Classroom Companion: Business

8.5 · Competitive Forces

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8
8.6 
 Competition, Cooperation, and Coopetition
7
Section 
4.3
 contains a layered business model for the Internet consisting of a 
network layer accommodating the infrastructure providers and the network service 
providers (ISPs); a transport layer (or equipment layer) which is the business arena 
of the manufacturers of user equipment and providers of cloud services; and an 
application layer containing applications, services, and content. In the layered 
Internet model, there is competition between companies within all three business 
layers. Companies usually compete within the same business layer and not between 
different business layers. At the same time, companies operating in digital markets 
cooperate. Companies at different layers must obviously cooperate to provide digi-
tal services to consumers. For example, an electronic newspaper needs the support 
of ISPs to deliver the newspaper to its readers. This is called vertical cooperation. 
Companies in the digital economy may also cooperate at the same business layer 
(horizontal cooperation). Since companies compete within the same business layer, 
such companies may both compete and cooperate at the same time. This is called 
coopetition (Shapiro & Varian, 
1999
).
Definition 8.4
Companies compete within the same business layer. The companies may cooperate 
both within the same business layer (horizontal cooperation) and across business lay-
ers (vertical cooperation). Coopetition implies that a company simultaneously com-
petes and cooperates with other companies within the same business layer.
Type
Threat
Substitutes
BitTorrent technology (See for example BitTorrent on Wikipedia) based 
on P2P distributed file sharing (Popcorn Time was a serious threat to 
Netflix before it was discontinued for legal reasons in 2014 (Idland 
et al., 
2015
)). The technology is still a threat to Netflix if intellectual 
property rights can be solved in a satisfactory way
Comple-
mentors
Film studios and video producers for delivery of content and ISPs for 
distribution of the streaming service
Govern-
ment
Accusation of tax evasion, high energy usage, and traffic stress on the 
broadband networks. Some countries (e.g., Iran and China) block 
access to Netflix. Censorship of content
The public
The public may react to the content of films and shows. One problem for 
Netflix is that it provides global services and is subject to reactions from 
different cultures restricting what is regarded as universally acceptable 
content
. Table 8.2 (continued)