen & Xiaojun Wang & Yusen Xia, 2019. "Production Coopetition Strategies for Competing Manufacturers that Produce Partially Substitutable Products," Production and Operations Management, Production and Operations Management Society, vol. 28(6), pages 1446-1464, June.
  • Handle: RePEc:bla:popmgt:v:28:y:2019:i:6:p:1446-1464
    DOI: 10.1111/poms.12998
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    3. Liu, Samuel Shuai & Hua, Guowei & Ma, Benedict Jun & Cheng, T.C.E., 2023. "Competition between green and non-green products in the blockchain era," International Journal of Production Economics, Elsevier, vol. 264(C).
    4. Sachin B. Modi & David E. Cantor, 2021. "How Coopetition Influences Environmental Performance: Role of Financial Slack, Leverage, and Leanness," Production and Operations Management, Production and Operations Management Society, vol. 30(7), pages 2046-2068, July.
    5. Palátová, P. & Rinn, R. & Machoň, M. & Paluš, H. & Purwestri, R.C. & Jarský, V., 2023. "Sharing economy in the forestry sector: Opportunities and barriers," Forest Policy and Economics, Elsevier, vol. 154(C).
    6. Brandl, Tim, 2021. "Managing contract manufacturing relationships - An explorative research framework," Chapters from the Proceedings of the Hamburg International Conference of Logistics (HICL), in: Kersten, Wolfgang & Ringle, Christian M. & Blecker, Thorsten (ed.), Adapting to the Future: How Digitalization Shapes Sustainable Logistics and Resilient Supply Chain Management. Proceedings of the Hamburg Internationa, volume 31, pages 103-127, Hamburg University of Technology (TUHH), Institute of Business Logistics and General Management.
    7. Hubert Pun & Pengwen Hou, 2022. "Combating copycatting from emerging market suppliers in global supply chains," Production and Operations Management, Production and Operations Management Society, vol. 31(8), pages 3304-3319, August.
    8. Lütkemeyer, Daniel & Heese, H. Sebastian & Wuttke, David A. & Gernert, Andreas K., 2022. "Pricing and market entry decisions in personalized medicine," International Journal of Production Economics, Elsevier, vol. 253(C).
    9. Ji, Jingna & Li, Tao & Yang, Lei, 2023. "Pricing and carbon reduction strategies for vertically differentiated firms under Cap-and-Trade regulation," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 171(C).
    10. Wang, Yuyan & Zhang, Xiaozhen & Cheng, T.C.E. & Wu, Tsung-Hsien, 2023. "Choice of the co-opetition model for a new energy vehicle supply chain under government subsidies," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 179(C).
    11. Li, Wei & Zhao, Xuan & Chen, Jing, 2023. "Co-opetition or decentralization? A study of manufacturers’ sourcing and distribution strategies," European Journal of Operational Research, Elsevier, vol. 311(3), pages 867-886.
    12. Cao, Kaiying & Xu, Yuqiu & Hua, Ye & Choi, Tsan-Ming, 2023. "Supplier or co-optor: Optimal channel and logistics selection problems on retail platforms," European Journal of Operational Research, Elsevier, vol. 311(3), pages 971-988.
    13. Linwei Pan & Xueyu Liao & Rui Li & Shuangping Cao, 2023. "The Industrial Decision Analysis of Regional Coordinated Development Considering Information Distribution and Fairness Preference," Sustainability, MDPI, vol. 15(22), pages 1-20, November.
    14. Chu, Xiang & Liu, Jun & Ren, Long & Gong, Daqing, 2020. "Optimal contract design with a common agency in last-mile logistics," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 139(C).
    15. Li, Wei & Zhao, Xuan, 2022. "Competition or coopetition? Equilibrium analysis in the presence of process improvement," European Journal of Operational Research, Elsevier, vol. 297(1), pages 180-202.
    16. Li, Na & Zhang, Yue & Teng, De & Kong, Nan, 2021. "Pareto optimization for control agreement in patient referral coordination," Omega, Elsevier, vol. 101(C).
    17. Li, Wei & Chen, Jing, 2020. "Manufacturer’s vertical integration strategies in a three-tier supply chain," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 135(C).
    18. Weizhe Yang & Yaozhong Wu & Qinglong Gou & Wen Zhang, 2023. "Co‐opetition strategies in supply chains with strategic customers," Production and Operations Management, Production and Operations Management Society, vol. 32(1), pages 319-334, January.
    19. Chen, Xu & Wang, Xiaojun & Zhang, Dan & Yang, Mingfang, 2023. "Selling models for platforms under service-sensitive demand," Omega, Elsevier, vol. 115(C).
    20. Cheng, Yongwei & Fan, Tijun, 2021. "Production coopetition strategies for an FV automaker and a competitive NEV automaker under the dual-credit policy," Omega, Elsevier, vol. 103(C).
    21. Liu Liu & Ying Yuan & Xiaoya Wang & Hongfu Huang, 2022. "Strategic Licensing of Green Technologies to a Brown Rival: A Game Theoretical Analysis," Mathematics, MDPI, vol. 10(23), pages 1-21, November.
    22. Chen, Xu & Wang, Xiaojun & Jing, Haojie, 2023. "Technology licensing strategies for three cost-differential manufacturers," European Journal of Operational Research, Elsevier, vol. 308(2), pages 622-635.
    23. Chen, Xu & Li, Shanshan & Wang, Xiaojun, 2020. "Evaluating the effects of quality regulations on the pharmaceutical supply chain," International Journal of Production Economics, Elsevier, vol. 230(C).

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