Strategic Managment

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For use with Strategic Management: Competitiveness and Globalization (EMEA Edition) by Henk W. Volberda, Robert E. Morgan, Patrick Reinmoeller, Michael A. Hitt, R. Duane Ireland and Robert E. Hoskisson 1408019183© 2011 Cengage Learning

Chapter 10

COOPERATIVE STRATEGY

Learning Objectives

1. What are the traditional and emerging motives that cause firms to expand internationally?

2. What are the four primary benefits of an international strategy?

3. What four factors provide a basis for international business-level strategies?

4. What are the three international corporate-level strategies? How do they differ from each other? What factors lead to their development?

5. What environmental trends are affecting international strategy?

Opening case:
Using cooperative strategies at IBM

Describe the business analytics business for IBM.

2. What future cooperative arrangements do you consider IBM might employ in the business analytics space?

Strategic alliances as a primary type of cooperative strategy

Strategic Alliance: A cooperative strategy in which firms combine some of their resources and capabilities to create a competitive advantage
Three types of strategic alliance
Joint venture
Equity strategic alliance
Nonequity strategic alliance
Reasons firms develop strategic alliances
Slow cycle markets
Fast cycle markets
Standard cycle markets

Business-level cooperative strategy

Complementary strategic alliances
Vertical complementary strategic alliances
Horizontal complementary strategic alliances
Competition response strategy
Uncertainty-reducing strategy
Competition-reducing strategy
Explicit collusion
Tacit colllusion
Assessment of business-level cooperative

strategies

Corporate-level cooperative strategy

For diversification in terms of products or markets

Diversifying strategic alliance

Synergistic strategic alliance

Franchising

Assessment of corporate-level cooperative strategies

International cooperative strategy

Cross-border strategic alliance

Firms with headquarters in different nations decide to combine some of their resources and capabilities to create a competitive advantage

Network cooperative strategy

A cooperative strategy wherein several firms agree to form multiple partnerships to achieve shared objectives
Alliance network types
Stable alliance network in mature industries
Dynamic alliance network in more turbulent industries

Competitive risks with cooperative strategies

Many cooperative strategies fail
Managing risks:
Competitive risks – opportunistic behaviour, misrepresentation, not making resources or capabilities available, one-sided investment in the alliance

Managing cooperative strategies

Co-ordination
Categorizing knowledge learned
Managing tangible and intangible assets

Two approaches:
Cost minimsation
Opportunity maximisation

Need for mutual trust

Closing case:
BT and HP: pursuing a successful strategic alliance

Why does this alliance work so well?

To what extent is this alliance sustainable? What challenges might undermine this alliance?

Summary

Cooperative strategies involve firms working together for a shared objective usually through strategic alliances (equity and nonequity) or joint ventures
Collusive strategies also used but explicit collusion illegal in most countries
The cycle of market conditions will affect cooperative strategies
Business-level : vertical or horizontal complementary alliances, competition-responding, competition-reducing and uncertainty-reducing strategies
Corporate-level: diversifying and synergistic alliances, also franchising
Cross-border alliances entail risk
Network cooperative strategy involves multiple partnerships in stable or dynamic networks
Risk of cooperative strategies is mitigated by trust

Review questions

1. What is the definition of cooperative strategy and why is this strategy important to firms competing in the twenty-first century competitive landscape?

2. What is a strategic alliance? What are the three types of strategic alliances firms use to develop a competitive advantage?

3. What are the four business-level cooperative strategies and what are the differences between them?

4. What are the three corporate-level cooperative strategies? How do firms use each one to create a competitive advantage?

5. Why do firms use cross-border strategic alliances?

6. What risks are firms likely to experience as they use cooperative strategies?

7. What are the differences between the cost-minimization

approach and the opportunity-maximization approach to

managing cooperative strategies?