Chapter 9 Cooperative Strategy by yurtgc548

VIEWS: 1 PAGES: 20

									       Chapter 9: Cooperative Strategy

n Overview:
  n Cooperative strategies and why firms use them
  n Three types of strategic alliances
  n Business-level cooperative strategies & their use
  n Corporate-level cooperative strategies in diversified
    firms
  n Cross-border strategic alliances’ importance as an
    international cooperative strategy
  n Network alliances

                                                      1
Chapter 9: Cooperative Strategy




                                  2
                         Introduction
n Cooperative strategy
  n A strategy in which firms work together to achieve a
    shared objective
  n One of 3 means firms use to grow and improve
    performance (mode)
       n   Internal development, mergers and acquisitions, and
           cooperation
   n Core and critical parts of firms strategies today
   n Has implications for a firm’s corporate, business,
     and international strategy
   n Competitive advantage and above average returns
       n   Collaborative or relational advantages            3
  Primary Type of Cooperative Strategy:
           Strategic Alliances
n Strategic Alliance
   n A cooperative strategy in which firms combine some of their
     resources and capabilities to create a competitive advantage
   n Involve firms with some degree of exchange and sharing of
     resources and capabilities to co-develop, sell, and service
     goods or services
n 3 major types of strategic alliances
   n Joint Venture
      n Two or more firms create a legally independent company to

        share some of their resources and capabilities to develop a
        competitive advantage
      n Partners typically own equal percentages and contribute

        equally to the ventures operations                       4
  Primary Type of Cooperative Strategy:
           Strategic Alliances
n 3 major types of strategic alliances
   n Equity Strategic Alliance
      n Two or more firms own different percentages of the
        company they have formed by combining some of their
        resources and capabilities to develop a competitive
        advantage
   n Nonequity Strategic Alliance
      n Two or more firms develop a contractual relationship to
        share some of their unique resources and capabilities to
        create a competitive advantage
            §   Licensing agreements
            §   Distribution agreements
            §   Supply contracts
            §   Outsourcing commitments
       n   A separate independent company is NOT established
                                                                   5
      Reasons Firms Develop Strategic
                 Alliances
n Why firms develop strategic alliances
  n   They allow partners to create value that they couldn’t
      develop by acting independently
  n   They allow partners to enter markets more quickly and
      with greater market penetration possibilities
  n   Most firms lack the full set of resources and capabilities
      needed to reach their objectives
  n   They are a prime vehicle for firm growth – mode of
      entry into new product or geographic markets
  n   Can account for 25% of sales revenue in large firms

                                                             6
      Reasons Firms Develop Strategic
                 Alliances
n Strategic alliances can be used to
  n   Reduce competition
  n   Gain market power
  n   Enhance a firm’s competitive capabilities
  n   Gain access to resources and new (restricted) markets
  n   Take advantage of opportunities
  n   Build strategic flexibility
  n   Help the firm innovate
  n   Provide for a new source of revenue and for firm growth
  n   Enhance organizational response times
  n   Gain new knowledge and experiences
  n   Overcome trade barriers
  n   Establish better economies of scale and scope
  n   Lower costs                                               7
  Business-Level Cooperative Strategy

n Business level cooperative strategies are
  used to grow and improve firm performance
  in individual product markets (industries)
n 4 types
  n Complementary strategic alliances
  n Competition response strategy
  n Uncertainty-reducing strategy
  n Competition-reducing strategy


                                              8
  Business-Level Cooperative Strategy

n Complementary Strategic Alliances
  n   Firms share some of their resources and capabilities in
      complementary ways to develop competitive advantages
  n   Two Types:
       n   Vertical CSA
            § Partnering firms share resources & capabilities from different
              stages of the value chain to create a competitive advantage.
       n   Horizontal CSA
            § Partnering firms share resources & capabilities from the same
              stage(s) of the value chain to create a competitive advantage
            § Commonly used for long-term product development and
              distribution opportunities

                                                                               9
  Business-Level Cooperative Strategy

n Competition Response Strategy
  n Competitive Rivalry (Ch. 5)
       n   Competitors initiate competitive actions to attack
           rivals and launch competitive responses to their
           competitor’s actions
  n   Strategic alliances can be used at the business
      level to respond to competitor’s attacks
       n   Primarily formed to take strategic actions vs. tactical
           actions
            § Can be difficult to reverse and expensive to operate

                                                                     10
  Business-Level Cooperative Strategy

n Uncertainty-Reducing Strategy
  n   Can be used to hedge against risk and uncertainty
  n   As examples, entering new product markets, emerging
      economies and establishing a technology standard are
      unknown areas so by partnering with a firm in the
      respective industry, a firm’s uncertainty (risk) is reduced
  n   Uncertainty is reduced by combining knowledge &
      capabilities




                                                             11
   Business-Level Cooperative Strategy

n Competition-Reducing Strategy
  n Collusive strategies differ from strategic alliances in that
    they are often illegal
  n 2 Types
       n   Explicit collusion
             § Direct negotiation among firms to establish output levels
               and pricing agreements that reduce industry competition
       n   Tacit collusion
             § Indirect coordination of production and pricing decisions by
               several firms, which impacts the degree of competition
               faced in the industry

                                                                       12
  Business-Level Cooperative Strategy
n Assessment of Business-level cooperative strategies
   n   The integrated resources and capabilities must be valuable, rare,
       imperfectly imitable, and nonsubstitutable
   n   Complementary alliances, especially the vertical ones, have
       greatest probability of creating competitive advantage
   n   Horizontal alliances are can be hard to maintain since they are
       usually between rival companies
   n   Competition response and uncertainty reducing alliances tend to
       create advantages that are more temporary in nature
   n   Competition-reducing alliances have lowest probability of creating
       sustainable competitive advantages



                                                                      13
  Corporate-Level Cooperative Strategies

n Corporate-level cooperative strategies used to help
  firm diversify itself in terms of products offered or
  markets served or both
n 3 Common Forms
   n   Diversifying strategic alliance
        n   Firms share some of their resources & capabilities to diversify
            into new product or market areas
   n   Synergistic strategic alliance
        n   Firms share some of their resources & capabilities to create
            economies of scope
        n   Diversifies the involved firms into a new business in a
            synergistic way                                             14
  Corporate-Level Cooperative Strategies

n 3 Common Forms (cont.)
   n Franchising
    n   Firm uses a franchise as a contractual relationship to describe
        and control the sharing of its resources and capabilities with
        partners
          § Franchise: contractual agreement between two legally
            independent companies whereby the franchisor grants the
            right to the franchisee to sell the franchisor's product or do
            business under its trademarks in a given location for a
            specified period of time



                                                                       15
  Corporate-Level Cooperative Strategies

n Assessment of corporate-level cooperative
 strategies
  n   In comparison with business-level strategies
       n   Usually broader in scope and more complex
       n   Also more challenging and costly
  n   Can be used to develop useful knowledge about how to
      succeed in the future
  n   Can lead to competitive advantage if they are managed in
      ways that are valuable, rare, imperfectly imitable, and
      nonsubstitutable


                                                           16
        International Cooperative Strategy

n Cross-Border Strategic Alliance
   n   International cooperative strategy in which firms with headquarters
       in different nations combine some of their resources and capabilities
       to create a competitive advantage
n Why cross-border strategic alliances?
   n   Can help firms use their resources and capabilities to create value
       in locations outside their home market
   n   Multinational corporations outperform firms that operate only
       domestically
   n   Due to limited domestic growth opportunities, firms look outside their
       national borders to expand business
   n   Some foreign government policies require investing firms to partner
       with a local firm to enter their markets
   n   Local partners can help firms overcome liabilities of moving into a
       foreign country (example: lack of knowledge about local culture)
                                                                       17
            Network Cooperative Strategy

n Network Cooperative Strategy
  n   Cooperative strategy wherein several firms agree to form multiple
      partnerships to achieve shared objectives
  n   Very effective when formed by geographically clustered firms (i.e.,
      Silicon Valley in N. California)
       n   Japanese keiretsus and Korean Chaebols
  n   Firm’s gain access to their partners other partners - so multiple
      alliances with multiple partnerships
  n   Can increase competitive advantage potential as set of shared
      resources and capabilities expands
  n   Can be problematic - could lock firm in with partners and exclude
      development of alliances with others



                                                                      18
            Network Cooperative Strategy

n Alliance network types: Set of strategic alliance
  partnerships resulting from use of a network
  cooperative strategy
  n   Stable alliance network
       n   Formed in mature industries where demand is relatively constant
           and predictable
       n   Directed primarily toward developing products at a low cost and
           exploiting economies of scale and scope
  n   Dynamic Alliance Networks
       n   Used in industries characterized by environmental uncertainty,
           frequent product innovations, and short product life cycles
       n   Directed primarily toward continued development of products
           that are uniquely attractive to customers
                                                                      19
      Competitive Risks with Cooperative
                  Strategies
n Risks
  n   2/3 have serious problems in first 2 years and 50% end up failing
  n   Partners may choose to act opportunistically due to inadequate
      contracts
  n   Partner competencies may be misrepresented
  n   Partner may fail to make available the complementary resources
      and capabilities that were committed
  n   One partner may make investments specific to the alliance while
      the other partner may not – holding alliance partner's specific
      investments hostage


                                                                       20

								
To top