Bilingual Series-Strategic Management
Chapter 9
Cooperative Strategy
Strategic
Inputs
Chapter 2
External
Environment
Strategic Intent
Strategic Mission
Chapter 3
Internal
Environment
Chapter 4
Chapter 5
Business-Level Competitive
Strategy
Dynamics
Chapter 7
Acquisitions &
Restructuring
Outcomes
Strategic
Strategic
Actions
Strategy Formulation
Feedback
Chapter 8
International
Strategy
The Strategic
Management
Process
Strategy Implementation
Chapter 6
Corporate-Level
Strategy
Chapter 10
Corporate
Governance
Chapter 11
Structure
& Control
Chapter 9
Cooperative
Strategies
Chapter 12
Strategic
Leadership
Chapter 13
Strategic
Competitiveness
Above Average
Returns
Entrepreneurship
& Innovation
Strategic
Alliances
Partnerships between
firms
where their
Firm A
Firm B
Resources
Capabilities
are combined to pursue
mutual interests to
Core
Competencies
Develop
Goods
Manufacture
Distribute
Services
Types of Strategic Alliances
Joint Venture
Independent firm is created by the joining assets from two other firms
where each contributes 50% of the total
Example: Dow Corning from Dow Chemical and Corning Inc.
Equity Strategic Alliance
Partnership where the two partners do not own equal shares
Example: Chrysler and Mitsubishi Automotive
Non-Equity Strategic Alliance
Contract is given to supply, produce or distribute a firm’s goods or
services (without equity sharing)
Example: Chrysler’s supplier network
Reasons for Alliances by Market Type
Slow
Cycle
Market
Standard
Cycle
Market
Fast
Cycle
Market
Gain access to a restricted market
Establish franchise in a new market
Maintain market stability
Gain market power
Gain access to complementary resources
Overcome trade barriers
Meet competitive challenge
Pool resources for large projects
Learn new business techniques
Increase speed of product, service or market entry
Maintain market leadership
Form an industry technology standard
Share risky R&D expenses
Overcome uncertainty
Types of Strategic Alliances
Complementary Alliances
Busines
s-Level
Competition Reduction Alliances
Competition Response Alliances
Uncertainty Reduction Alliances
Diversification Alliances
Corporate
-Level
Synergistic Alliances
Franchising
Types of Business-Level Strategic Alliances
Complementary Strategic Alliances
Partnerships that build on the complementarities among firms
that make each more competitive
Supplier Value Chain
Include distribution, supplier or
outsourcing alliances where firms rely
on upstream or downstream partners
to build competitive advantage
Buyer Value Chain
Vertical
Alliance
Example: Japanese manufacturers rely on
close relationships among suppliers to
implement Just-In-Time inventory
systems
Types of Business-Level Strategic Alliances
Complementary Strategic Alliances
Used to increase the strategic competitiveness of the partners
Supplier Value Chain
Buyer Value Chain
Horizontal
Alliance
Example: Product development agreements between Microsoft and
Dreamworks SKG
or
Joint ventures between BMG Entertainment and Universal Music
Types of Business-Level Strategic Alliances
Competition Reduction Strategies
Avoiding competition by using tacit collusion such as price fixing
Example: OPEC petroleum cartel
Competition Response Strategies
Firms join forces to respond to a strategic action of another
competitor
Example: DirecTV has agreement with Time Warner for
exclusive programming
Uncertainty Reduction Strategies
Alliances can be used to hedge against risk and uncertainty
Example: ATT acquires Teleport, a provider of
telecommunications services to business customers
Types of Corporate-Level Strategic Alliances
Diversifying Alliances
Allows a firm to expand into a new product or market area with an acquisition
Example: Samsung Group joins with Nissan to build new autos
Synergistic Strategic Alliances
Create economies of scope between two or more firms, creating synergy
across multiple businesses between firms
Example: Sony shares development with many small firms
Franchising
Allows firms to grow and relatively strong centralized control without
significant capital investments
Example: McDonald’s or Century 21
International Cooperative Strategies
Allows risk sharing by reducing financial investment
Host partner knows local market and customs
However....
International alliances can be difficult to manage
due to differences in management styles,
cultures or regulatory constraints
Must gauge partner’s strategic intent so they do not
gain access to important technology and become a
competitor
Network Strategies
Network strategies involve a group of interrelated
firms that work for the common good of all
Example: Japanese keiretsus or U.S. R&D consortia
Stable Networks
The three types
of networks:
Dynamic Networks
Internal Networks
Network Strategies
Stable network
Long term relationships that often appear in mature industries with
largely predictable market cycles
Example: NIKE’s relationships with suppliers and distributors
Dynamic network
Arrangements that evolve in industries with rapid technological change
leading to short product life cycles
Example: Apple computer and Sharp electronics
Internal network
Management system used to coordinate a global web of suppliers and
customers
Example: Asea Brown Boveri’s network
Competitive Risks with Cooperative Strategies
While cooperative systems can offer many advantages,
there are also significant risks associated with them
Poor contract development
Misrepresentation of partners’ competencies
Failure of partners to make complementary
resources available
Being held hostage through specific investments
made with partner
Misunderstanding a partner’s strategic intent
Managing Risks in Cooperative Strategies
Competitive Risks
* Inadequate contracts
Misrepresentation of
* competencies
*
*
Partner fails to use
complementary
resources
Holding alliance
partner’s specific
investments hostage
Risk and
Asset
Management
Approaches
contracts
* Detailed
and monitoring
Outcome
Value
Creation
*
Developing
trusting
relationships