A cooperative strategy allows firms to collaborate and achieve shared objectives. The primary cooperative strategy is a strategic alliance, where firms combine resources to gain a competitive advantage. Major types of strategic alliances include joint ventures, equity alliances, and non-equity alliances. Firms form alliances to rapidly enter new markets and leverage existing resources. Managing trust is important for successful cooperative strategies.
A cooperative strategy allows firms to collaborate and achieve shared objectives. The primary cooperative strategy is a strategic alliance, where firms combine resources to gain a competitive advantage. Major types of strategic alliances include joint ventures, equity alliances, and non-equity alliances. Firms form alliances to rapidly enter new markets and leverage existing resources. Managing trust is important for successful cooperative strategies.
A cooperative strategy allows firms to collaborate and achieve shared objectives. The primary cooperative strategy is a strategic alliance, where firms combine resources to gain a competitive advantage. Major types of strategic alliances include joint ventures, equity alliances, and non-equity alliances. Firms form alliances to rapidly enter new markets and leverage existing resources. Managing trust is important for successful cooperative strategies.
A cooperative strategy allows firms to collaborate and achieve shared objectives. The primary cooperative strategy is a strategic alliance, where firms combine resources to gain a competitive advantage. Major types of strategic alliances include joint ventures, equity alliances, and non-equity alliances. Firms form alliances to rapidly enter new markets and leverage existing resources. Managing trust is important for successful cooperative strategies.
Introduction • A cooperative strategy is a means by which firms collaborate to achieve a shared objective. • Cooperating with others is a strategy a firm uses to create value for a customer that it likely could not create by itself • Firms also try to create competitive advantages when using a cooperative strategy Strategic Alliances – Primary Cooperative Strategy • A strategic alliance is a cooperative strategy in which firms combine some of their resources to create a competitive advantage. • Involve firms with some degree of exchange and sharing of resources to jointly develop, sell, and service goods or services. • In addition, firms use strategic alliances to leverage their existing resources while working with partners to develop additional resources as the foundation for new competitive advantages. Types of major strategic alliance • Joint Venture - in which two or more firms create a legally independent company to share some of their resources to create a competitive advantage. • Typically, partners in a joint venture own equal percentages and contribute equally to the venture’s operations. • Formed to improve a firm’s ability to compete in uncertain competitive environments, joint ventures can be effective in establishing long-term relationships and in transferring tacit knowledge between partners • SAIC-GM • SAIC-VW Continued… • Equity Strategic Alliance • An equity strategic alliance is an alliance in which two or more firms own different percentages of a company that they have formed by combining some of their resources to create a competitive advantage. As with most alliances, the partners are seeking complementary resources and/or capabilities. • Non Equity Strategic Alliance • two or more firms develop a contractual relationship to share some of their resources to create a competitive advantage. In this type of alliance, firms do not establish a separate independent company and therefore do not take equity positions. • Licensing agreements, Distribution agreements, Supply Contracts Why Strategic Alliances • Create value they couldn’t generate by acting independently and entering markets more rapidly • Most firms lack full set of resources Market Type Business Level Cooperative Strategy • A business-level cooperative strategy is a strategy through which firms combine some of their resources to create a competitive advantage by competing in one or more product markets. Complementary Strategic Alliances Vertical Complementary Strategic Alliance • Firms share some of their resources from different stages of the value chain to create a competitive advantage. • Vertical complementary alliances are formed to adapt to environmental changes; sometimes the changes represent an opportunity for partnering firms to innovate while adapting. • AT&T has built alliances with multiple companies, such as Rockwell automation, Emerson, and LoJack, an anti-car-theft company, to develop technology-based products that satisfy the needs of current and future customers. • It is integrating the technology-based products with AT&T’s network such as sprinkler heads made by HydroPoint to develop smart irrigation systems. Horizontal Complementary Strategic Alliance • A horizontal complementary strategic alliance is an alliance in which firms share some of their resources from the same stage (or stages) of the value chain for creating a competitive advantage. • Coopetition Competition Response Strategy • Competitors initiate competitive actions (strategic and tactical) to attack rivals and launch competitive responses (strategic and tactical) to their competitors’ actions. • The alliance among Google, Intel, and TAG Heuer is a strategic response to Apple’s strategic action of introducing the iWatch. Uncertainty reducing strategy • These strategies are used where uncertainty exists, such as in entering new product markets, especially those within emerging economies. • The development of new products to enter new markets and the entry into emerging markets often carry with them significant risks. Thus, to reduce or mollify these risks, firms often develop R&D alliances and alliances with emerging market firms, respectively. • For example, Daimler AG formed a partnership with Tesla through which it bought Tesla batteries to use in its “smart” minicar as well as its Freightliner trucks. • Daimler originally bought a 9 percent stake in Tesla and gradually sold off shares until it sold its final 4 percent ownership stake in 2014. • Daimler and other auto manufacturers are now bringing a number of new electric vehicles to the market, creating significant competition for Tesla. Competition reducing strategy • Explicit Collusion • Tacit Collusion Corporate Level Cooperative Strategy • A corporate-level cooperative strategy is a strategy through which a firm collaborates with one or more companies to expand its operations. • Diversifying alliances, synergistic alliances, and franchising are the most commonly used corporate-level cooperative strategies Diversifying Strategic Alliance • A diversifying strategic alliance is a strategy in which firms share some of their resources to engage in product and/or geographic diversification. • Companies using this strategy typically seek to enter new markets (either domestic or outside of their home setting) with existing products or with newly developed products. • Managing diversity gained through alliances has fewer financial costs but often requires more managerial expertise. • The need for expertise in managing diversity is heightened by the fact that the focal firm has less control over the partner. • Managers must coordinate and build trust in order to coordinate alliance activities. • Additionally, they have to work at understanding their diverse partners and their capabilities in order to successfully coordinate within the alliance Synergistic Strategic Alliance • A synergistic strategic alliance is a strategy in which firms share some of their resources to create economies of scope. • Similar to the business-level horizontal complementary strategic alliance, synergistic strategic alliances create synergy across multiple functions or multiple businesses between partner firms. • A common example of a synergistic alliance is when firms partner across the value chain. When supply chain partners co-align, they often can create synergistic benefits enjoyed by both partners. Examples • Renault SA and Nissan Motor Company • The firms seek to create economies of scope by sharing their resources to develop manufacturing platforms that can be used to produce cars that will carry either the Renault or the Nissan brand. • Later the firms added Mitsubishi to this alliance to become the largest automotive alliance in the world • BMW alliance with Brilliance Franchising • A firm (the franchisor) uses a franchise as a contractual relationship to describe and control the sharing of its resources with its partners (the franchisees) • McDonald’s, Choice Hotels International, Hilton International, Marriott International, Mrs. Fields Cookies, Subway, and Ace Hardware are well-known firms using the franchising corporate-level cooperative strategy. International Cooperative Strategy • A cross-border strategic alliance is a strategy in which firms with headquarters in different countries decide to combine some of their resources to create a competitive advantage. • Potential to help firms use some of their resources to create value in locations outside their home market. • Ford and Mahindra had formed a strategic alliance that will allow both of them to combine their complementary capabilities in the development of new vehicles for the Indian market. Ford will gain Mahindra’s knowledge of designing and manufacturing cars for emerging markets and Mahindra will gain access to Ford’s technological capabilities. Network Cooperative Strategy • A network cooperative strategy is a strategy by which several firms agree to form multiple partnerships to achieve shared objectives. • Cisco has formed alliances with a host of companies including IBM, Emerson, Hitachi, CA Technologies, Fujitsu, Intel, Nokia, and Wipro. • Cisco uses alliances to drive its growth, differentiate itself from competitors, enter new businesses areas, and create competitive advantages. • Stable Alliances • Dynamic Alliances Competitive risks • A firm may act in a way the partner thinks is opportunistic • A firm has misrepresented resources • Failure to make available committed resources • One firm may make investments specific to the alliance Competitive risks Managing Cooperative Strategies • Trust is an increasingly important aspect of successful cooperative strategies. • Firms place high value on opportunities to partner with companies known for their trustworthiness. • When trust exists, a cooperative strategy is managed to maximize the pursuit of opportunities between partners. • Without trust, formal contracts and extensive monitoring systems are used to manage cooperative strategies. • In this case, the interest is “cost minimization” rather than “opportunity maximization.
