0    Cooperative Strategy              Chapter Ten© 2006 by Nelson, a division of Thomson Canada Limited.   10-1
Chapter 3                                   External                                                 The Strategic        ...
Cooperative StrategyKnowledge Objectives:1. Define cooperative strategies & explain why firms use   them.2. Define & discu...
A Cooperative StrategyA strategy in which firms work together to        achieve a shared objective.       © 2006 by Nelson...
Strategic Alliances                             Firm APartnerships between firms                                       Fir...
Types of Strategic AlliancesJoint VentureStrategic alliance in which two or more firms create a legallyindependent company...
Reasons for Alliances by Market TypeSlow        * Gain access to a restricted marketCycle       * Establish franchise in a...
Business-level Cooperative Strategies     © 2006 by Nelson, a division of Thomson Canada Limited.   10-8
Vertical & Complementary Strategic Alliances         © 2006 by Nelson, a division of Thomson Canada Limited.   10-9
Types of Business-level Strategic AlliancesCompetition Reduction Strategies Often illegal types of cooperative strategy wh...
Types of Business-Level Strategic AlliancesCompetition Response Strategies  Firms join forces to respond to a strategic ac...
Types of Corporate-level Strategic AlliancesDiversifying Alliances  Allows a firm to expand into a new product or market  ...
International Cooperative Strategies  Allows risk sharing by reducing financial investment.  Host partner knows local ma...
Network Cooperative StrategyAlliance network types:• Stable Alliance network   Built for the exploitation of economies ava...
Competitive Risks With Cooperative Strategies While cooperative systems can offer many advantages, there are also signific...
Managing Risks in Cooperative StrategiesCompetitive Risks* Inadequate  Inadequate                         Risk & Asset  co...
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Chapter 10

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  • Chapter 10

    1. 1. 0 Cooperative Strategy Chapter Ten© 2006 by Nelson, a division of Thomson Canada Limited. 10-1
    2. 2. Chapter 3 External The Strategic Strategic . Inputs Environment The Strategic Management Process Strat. Intent Chapter 4 Strat. Mission Management . Internal Environment Process Strategy Formulation Strategy ImplementationStrategic Actions Chapter 5 Chapter 6 Chapter 7 Chapter 11 Chapter 12 Bus. - Level Competitive Corp. - Level Corporate Structure Strategy Dynamics Strategy Governance & Control Chapter 8 Chapter 9 Chapter 10 Chapter 13 Chapter 14 Acquisitions & International Cooperative Strategic Entrepreneurship Restructuring Strategy Strategies Leadership & Innovation Outcomes Strategic Chapter 2 Chapter 1 Feedback Above Average Strategic Returns Competitiveness © 2006 by Nelson, a division of Thomson Canada Limited. 10-2
    3. 3. Cooperative StrategyKnowledge Objectives:1. Define cooperative strategies & explain why firms use them.2. Define & discuss three types of strategic alliances.3. Name the business-level cooperative strategies & describe their use.4. Discuss the use of corporate-level cooperative strategies & describe their use.5. Understand the importance of cross border strategic alliances as an international cooperative strategy.6. Describe cooperative strategies’ risks.7. Describe two approaches used to manage cooperative strategies. © 2006 by Nelson, a division of Thomson Canada Limited. 10-3
    4. 4. A Cooperative StrategyA strategy in which firms work together to achieve a shared objective. © 2006 by Nelson, a division of Thomson Canada Limited. 10-4
    5. 5. Strategic Alliances Firm APartnerships between firms Firm Bwhere their Resources Capabilities Core Competenciesare combined to pursuemutual interests to Develop Goods Manufacture Distribute Services © 2006 by Nelson, a division of Thomson Canada Limited. 10-5
    6. 6. Types of Strategic AlliancesJoint VentureStrategic alliance in which two or more firms create a legallyindependent company to share some of their resources &capabilities to develop a competitive advantage. Domtar & Cascades formed NorampacEquity Strategic AlliancePartnership where the 2 partners don’t own equal shares. Alstream Inc. Microcell & NR CommunicationsNon-Equity Strategic AllianceContract is given to supply, produce or distribute a firm’sgoods or services (without equity sharing). RIM - Research in Motion’s “Blackberry” services used on wireless devices worldwide. © 2006 by Nelson, a division of Thomson Canada Limited. 10-6
    7. 7. Reasons for Alliances by Market TypeSlow * Gain access to a restricted marketCycle * Establish franchise in a new market * Maintain market stabilityMarket * Gain market powerStandard * Gain access to complementary resourcesCycle * Overcome trade barriers * Meet competitive challengeMarket * Pool resources for large projects * Learn new business techniquesFast * Speed-up product, service or market entry * Maintain market leadershipCycle * Form an industry technology standardMarket * Share risky R&D expenses * Overcome uncertainty © 2006 by Nelson, a division of Thomson Canada Limited. 10-7
    8. 8. Business-level Cooperative Strategies © 2006 by Nelson, a division of Thomson Canada Limited. 10-8
    9. 9. Vertical & Complementary Strategic Alliances © 2006 by Nelson, a division of Thomson Canada Limited. 10-9
    10. 10. Types of Business-level Strategic AlliancesCompetition Reduction Strategies Often illegal types of cooperative strategy which are used to reduce competition.Explicit Collusion: When firms directly negotiate production output & pricing agreements in order to reduce competition.Tacit Collusion: When several firms in an industry indirectly coordinate their production & pricing decisions by observing each others competitive actions & responses. © 2006 by Nelson, a division of Thomson Canada Limited. 10-10
    11. 11. Types of Business-Level Strategic AlliancesCompetition Response Strategies Firms join forces to respond to a strategic action of another competitor. Mega Bloks’ agreement with Disney.Uncertainty Reduction Strategies Alliances can be used to hedge against risk & uncertainty. Siemens & Fujitsu – “Fujitsu Siemens Computers” sharing technical resources & capabilities. © 2006 by Nelson, a division of Thomson Canada Limited. 10-11
    12. 12. Types of Corporate-level Strategic AlliancesDiversifying Alliances Allows a firm to expand into a new product or market area with an acquisition. Flynn Canada created strategic alliances with U.S. contractors.Synergistic Strategic Alliances Create economies of scope between 2 or more firms, creating synergy across multiple businesses between firms. Cisco Systems has many synergistic strategic alliances.Franchising Allows firms to grow with relatively strong centralized control without significant capital investments. Boston Pizza with 200 restaurants in Western Canada. © 2006 by Nelson, a division of Thomson Canada Limited. 10-12
    13. 13. International Cooperative Strategies  Allows risk sharing by reducing financial investment.  Host partner knows local market & 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. © 2006 by Nelson, a division of Thomson Canada Limited. 10-13
    14. 14. Network Cooperative StrategyAlliance network types:• Stable Alliance network Built for the exploitation of economies available between firms.• Dynamic Alliance network Used in industries characterised by frequent product innovations & short product life cycles. © 2006 by Nelson, a division of Thomson Canada Limited. 10-14
    15. 15. 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 specificinvestments made with partner.Misunderstanding partner’s strategic intent. © 2006 by Nelson, a division of Thomson Canada Limited. 10-15
    16. 16. Managing Risks in Cooperative StrategiesCompetitive Risks* Inadequate Inadequate Risk & Asset contracts contracts Management Approaches* Misrepresentation Misrepresentation Outcome of competencies of competencies * Detailed Detailed* Partner fails to use* Partner fails to use contracts and contracts and Value complementary complementary monitoring monitoring Creation resources resources * Developing * Developing* Holding alliance Holding alliance trusting trusting partner’sspecific partner’s specific relationships relationships investments investments hostage hostage © 2006 by Nelson, a division of Thomson Canada Limited. 10-16

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