COMPETITION	
  &	
  COOPERATION	
  
MARKET SYSTEM DYNAMICS
In market systems people relate in two
ways:
they Compete … or they Cooperate

Limited
Growth
No Po...
DEFINING	
  SUSTAINABILITY	
  
TIME	
  

Growth	
  with	
  
Poverty	
  
Reduc5on	
  

Bad Competition:

Good Competition:
...
DEFINING	
  SUSTAINABILITY	
  
TIME	
  

Growth	
  with	
  
Poverty	
  
Reduc5on	
  

Bad Cooperation:

Good Cooperation:
...
DEFINING	
  SUSTAINABILITY	
  
TIME	
  

Growth	
  with	
  
Poverty	
  
Reduc5on	
  

Unsupportive Benefits:

Supportive B...
ASSESSING	
  DRIVING	
  FORCES	
  OF	
  
COMPETITION	
  AND	
  COOPERATION	
  
How do relationships, rules and interconnec...
EFFECTIVE COMPETITION AND COOPERATION
•  Effec5ve	
  compe55on	
  drives	
  improved	
  performance	
  	
  	
  
•  Compe55o...
Rice FARMERs
What do these imply about the relationships:

1. “When my neighbor does well it is a reflection on his
selfis...
AVOCADO TRADER
1.  “I don’t work in the business of avocados. I buy. I

sell. I am looking for a quick return. It makes no...
MILLER/PROCESSOR
1.  “I didn’t spend $1million in this milling plant to
become a trader - that is someone else’s job”
2.  ...
AGRODEALER
1.  “I know my future depends on smallholders, but I
don’t know how to get to my future and it seems too
far aw...
IMPORTER
1.  “I know there are local opportunities to buy and sell beans, but
it would require me to work with smallholder...
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Competition & cooperation

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Competition & cooperation

  1. 1. COMPETITION  &  COOPERATION  
  2. 2. MARKET SYSTEM DYNAMICS In market systems people relate in two ways: they Compete … or they Cooperate Limited Growth No Poverty Reduction Growth with Poverty Reduction Effec0ve  market  system   performance:   Ongoing upgrading More inclusive benefit flows -  -  2
  3. 3. DEFINING  SUSTAINABILITY   TIME   Growth  with   Poverty   Reduc5on   Bad Competition: Good Competition: •  Drives resistance to improvement •  Drives improvements •  Competition between people/firms doing different things •  Competition between people/firms doing the same thing 3
  4. 4. DEFINING  SUSTAINABILITY   TIME   Growth  with   Poverty   Reduc5on   Bad Cooperation: Good Cooperation: •  Collusion to ensure win/lose •  Responsive to joint threats and opportunities leading to win/win •  Short term, distrustful •  Long term, trusting 4
  5. 5. DEFINING  SUSTAINABILITY   TIME   Growth  with   Poverty   Reduc5on   Unsupportive Benefits: Supportive Benefits: •  Benefits isolated to a few •  Broader distribution of benefits •  Social/economic benefits often at odds •  Social and economic benefits mutually reinforcing 5
  6. 6. ASSESSING  DRIVING  FORCES  OF   COMPETITION  AND  COOPERATION   How do relationships, rules and interconnected systems influence effectiveness? Degree of VC Effectiveness Best Norm:  Constant  upgrading   Innovation/Differentiation HIGH Bad Joint Marketing Transparent  rules   Zero-­‐sum  tac5cs     Competition Better Embedded Services Poli5cal  Favori5sm   Collusion Anti-compete rules HIGH Specialised Services Joint  response  to  opps.  &  threats   Compe55ve  response   internalised   Better Norm:  Constant  upgrading   Best LOW Cooperation Bad HIGH
  7. 7. EFFECTIVE COMPETITION AND COOPERATION •  Effec5ve  compe55on  drives  improved  performance       •  Compe55on  to  win  a  nego5a5on  (i.e.,  between  func5onal   levels)  oLen  creates  the  wrong  incen5ves  driving  win/lose   outcomes   •  Effec5ve  coopera5on  is  not  organisa5onally  defined  –  it  is   behavioural  defined   •  Ongoing  performance  improvements  and  beQer   outcomes  for  a  wider  set  of  market  actors  –  especially   the  poor   •  Coopera5on  that  focuses  on  shiLing  power  to  win   nego5a5ons  does  not  address  the  underlying  systemic   constraints     7
  8. 8. Rice FARMERs What do these imply about the relationships: 1. “When my neighbor does well it is a reflection on his selfishness and he should act more like the rest of the community” 2. “ We have tried to pool our money to buy larger amounts of inputs to get a better deal, but we couldn’t get it to work as many of us could not hold cash long enough to get organized” 3. “I try to learn from my neighbor because I know he gets better yields. But he is tight-lipped about how. I don’t know anybody else to learn from.” 8
  9. 9. AVOCADO TRADER 1.  “I don’t work in the business of avocados. I buy. I sell. I am looking for a quick return. It makes no sense to think long term” 2.  “When farmers come to sell to me, I know that they are desperate so I make them wait” 3.  “I need a reliable supply from a group of farmers, but other traders that do not provide their farmers with credit and other services often offer a higher price, and my farmers take it” 9
  10. 10. MILLER/PROCESSOR 1.  “I didn’t spend $1million in this milling plant to become a trader - that is someone else’s job” 2.  “I want to source more maize from small maize farmers, but I have had trouble with a few aggregators thinking short-term and cheating me so I am not sure how to start” 3.  “I need to generate loyalty with my suppliers and limit pirate buying, so embedding services and providing performance incentives should help keep my utilization rates high” 10
  11. 11. AGRODEALER 1.  “I know my future depends on smallholders, but I don’t know how to get to my future and it seems too far away” 2.  “Smallholders do not have money and never will, so government or NGOs should just buy my inputs to give to them” 3.  “I heard another agrodealer on the radio, so I called my cousin in the tax authority to check on how they can afford advertising” 11
  12. 12. IMPORTER 1.  “I know there are local opportunities to buy and sell beans, but it would require me to work with smallholders, investing time and money while my competitors continue to make money on imports” 2.  “I know that if my competitors start investing in smallholder production, I can get smallholders to sell to me for a bit more money, because the rice is higher quality. I can then make the other guy pay for increasing my supply” 3.  “As importers we would be interested in investing in local smallholder production if we could get some government support, but when we get together to talk about this we just argue or accuse each other of bad business practice” 12

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