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- 1. Chapter 9 Transparency 9-1 CooperativeStrategy Michael A. Hitt R. Duane Ireland Robert E. Hoskisson ©1999 South-Western College Publishing
- 2. Chapter 3 Internal Environment Chapter 2 External Environment TheStrategic Management Process Strategic Intent Strategic Mission Strategic Competitiveness Above Average Returns Feedback Strategy Formulation Chapter 4 Business- Level Strategy Chapter 5 Competitive Dynamics Chapter 6 Corporate-Level Strategy Chapter 8 International Strategy Chapter 9 Cooperative Strategies Chapter 7 Acquisitions & Restructuring Strategy Implementation Chapter 10 Corporat e Governan ce Chapter 11 Structure & Control Chapter 12 Strategic Leadership Chapter 13 Entrepreneurship & Innovation Transparency 9-2 StraItnepg uict s StraAtcetgi oi cn s StraOteugticcome s
- 3. Firm A Firm B Partnershipsbetween firms Transparency 9-3 Strategic Alliances
- 4. Strategic Alliances where their Firm A FirmB Partnerships between firms Capabilities Core Competencies Resources Transparency 9-4
- 5. where their are combinedto pursue mutual interests to Develop Manufacture Distribute Goods Services Firm A Firm B Partnerships between firms Core Competencies Capabilities Resources Transparency 9-5 Strategic Alliances
- 6. Independent firm iscreated by the joining assets from two other firms where each contributes 50% of the total Dow Corning from Dow Chemical and Corning Inc. Transparency 9-6 Types of Strategic Alliances Joint Venture
- 7. Types of StrategicAlliances Joint Venture Independent firm is created by the joining assets from two other firms where each contributes 50% of the total Dow Corning from Dow Chemical and Corning Inc. Equity Strategic Alliance Partnership where the two partners do not own equal shares Chrysler and Mitsubishi Automotive Transparency 9-7
- 8. Transparency 9-8 Independent firmis created by the joining assets from two other firms where each contributes 50% of the total Dow Corning from Dow Chemical and Corning Inc. Equity Strategic Alliance Partnership where the two partners do not own equal shares 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) Types of Strategic Alliances Joint Venture
- 9. * Establish franchisein a new market * Maintain market stability Transparency 9-9 Reasons for Alliances by Market Type Slow Cycle * Gain access to a restricted market Market
- 10. Standard * Overcometrade barriers Cycle Mark*eMtMeet competitive challenge * Pool resources for large projects * Learn new business techniques * Gain access to a restricted market * Establish franchise in a new market * Maintain market stability * Gain market power * Gain access to complementary resources Slow Cycle Market Reasons for Alliances by Market Type Transparency 9-10
- 11. Transparency 9-11 Standard Cycle Market Slow Cycle Market FastCycle 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 Reasons for Alliances by Market Type
- 12. Types of StrategicAlliances Business- Level Complementary Alliances Competition Reduction Alliances Competition Response Alliances Uncertainty Reduction Alliances Transparency 9-12
- 13. Business- Competition Response Alliances Level Corporate- Synergistic Alliances Franchising Typesof Strategic Alliances Business- LLeev veell CCoommpplleemmeennttaarryyA Alllliiaanncceess CCoommppeettiittiioonn RReedduuccttiioonnAAlllliiaanncc eess Competition Response Alliances UUnncceerrttaaiinnttyy RReedduuccttiioonnAAlllliiaanncc eess Diversification Alliances Transparency 9-13
- 14. Types of Business-LevelStrategic Alliances Complementary Strategic Alliances Partnerships that build on the complementarities among firms that make each more competitive Transparency 9-14
- 15. Partnerships that buildon the complementarities among firms that make each more competitive Supplier Value Chain Buyer Value Chain Vertical Alliance Include distribution, supplier or outsourcing alliances where firms rely on upstream or downstream partners to build competitive advantage Types of Business-Level Strategic Alliances Complementary Strategic Alliances Transparency 9-15
- 16. Partnerships that buildon the complementarities among firms that make each more competitive Supplier Value Chain Buyer Value Chain Vertical Alliance Include distribution, supplier or outsourcing alliances where firms rely on upstream or downstream partners to build competitive advantage Japanese manufacturers rely on close relationships among suppliers to implement Just-In- Time inventory systems Types of Business-Level Strategic Alliances Complementary Strategic Alliances Transparency 9-16
- 17. Horizontal Alliance Used to increasethe strategic competitiveness of the partners Supplier Value Chain Buyer Value Chain Types of Business-Level Strategic Alliances Complementary Strategic Alliances Transparency 9-17
- 18. Used to increasethe strategic competitiveness of the partners Product development agreements between Microsoft and Dreamworks SKG or Marketing agreements between Delta and SwissAir Types of Business-Level Strategic Alliances Complementary Strategic Alliances Horizontal Alliance Supplier Value Chain Buyer Value Chain Transparency 9-18
- 19. Avoiding competition byusing tacit collusion such as price fixing OPEC petroleum cartel Types of Business-Level Strategic Alliances Competition Reduction Strategies Transparency 9-19
- 20. Avoiding competition byusing tacit collusion such as price fixing OPEC petroleum cartel Competition Response Strategies Firms join forces to respond to a strategic action of another competitor DirecTV has agreement with Time Warner for exclusive programming Types of Business-Level Strategic Alliances Competition Reduction Strategies Transparency 9-20
- 21. Avoiding competition byusing tacit collusion such as price fixing OPEC petroleum cartel Competition Response Strategies Firms join forces to respond to a strategic action of another competitor DirecTV has agreement with Time Warner for exclusive programming Uncertainty Reduction Strategies Alliances can be used to hedge against risk and uncertainty ATT acquires Teleport, a provider of telecommunications services to business customers Types of Business-Level Strategic Alliances Competition Reduction Strategies Transparency 9-21
- 22. Types of Corporate-LevelStrategic Alliances Diversifying Alliances Transparency 9-22 Allows a firm to expand into a new product or market area with an acquisition Samsung Group joins with Nissan to build new autos
- 23. Allows a firmto expand into a new product or market area with an acquisition 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 Sony shares development with many small firms Types of Corporate-Level Strategic Alliances Diversifying Alliances Transparency 9-23
- 24. Allows a firmto expand into a new product or market area with an acquisition 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 Sony shares development with many small firms Franchising Allows firms to grow and relatively strong centralized control without significant capital investments McDonald’s or Century 21 Types of Corporate-Level Strategic Alliances Diversifying Alliances Transparency 9-24
- 25. International Cooperative Strategies Transparency9-25 Allows risk sharing by reducing financial investment
- 26. Allows risk sharingby reducing financial investment Host partner knows local market and customs International Cooperative Strategies Transparency 9-26
- 27. Allows risk sharingby 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 International Cooperative Strategies Transparency 9-27
- 28. Allows risk sharingby 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 International Cooperative Strategies Transparency 9-28
- 29. Network Strategies Transparency 9-29 Networkstrategies involve a group of interrelated firms that work for the common good of all Japanese keiretsus or U.S. R&D consortia
- 30. Network strategies involvea group of interrelated firms that work for the common good of all Japanese keiretsus or U.S. R&D consortia The three types of networks are: Stable Networks Dynamic Networks Internal Networks Network Strategies Transparency 9-30
- 31. Long term relationshipsthat often appear in mature industries with largely predictable market cycles NIKE’s relationships with suppliers and distributors Network Strategies Stable network Transparency 9-31
- 32. Long term relationshipsthat often appear in mature industries with largely predictable market cycles NIKE’s relationships with suppliers and distributors Dynamic network Arrangements that evolve in industries with rapid technological change leading to short product life cycles Apple computer and Sharp electronics Network Strategies Stable network Transparency 9-32
- 33. Long term relationshipsthat often appear in mature industries with largely predictable market cycles NIKE’s relationships with suppliers and distributors Dynamic network Arrangements that evolve in industries with rapid technological change leading to short product life cycles Apple computer and Sharp electronics Internal network Management system used to coordinate a global web of suppliers and customers Asea Brown Boveri’s network Network Strategies Stable network Transparency 9-33
- 34. While cooperative systemscan offer many advantages, there are also significant risks associated with them Competitive Risks with Cooperative Strategies Transparency 9-34
- 35. While cooperative systemscan offer many advantages, there are also significant risks associated with them Poor contract development Competitive Risks with Cooperative Strategies Transparency 9-35
- 36. While cooperative systemscan offer many advantages, there are also significant risks associated with them Poor contract development Misrepresentation of partners’ competencies Competitive Risks with Cooperative Strategies Transparency 9-36
- 37. While cooperative systemscan 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 Competitive Risks with Cooperative Strategies Transparency 9-37
- 38. While cooperative systemscan 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 Competitive Risks with Cooperative Strategies Transparency 9-38
- 39. While cooperative systemscan 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 Competitive Risks with Cooperative Strategies Transparency 9-39
- 40. Managing Risks inCooperative Strategies Competitive Risks * Inadequate contracts * Misrepresentation of competencies * Partner fails to use complementary resources * Holding alliance partner’s specific investments hostage Transparency 9-40
- 41. Competitive Risks Risk and Asset Management Approaches * Detailed contractsand monitoring * Developing trusting relationship s Managing Risks in Cooperative Strategies partner’s specific investments hostage * Inadequate contracts * Misrepresentation of competencies * Partner fails to use complementary resources * Holding alliance Transparency 9-41
- 42. Competitive Risks Risk and Asset Management Approaches Outcome Value Creation Managing Risksin Cooperative Strategies partner’s specific investments hostage * Inadequate contracts * Misrepresentation of competencies * Partner fails to use complementary resources * Holding alliance * Detailed contracts and monitoring * Developing trusting relationship s Transparency 9-42