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    Chapter 9 cooperative strategy Chapter 9 cooperative strategy Presentation Transcript

    • ©2011 Cengage Learning. All Rights Reserved. May not be scanned,copied or duplicated, or posted to a publicly accessible website, inwhole or in part.Strategic Management:Concepts and Cases 9ePart II: Strategic Actions:Strategy FormulationChapter 9: Cooperative Strategy
    • ©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.Chapter 9: Cooperative Strategy• Overview: Seven content areas– Cooperative strategies and why firms use them– Three types of strategic alliances– Business-level cooperative strategies & their use– Corporate-level strategies in diversified firms– Cross-border strategic alliances’ importance as aninternational cooperative strategy– Competitive risks with cooperative strategies– Two approaches to manage cooperative strategies
    • ©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.Introduction• Cooperative strategy– Firms work together to achieve a shared objective
    • ©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.Primary Type of Cooperative Strategy:Strategic Alliances• Introduction: Strategic Alliance– Cooperative strategy in which firms combine resourcesand capabilities to create a competitive advantage• Three types of strategic alliances– 1. Joint venture– 2. Equity strategic alliance– 3. Nonequity strategic alliances, which include• Licensing agreements• Distribution agreements• Supply contracts• Outsourcing commitments
    • ©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.Primary Type of Cooperative Strategy:Strategic Alliances (Cont’d)• 1. Joint venture– Two or more firms create a legally independentcompany to share resources and capabilities to developa competitive advantage• 2. Equity strategic alliance– Two or more firms own a portion of the equity in theventure they have created• 3. Nonequity strategic alliance– Two or more firms develop a contractual relationship toshare some of their unique resources and capabilitiesto create a competitive advantage
    • ©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.Primary Type of Cooperative Strategy:Strategic Alliances (Cont’d)• Why firms might develop strategic alliances– Most firms lack the full set of resources and capabilitiesneeded to reach their objectives– Cooperative behavior allows partners to create valuethat they couldnt develop by acting independently– Aligning stakeholder interests (both inside and outsideof the organization) can reduce environmentaluncertainty– Alliances can …• provide a new source of revenue• be a vehicle for firm growth• enhance the speed of responding to market opportunities,technological changes, and global conditions• allow firms to gain new knowledge and experiences toincrease competitiveness
    • ©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.Primary Type of Cooperative Strategy:Strategic Alliances (Cont’d)• In summary, strategic alliances …– …can reduce competition and enhance a firm’scompetitive capabilities and– …create avenue for firm to gain access to resources– …allows firm to take advantage of opportunities, buildstrategic flexibility and innovate
    • ©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.Reasons for Strategic Alliances by Market TypeMarket ReasonSlow-Cycle • Gain access to restricted market• Establish a franchise in a new market• Maintain market stability (e.g., establishing standard)Fast-Cycle• Speed up development of new goods or services• Speed up new market entry• Maintain market leadership• Form an industry technology standard• Share risky R&D expenses• Overcome uncertaintyStandard-Cycle• Gain market power (reduce industry overcapacity)• Gain access to complementary resources• Establish better economies of scales• Overcome trade barriers• Meet competitive challenges from other competitors• Pool resources for very large capital project• Learn new business techniques
    • ©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.Business-Level Cooperative Strategy• Business level cooperative strategies are usedto grow and improve firm performance inindividual product markets.• Achieved through Complementary StrategicAlliances (CSA)
    • ©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.Business-Level Cooperative Strategy (Cont’d)• Complementary Strategic Alliances (CSA)– Firms share some of their resources and capabilities incomplementary ways to develop competitiveadvantages– Partners may have different• Learning rates• Capabilities to leverage complementary resources• Marketplace reputations• types of actions they can legitimately take– Some firms are more effective at managing alliancesand deriving benefits from them– Two forms include vertical and horizontal
    • ©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.Business-Level Cooperative Strategy (Cont’d)–2 Types of CSA:•1. Vertical CSA–partnering firms share resources & capabilities fromdifferent stages of the value chain to create a competitiveadvantage.–Ex: Nintendo’s partnership with Electronic Arts foradditional software and game•2. Horizontal CSA–partnering firms share resources & capabilities from thesame stage of the value chain to create a competitiveadvantage–commonly used for long-term product development anddistribution opportunities–Ex: Pfizer reached marketing agreements with two Indianmakers of generic drugs
    • ©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.Business-Level Cooperative Strategy (Cont’d)• Competition response strategy– Competitors• initiate competitive actions to attack rivals• launch competitive responses to their competitor’s actions– Strategic alliances (SA)• can be used at the business level to respond to competitor’sattacks• primarily formed to take strategic vs. tactical actions• can be difficult to reverse• expensive to operate
    • ©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.Business-Level Cooperative Strategy (Cont’d)• Uncertainty-reducing strategy– For example, entering new product markets, emergingeconomies and establishing a technology standard are unknownareas so by partnering with a firm in the respective industry, afirm’s uncertainty (risk) is reduced– Uncertainty reduced by combining knowledge & capabilities– Ex: Volkswagen partners with China’s BYD Co. to produce hybridand electric vehicles powered by lithium batteries. It also madeagreements with Samsung Electric and Toshiba Corp. to reducethe uncertainty about the insufficient capacity for lithium-ionbatteries used in hybrid vehicles.
    • ©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.Business-Level Cooperative Strategy (Cont’d)• Competition-reducing strategy: Two Collusive Strategies– Collusive strategies (CS) differ from strategic alliances in that CSare usually illegal– 1. Explicit collusion– Direct negotiation among firms to establish output levels and pricingagreements that reduce industry competition– Ex: Luxembourg’s Cargolux, Japan’s Nippon Cargo Airlines, and Korea’sAsiana Airlines: global conspiracy to fix prices on air freight– 2. Tacit collusion– Indirect coordination of production and pricing decisions by several firms,which impacts the degree of competition faced in the industry– Ex: Kellogg’s, General Mills, Post, and Quaker– Mutual forbearance: firms do not take competitive actions against rivalsthey meet in multiple markets
    • ©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.Business-Level Cooperative Strategy (Cont’d)• Business-level cooperative strategy – assessment– Used to develop competitive advantages (CA) for contributing tosuccessful positions & performance in individual product markets– Developing a CA using a strategic alliance, the integratedresources and capabilities must be valuable, rare, imperfectlyimitable and nonsubstitutable– Vertical alliances have greatest probability of creating CA;horizontal are sometimes difficult to maintain since they areusually between competitors– SA’s designed to respond to competition and reduce uncertaintyare more temporary than complementary (horizontal andvertical) strategic alliances– Competition-reducing has lowest probability of creating asustainable CA
    • ©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.Corporate-Level Cooperative Strategies• Corporate-level cooperative strategies (CLCS) help firmto diversify itself in terms of products offered, marketsserved or both• Common CLCS forms– 1. Diversifying strategic alliance• Firms share some of their resources & capabilities to diversify into new productor market areas• Ex: Alcatel-Lucent and 1020 Placecast in mobile advertising– 2. Synergistic strategic alliance• Firms share some of their resources & capabilities to create economies of scope• Ex: Disney’s ABC partners with Google’s YouTube– 3. Franchising• Firm uses a franchise as a contractual relationship to describe and control thesharing of its resources and capabilities with partners– Franchise: contractual agreement between two legally independent companieswhereby the franchisor grants the right to the franchisee to sell the franchisorsproduct or do business under its trademarks in a given location for a specified periodof time
    • ©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.Corporate-Level Cooperative Strategies (Cont’d)• Assessment of corporate-level cooperative strategies– Costs incurred regardless of type selected• Important to monitor expenditures!– In comparison w/ business-level strategies• Usually broader in scope• More complex and therefore more costly– Can develop useful knowledge … and, in order to gainmaximum value should organize and verify properdistribution with those involved in forming and usingalliances
    • ©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.International Cooperative Strategy• Cross-Border Strategic Alliance– International cooperative strategy in which firms withheadquarters in different nations combine some of theirresources and capabilities to create a competitiveadvantage– Ex: IMG Worldwide Inc. has international JV with otherbroadcasting firms• Why cross-border strategic alliances?– Multinational corporations outperform firms thatoperate only domestically– Due to limited domestic growth opportunities, firmslook outside their national borders to expand business– Some foreign government policies require investingfirms to partner with a local firm to enter their markets
    • ©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.• Risks– Partners may choose to act opportunistically– Partner competencies may be misrepresented– Partner may fail to make available the complementary resourcesand capabilities that were committed– One partner may make investments specific to the alliance whilethe other partner may notCompetitive Risks in Cooperative Strategies
    • ©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.Managing Cooperative Strategy• Two primary approaches– 1. Cost minimization– 2. Opportunity maximization
    • ©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.Managing Cooperative Strategy (Cont’d)• 1. Cost minimization– Relationship with partner is formalized with contracts– Contracts specify how cooperative strategy is to bemonitored and how partner behavior is to be controlled– Goal is to minimize costs and prevent opportunisticbehaviors by partners– Costs of monitoring cooperative strategy are greater– Formalities tend to stifle partner efforts to gainmaximum value from their participation
    • ©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.Managing Cooperative Strategy (Cont’d)• 2. Opportunity Maximization– Focus: maximizing partnerships value-creationopportunities– Informal relationships and fewer constraints allowpartners to• take advantage of unexpected opportunities• learn from each other• explore additional marketplace possibilities– Partners need a high level of trust that each party willact in the partnerships best interest, which is moredifficult in international situations