This document discusses various cooperative strategies that firms can employ, including strategic alliances, joint ventures, equity alliances, and non-equity alliances. It describes the types and benefits of these strategies at both the business and corporate levels. Specifically, it outlines how cooperative strategies can help firms access new markets, share risks and costs, and gain competitive advantages through combined resources and capabilities. The document also notes some of the challenges of international and network cooperative strategies and emphasizes the importance of effective management to maximize opportunities while minimizing competitive risks when employing these approaches.

1. Cooperative Implications
for
Strategy
Presented By:
Yogesh Kakra
Prabhu Pareek

2. IBM
• More than 35,000 employees
• Three core business units-
• System & financing, Software, and services
• Using three means to grow internal development, merger
& acquisition and cooperation
• Cooperative strategy means firms work together to
achieve shared objective
• They improve their services for maximize customer
values and able to improve internally

3. Strategic Alliances
• Primary type
• Firm combine their resources & capabilities to create
competitive advantage
• Like in insurance sectors- ICICI linked with Prudential,
Max with New York Life, Bajaj with Alliance
• Helps in increase confidence level of customer
• Competitive advantage developed through cooperative
strategy called collaboration advantage
• Enhance firm’s marketplace success
• Three types: Joint venture
• Equity Strategic Alliances
• Non equity Strategic Alliances

4. Types of Strategic Alliances
• Joint Venture
– Two / more firms create a legally independent company to share
of some resources & capabilities
– Establish long term relationship and transferring knowledge
• Equity Strategic Alliances
– Own different percentage of the company by combining their
resources and capabilities
– Like many foreign direct investments
• Non-equity Strategic Alliances
– Develop contractual relationship to share some unique
resources and capabilities
– Firms do not establish a separate company and do not take
equity position
– Like license agreement, supply contracts, distribution agreement

5. Reasons for Strategic Alliances
• Slow Cycle
– Gain access to a restricted market
– Establish a franchise in a new market
– Maintain market stability (e.g.. establishing standards)
• Fast Cycle
– Speed up development of new goods or service
– Speed up new market entry
– Maintain market leadership
– Form an industry technology standard
– Share risky R&D expenses
– Overcome uncertainty
Cont…

6. Cont…
Reasons for Strategic Alliances
• Standard Cycle
– Gain market power (reduce industry overcapacity)
– Gain access to complementary resources
– Establish economies of scale
– Overcome trade barriers
– Meet competitive challenges from other competitors
– Pool resources for very large capital projects
– Learn new business techniques

7. Business-Level Cooperative
Strategies
• Complementary strategic alliances
 Vertical
 Horizontal
• Competition response strategy
• Uncertainty reducing strategy
• Competition reducing strategy
Cont…

8. Cont…
Business-Level Cooperative
Strategies
• Complementary Strategy
• Combine partner firms’ assets in complementary ways to
create new value
• Include distribution, supplier or outsourcing alliances
where firms rely on upstream or downstream partners to
build competitive advantage
• Vertical: Firms agree to use their skills and capabilities in
different stages of the value chain to create value for
both firms
• Outsourcing
Cont…

9. Cont…
Business-Level Cooperative
Strategies
• Horizontal:
• Partners combine resources and skills to create value in
the same stage of the value chain
• Focus is on long-term product development and
distribution opportunities
• Partners may become competitors
• Eg. Pfizer has reached marketing agreement with two
Indian makers of generic drugs: Aurobindo Pharma Ltd.
and Claris Lifesciences Ltd.

10. Assessment of Cooperative
Strategies
• Complementary business-level strategic alliances,
especially the vertical ones, have the greatest probability
of creating a sustainable competitive advantage
• Horizontal complementary alliances are sometimes
difficult to maintain because they are often between rival
competitors
• Competitive advantages gained from competition and
uncertainty reducing strategies tend to be temporary

11. Corporate-Level Cooperative
Strategy
• Corporate-level strategies
 Help the firm diversify in terms of:
• Products offered to the market
• The markets it serves
 Require fewer resource commitments
 Permit greater flexibility in terms of efforts to diversify
partners’ operations
Cont…

12. Cont…
Corporate-Level Cooperative
Strategy
• Diversifying Strategic Alliances
• Expand into new product or market areas without
completing a merger or an acquisition
• Synergistic benefits of a merger or acquisition
– less risk
– greater flexibility
• Assess benefits of future merger between the partners
• Synergistic Strategic Alliances
• Joint economies of scope between two or more firms
• Synergy across multiple functions or multiple businesses
between partner firms

13. Corporate-Level Cooperative
Strategy
• Franchising
• Spreads risks and uses resources, capabilities, and
competencies without merger or acquisition
• A contractual relationship (the franchise) is developed
between the franchisee and the franchisor
• Alternative to growth through mergers and acquisitions

14. Assessment of Corporate-Level
Cooperative Strategies
• Compared to business-level strategies
– Broader in scope More complex
– More costly
• Can lead to competitive advantage and value when:
– Successful alliance experiences are internalized
– The firm uses such strategies to develop useful
• knowledge about how to succeed in the future

15. International Cooperative
Strategies
• Cross-border Strategic Alliance
– A strategy in which firms with headquarters in different
nations combine their resources and capabilities to create
a competitive advantage
– A firm may form cross-border strategic alliances to
leverage core competencies that are the foundation of its
domestic success to expand into international markets

16. International Cooperative
Strategies
• Synergistic Strategic Alliance
– Allows risk sharing by reducing financial investment
– Host partner knows local market and customs
– International alliances can be difficult to manage due to
differences in management styles, cultures or regulatory
constraints
– Must gauge partner’s strategic intent such that the partner
does not gain access to important technology and become
a competitor

17. Network Cooperative Strategy
• A cooperative strategy wherein several firms agree to
form multiple partnerships to achieve shared objectives
– Stable alliance network
– Dynamic alliance network
• Keys to a successful network cooperative strategy
– Effective social relationships
– Interactions among partners

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

19. International cooperative strategy
• Cross-Border Strategic Alliance
• International cooperative strategy in which firms with
headquarters in different nations combine some of their
resources and capabilities to create a competitive
advantage
• Can help firms use their resources and capabilities to
create value in locations outside their home market
• Due to limited domestic growth opportunities, firms look
outside their national borders to expand business
• Local partners can help firms overcome liabilities of
moving into a foreign country

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

21. Cont…
Network Cooperative Strategy
• Alliance network types: Set of strategic alliance
partnerships resulting from use of a network cooperative
strategy
• Stable alliance network
• Formed in mature industries where demand is
relatively constant and predictable
• Directed primarily toward developing products at a
low cost and exploiting economies of scale and scope
Cont…

22. Cont…
Network Cooperative Strategy
• Dynamic Alliance Networks
• Used in industries characterized by environmental
uncertainty, frequent product innovations, and short
product life cycles
• Directed primarily toward continued development of
products that are uniquely attractive to customers

23. Competitive Risks with Cooperative
Strategies

24. Managing Cooperative
Strategies
• Cost minimization management approach
– Formal contracts with partners
– Specify
• How strategy is to be monitored
• How partner behaviour is to be controlled
– Goals that minimize costs and prevent opportunistic
behaviour by partners
Cont…

25. Cont…
Managing Cooperative
Strategies
• Opportunity maximization approach
– Maximize partnership’s value-creation opportunities
– learn from each other
– Explore additional marketplace possibilities
– less formal contracts, fewer constraints

26. Thank You