Strategic

Management
Chapter 9
Cooperative
Strategy

Presented by
6 MDB

The Team

The Team
Team Member

ID

Khadijah Syarina

MR131139

Lee Yan She, Charlene

MR131152

Dr. Sudeash

MR 131151

Dr. Puvaneshwaran

MR 131149

Nirmalarubini
Prabagaran

MBS 141034

Suriakumaran
Ganasan

MBS 141053

Content
1.
2.
3.
4.
5.

Definition Cooperative Strategies

Three Major Types of Strategic Alliances
Business-Level Cooperative Strategies
Corporate-Level Cooperative Strategies
The Importance of Cross-Border Strategic
Alliances as an International Cooperative
Strategy
6. Cooperative Strategies' Risks

Define
cooperative
strategies and
explain why
firms use
cooperative
strategies

Cooperative
Strategy in Strategy

which firms
work together
to achieve a
shared
objective

They compete
globally but
may cooperate
locally

hy Firms use Cooperative Strategy?

Intense
rivalry

Difficult to
maintain
market
power

Cooperativ
e strategy
can reduce
market
power
through
better
norms of
competitio
n

Mutual
forbearanc
e

hy Firms use Cooperative Strategy?

Complemen
tary
resources

Based on
resourcebased view

To
compete,
firms need
resources

Hold 15% in Renault

Strong in Asia

But they
dont have
or may be
found in
others
Same CEO Carlos Ghosn
firms
Hold 43.3% in Nissan
Strong in Europe

hy Firms use Cooperative Strategy?

Squeezed in the middle,
cooperate to established
economies of scale
To create value for a customer
that it likely could not create
not itself
To create competitive
advantage

Define and
discuss the
three major
types of
strategic
alliances

Strategic Alliances
A primary type of cooperative strategy in
which firms combine some of their resources
and capabilities to

Involves the exchange and

sharing of resources and
capabilities to co-develop or
distribute goods and services.
Requires cooperative behavior
from all partners

Strategic Alliances Behaviours

Example
of
cooperativ
e behavior
known to
contribute
to alliance
success:

Actively
solving
problems

Being
trustwort
hy

Consistent
pursuing
ways to
combine
partners
resources
and
capabilitie
s to create
value.

Collaborat
ive
(relational
)
advantage

A
competitiv
e
advantage
developed
through a
cooperativ
e strategy.

Strategic Alliances
Firm A Firm B
Resources
Capabilities
Core Competencies

Resources
Capabilities
Core Competencies

Combined
Resources
Capabilities
Core Competencies

Mutual interests in designing, manufacturing,

or distributing goods or services

Major Types Of Strategic

Alliances
Joint Venture
Two or more firms create a legally independent company by sharing some of their
resources and capabilities.
Equity strategic alliance
Partners who own different percentages of equity in a separate company they have
formed.
Nonequity strategic alliance
Two or more firms develop a contractual relationship to share some of their unique
resources and capabilities.
Licensing agreements
Distribution agreements
Supply contracts
Outsourcing commitments

Reasons for strategic alliances by market type

Market

Reason

Slow-Cycle

Gain access to a restricted market

Establish a franchise in a new market
Maintain market stability (e.g., establishing
standards)

Fast-Cycle

Standard-Cycle

Gain market power (reduce industry

overcapacity)
Gain access to complementary resources
Establish better economies of scale
Overcome trade barriers
Meet competitive challenges from other
competitors
Pool resources for very large capital projects

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 uncertainty

Name the
business-level
cooperative
strategies and
describe their
use ?

Business-Level
Cooperative Strategies
Complementary
Strategic Alliances
Competition Response
Strategy
Uncertainty Reducing
Strategy
Competition Reducing
Strategy

Vertical
Horizontal

Complementary Strategic Alliances

firms share some of their resources and capabilities in

complementary ways to develop competitive advantages

Types

Vertical

Horizontal

Meanin
g

share their resources

and capabilities from
different stages of the
value chain to create a
competitive advantage

share some of their

resources and
capabilities from the
same stage of the value
chain to create a
competitive advantage

Focus

To adapt to the
Long-term product
environmental change
development,
like economic downturn distribution
opportunities

Partner
with

Outsourcing
Supplier / distributor

Competitor

Competition Response
Alliances

When? Occur
when firms join
forces to
respond to a
strategic action
of another
competitor.

Why? they can

be difficult to
reverse and
expensive to
operate

Ex: Redbox
from Coinstar
and Verizon

Uncertainty-Reducing
Strategy
Are used to
hedge against
risk and
uncertainty.

Ex: Daimler
These alliances
AG of An allianceare most
noticed in fastGermany &may be
markets.
Tesla formed cycle
to
reduce the
uncertainty
associated
with
developing
new product
or technology
standards.

Competition-Reducing Strategy

Purpose: to avoid
destructive/excessiv
e competition

Explicit collusion:
when firms directly
negotiate production
output and pricing
agreements in order
to reduce
competition (illegal).

Tacit collusion:
when firms in an
industry indirectly
coordinate their
production and
pricing decisions by
observing other
firms actions and
responses.

Name the
business-level
cooperative
strategies and
describe their
use

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.

Diversifying Strategic Alliances

Diversifying
Strategic Alliance

Allows a firm to expand into new

product or market areas without
completing a merger or an
acquisition.

Provides some of the potential

synergistic benefits of a merger or
acquisition, but with less risk and
greater levels of flexibility.

Permits a test of whether a

future merger between the
partners would benefit both
parties.

Synergistic Strategic Alliances

Diversifying
Strategic Alliance

Synergistic
Strategic Alliance

Creates joint economies of

scope between two or
more firms.
Creates synergy across
multiple functions or
multiple businesses
between partner firms.

Franchising

Diversifying
Strategic Alliance

Spreads risks and uses resources,

Synergistic
Strategic Alliance

A contractual relationship (franchise)

Franchising

capabilities, and competencies

without merging or acquiring another
firm.
is developed between two parties, the
franchisee and the franchisor.

An alternative to pursuing growth

through mergers and acquisitions.

Discuss the use

of corporatelevel
cooperative
strategies in
diversified firms

INTERNATIONAL COOPERATIVE STRATEGY

Cross-border Strategic Alliance

International
cooperative
strategy

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

These
alliances are
sometimes
formed
instead of
mergers and
acquisitions,
which can be
riskier

Cross-border
alliances can
be complex
and hard to
manage

INTERNATIONAL COOPERATIVE
STRATEGY

Why form cross-border strategic

A firm
may form cross-border
alliances?
strategic alliances to leverage
core competencies that are the
foundation of its domestic success
to expand into international
markets.

Multinational corporations
outperform firms that operate only
domestically.
Due to limited domestic growth
opportunities, firms look outside
their national borders to expand
business.
Some foreign government policies
require investing firms to partner
with a local firm to enter their
markets

Explain
cooperative
strategies' risks

Competitive Risks of Cooperative

Strategies

Partners may
act
opportunistic
ally.

Partners may
misrepresent
competencies
brought to
the
partnership.

Partners fail
to make
committed
resources
and
capabilities
available to
other
partners.

One partner
may make
investments
that are
specific to
the alliance
while its
partner does
not

Competitive Risks of Cooperative

Strategies

Describe two
approaches
used to manage
cooperative
strategies

Managing Cooperative Strategies

Two
primary
approache
s
Opportuni
Cost
ty
minimizati
maximizat
on
ion

Managing Cooperative
Strategies
Cost
Minimizati
on
Managem
ent
Approach

Have
formal
contracts
with
partners.

Specify
how
strategy is
to be
monitored
.

Specify
how
partner
behaviour
is to be
controlled
.

Set goals
that
minimize
costs and
to prevent
opportuni
stic
behaviour
by
partners.

Managing Cooperative
Strategies
Opportuni
ty
Maximizat
ion
Approach

Maximize
partnershi
ps valuecreation
opportunit
ies

Learn
from each
other

Explore
additional
marketpla
ce
possibiliti
es

Maintain
less
formal
contracts,
fewer
constraint
s

Thank You