October 24, 2013

Rivals to compete? Or rivals to ally?

Today's tutorial raised some interesting thoughts on the concept of competition and whether organisations should share knowledge, skills and expertise on their processes for mutual benefit or whether they should keep processes and secrets to themselves, and compete against their rivals. The traditional view would argue that competition is beneficial to the consumer, as rivals try and outdo each other with innovative ideas and try to sell their product at a lower price than their rivals. However, would this ultimately lead to a reduction in quality as cost is reduced?

The traditional view would argue that an organisation that establishes itself as market leader would want to maintain its position, by keeping its innovative ideas to itself. However, if it is competing against a whole host of organisations who may collaborate together, the organisation may be fighting a losing battle. A good metaphor that was used in class is again, sports. Me and one of my good friends enjoy cycling, and have taken part in many road races of over 100km. When we race, we are competing against one another, and it is very very VERY competitive. However, we train together in between races to push each other further and harder, to motivate ourselves and to share knowledge and tips on good training routines and routes that make us overall, fitter, stronger and better cyclists. This ulitmately sees us both perform better in the races than if we trained solely by ourselves.

I think this is a very good way of describing how the sharing of knowledge can help organisations that are in competition. Sure, you could argue that collaboration could lead to price cartels between rivals earning themselves more money, but this would only occur in the short term as organisations are likely to self regulate and be more transparent about their deals. The example of British Airways and Virgin Atlantic setting up a price cartel before Virgin eventually blew the whistle is a prime example of this. Furthermore, when at the top, the only way is down. Perhaps the sharing of knowledge, processes and ideas is a better way to maintain market position with the focus being to expand the market, rather than fight tooth and nail to preserve what you have against rivals.

Paul eventually demonstrated a very good example, showing that an organisation should not try and compete to increase their individual market share, but should collaborate to increase the size of the market, and bring in new customers through new and innovative ideas. This was a perfect illustration of why rivals should ally and share information. As someone who has studied Economics at A2 Level and briefly at BSC level before chaning my degree, this idea completely contrasted to the views I had been shown and taught about competition within economics. However, I think it would be a much more beneficial environment to live in with all organisations acting this way than the traditional economic view of competition being a good thing. Why have a 'win lose' scenario when you can have a 'win win' for all parties, including society as a whole?

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