One of the common strategic approaches for business and management is the Game Theory, which describes the competitive nature of market situations and involves a reliance or assumption of one competitor’s position or strategy to define or outline the decision making of the other. The simple outline for this model includes two or more competitors, but once many competitors are introduced, the Game Theory model is no longer applicable.
The following paper regards the PARTS model, which uses the Game Theory model as a base but builds upon it using five elements factored in as extra dimensions to the theory. Those five elements include Players, Added Value, Rules, Tactics and Scope, which enable the PARTS model to consider a much more realistic set of parameters or outcomes than the Game Theory alone.
Taking into account more than just the competitors involved means that, although using the PARTS model alongside the Game Theory provides a much more detailed idea about the future for a product or service, it is a much more involved and multi-faceted process. In return, if used properly this model can return a stronger strategy to the user. Important in the whole process, though, is that information in all elements in the PARTS model must be known and not assumed.
The PARTS model is important and relevant in today’s business world because it discusses not only competition and competitive advantage, but also incorporates co-operation between businesses and products for the good of the category or sector. The founders of the PARTS model call this drawing together of competition and co-operation, ‘Co-opetition’, and this can go a long way towards not only explaining market and company trends, but also towards planning future business with competitors acting not only adversely, but also favourably influencing business activities.
A large element of the model had to do with their ‘Value Net’, which was directly influenced by Porter’s 5 Forces, but rather than focussing purely on competition, the PARTS model used the idea of ‘Complementors’. These are other businesses, which could also be competitors, but thanks to their product or service building the market ‘for the greater good’, they act in a complementary manner as well as competitively. Pure complementary organisations also exist, such as businesses which provide a product or service that directly improves the quality or execution of another product, for example Logitech purely complements Apple’s iPad, by producing an iPad specific keyboard.
The model has been found to work in many applications, but is best used when there are a few organisations competing in one market, some ‘complementors’ with the same suppliers, and obviously a good understanding of each of the elements of the model. In larger business, where many of these elements are either commonly known or easily discovered, this model can produce a comprehensive strategy for the business to operate in and take into account the entire value chain from supplier to customer, but importantly considering all of the competitors and complementors involved.
Background
Founded by professors Barry Nalebuff (of Harvard) and Adam Brandenburger (of Yale) in 1996 (although the model was being developed from circa 1993), the PARTS model and their concept of ‘Co-opetition’ was itself a development of the Game Theory of management which was founded in 1944 by Neumann and Morgenstern. Although the Game Theory is often used as an acceptable and mainstream business strategy, Nalebuff and Brandenburger identified that although competition was an important aspect of decision making, the Game Theory did not elaborate on the positive impact that some competition could have on the market in which the business was operating. There is also an argument to show that a lack of competition could negatively influence the market in general, and that competition encourages complementary business.
Though the PARTS model is relatively comprehensive in its approach to dissecting a business and its strategy, there have been pitfalls identified in using the model because it does not explicitly relate to any industry (Hubbard, 2011). Considering the five elements of the PARTS model, each of these have scope for expansion relative to a particular industry or business, and therefore no individual model has been found to develop on the PARTS model apart from the initial expansion of Nalebuff and Brandenburger’s own ‘Co-opetition’ theory which eventually developed into the PARTS model.
The following paper regards the PARTS model, which uses the Game Theory model as a base but builds upon it using five elements factored in as extra dimensions to the theory. Those five elements include Players, Added Value, Rules, Tactics and Scope, which enable the PARTS model to consider a much more realistic set of parameters or outcomes than the Game Theory alone.
Taking into account more than just the competitors involved means that, although using the PARTS model alongside the Game Theory provides a much more detailed idea about the future for a product or service, it is a much more involved and multi-faceted process. In return, if used properly this model can return a stronger strategy to the user. Important in the whole process, though, is that information in all elements in the PARTS model must be known and not assumed.
The PARTS model is important and relevant in today’s business world because it discusses not only competition and competitive advantage, but also incorporates co-operation between businesses and products for the good of the category or sector. The founders of the PARTS model call this drawing together of competition and co-operation, ‘Co-opetition’, and this can go a long way towards not only explaining market and company trends, but also towards planning future business with competitors acting not only adversely, but also favourably influencing business activities.
A large element of the model had to do with their ‘Value Net’, which was directly influenced by Porter’s 5 Forces, but rather than focussing purely on competition, the PARTS model used the idea of ‘Complementors’. These are other businesses, which could also be competitors, but thanks to their product or service building the market ‘for the greater good’, they act in a complementary manner as well as competitively. Pure complementary organisations also exist, such as businesses which provide a product or service that directly improves the quality or execution of another product, for example Logitech purely complements Apple’s iPad, by producing an iPad specific keyboard.
The model has been found to work in many applications, but is best used when there are a few organisations competing in one market, some ‘complementors’ with the same suppliers, and obviously a good understanding of each of the elements of the model. In larger business, where many of these elements are either commonly known or easily discovered, this model can produce a comprehensive strategy for the business to operate in and take into account the entire value chain from supplier to customer, but importantly considering all of the competitors and complementors involved.
Background
Founded by professors Barry Nalebuff (of Harvard) and Adam Brandenburger (of Yale) in 1996 (although the model was being developed from circa 1993), the PARTS model and their concept of ‘Co-opetition’ was itself a development of the Game Theory of management which was founded in 1944 by Neumann and Morgenstern. Although the Game Theory is often used as an acceptable and mainstream business strategy, Nalebuff and Brandenburger identified that although competition was an important aspect of decision making, the Game Theory did not elaborate on the positive impact that some competition could have on the market in which the business was operating. There is also an argument to show that a lack of competition could negatively influence the market in general, and that competition encourages complementary business.
Though the PARTS model is relatively comprehensive in its approach to dissecting a business and its strategy, there have been pitfalls identified in using the model because it does not explicitly relate to any industry (Hubbard, 2011). Considering the five elements of the PARTS model, each of these have scope for expansion relative to a particular industry or business, and therefore no individual model has been found to develop on the PARTS model apart from the initial expansion of Nalebuff and Brandenburger’s own ‘Co-opetition’ theory which eventually developed into the PARTS model.