Do tough times all for more “co-opetition”?

The recent news points to a deteriorating environment for business. New strategies come in to play that firms would scarcely have considered during the boom years. The Economist has just reported the latest twist in the battle between the New York Post and the Daily News. Executives from both papers are talking about working together in some areas, such as distribution, in an effort to slash costs. With the global economy on the rocks, businesses everywhere are desperately searching for ways to save money or boost revenue. We’ve just heard that British Airways and American Airlines are planning to cooperate in some areas.

Hence the bit of management jargon: “co-opetition”. As the Economist mentions, Carmakers have long collaborated on vehicle platforms, engines and so on to achieve economies of scale. And airlines have shared check-in, gate management and other facilities.

BMW and Fiat are drawing closer together. DHL and UPS, two US based delivery firms are planning to collaborate. Under the terms of a proposed ten-year deal, UPS, which has some excess capacity in its American air-freight network, would carry DHL’s packages on its planes inside America—and between the United States, Canada and Mexico—for a fee of up to $1 billion a year.

The BBC report that British Airways has sealed an alliance with American Airlines that will allow the two carriers to agree fares, routes and schedules together. The move will also include Spain’s Iberia, which is merging with BA. With aviation fuel prices near record levels and spending on air travel slowing, airlines are looking at ways to cut costs.

Firms need to be careful not to break competition laws with these deals too. There’s every reason to be suspicious. BA’s rival Virgin Atlantic said the plan would reduce competition in the airline industry. “What they’re proposing is to create the world’s biggest airline with American Airlines. But we know what dominant players do - they snuff out competition, they raise prices and they become even more dominant,” said a Virgin spokesman

The Economist also reminds us of other risks: crafting “co-opetition” deals is a tricky business, not least because potential partners need to swallow their pride first. Firms also need to be very clear about what will and will not be covered by a deal. “You have to figure out exactly where you are co-operating and where you are competing, and not get your staff confused,” says Harold Sirkin of the Boston Consulting Group.