U.S. Hog farm National Pork Board

Here's how co-opetition fits in thriving pork industry

Co-opetition is a useful business concept for improving individual farms and the advancement of the pork industry.

Co-opetition is one of those synthesized buzzwords of business. It combines the words cooperation and competition and comes out of an area of economics called game theory. The word has been around for about 20 years and, in a nutshell, focuses on the fact that many industries operate best when combining competitive and cooperative strategies. At the 2017 Leman Conference, we held a session on this subject and invited Dr. Rebecca Liu of Lancaster University Management School in Scotland, along with Dr. Noel Williams of Iowa Select Farms to present approaches to the topic.

We, at the University of Minnesota, brought it forward as a topic as we see a general trend in innovation to increase in areas of cooperation while decreasing competitive aspects. We wanted to recognize the work of Prof. Bob Morrison who emphasized cooperative approaches to disease control while upholding the strong competitive nature of our industry. His untimely passing this past May has only further emphasized the need to pursue this area in more detail.

When we look at the swine industry, areas served well by competition are thriving. Productivity continues to improve, costs are being reduced, and the American pig farm is a prime example of efficiency in animal agriculture. We respond quickly and adeptly to challenges within the farm or production system, with improvements in reproduction, disease control, and feed efficiency.   Yet when we look at the threats and opportunities for the swine industry, they are almost invariably not on this supply side, but on the demand side.  The term “pork producer“ infers a passive approach to issues of demand,  one of being a "price taker." It is a comfortable position where responsibilities about aggregate demand are usually given to commodity organizations such as the National Pork Board and National Pork Producers Council.

With co-opetition, the argument is that the best businessperson is one that does not only excel at production but also works cooperatively with competitors to address common opportunities. The argument is that, far from simply allocating those responsibilities to other organizations, the decisions of each farm not only has effects inside its walls but outside as well.

The obvious example is an infectious disease.  When a farm becomes infected, it is not only a cost to the affected farm, it is a risk, and thus a cost, to surrounding farms. Therefore, the cost of that disease is driven not only by the clinical effects on the farm but also the ability to spread to other farms. Bob Morrison recognize this and initiated regional strategies that combined information sharing and the creation of common approaches for a region, rather than simply individual farms.

Studies in coopetition argue that these strategies among competitors need to be analyzed in more detail and may need alternative business models. One example may be the filtration of air to control pathogens. The competitive model would argue for filtration of incoming air. However, if the number of infected herds in a region is low, the aggregate cost of filtration to farms in the region may be best met by filtering exhaust air. The challenge is that the benefit of filtering exhaust air is to the surrounding farms, but the costs would be on the infected farm, with no benefit for that farm.

Disease control is just one example where the decisions for an individual farm affect others. Issues surrounding welfare, environment, and community, among others, often spillover, with problematic behaviors being attributed to much more than an individual farm. Issues that affect demand are being raised in importance, but with the lag in innovation when we compare it to the improvements in productivity that we have seen in the American swine industry.

Co-opetition is thus a useful concept as we consider improvements in our industry. The ability to take on opportunities to improve the position of individual farms and production systems that combination of cooperation and competition that allows for sharing of information and the creation of common strategies will need more discussion and investment.

 

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