Competition and cooperation are often viewed as strange bedfellows. However competing service providers cooperating on waiting area entertainment could turn out to be more boon than bane as a study by researchers involving NUS Business Associate Professor Lucy Gongtao Chen revealed. By cooperating on waiting area entertainment, competing service providers could experience increased savings and revenue.
Co-opetition, an amalgam of the words competition and co-operation, is used to refer to such cases which involve multiple firms in a cluster offering services of a similar nature and sharing the cost of maintaining a common space.
“Waiting time and price are two important dimensions that affect customers’ patronage at a service provider. Offering waiting area entertainment can effectively reduce the adverse effect of waiting experienced by customers and hence increase the customer flow,” said Assoc Prof Chen.
The team, which also included researchers from Cornell University, John Hopkins University and the Singapore University of Social Sciences, analysed case studies from Singapore, Taiwan and the US. They looked at various scenarios from a monopoly, two competing service providers not in co-opetition and two businesses in co-opetition. Their results showed that a service provider can achieve higher profitability when they engage in co-opetition.
Assoc Prof Chen explained, “Our study suggests that compared with investing in waiting area entertainment by itself, a service provider can improve its bottom line by cooperating with its competitors to improve the waiting area environment, while still competing on price. This finding is especially useful in a business environment with service clusters — firms offering services of a similar nature sharing a common space such as malls and boardwalks — which is often seen in Singapore.”
The research team was quick to caution however, that while it is important to be fair in allocating the entertainment cost among service providers, too much focus on this fairness may eliminate the benefit of co-opetition.
Possible future studies to build on these insights include analysing scenarios involving an increased number of competitors, or with asymmetric service providers, and by testing the findings in the field or a laboratory.