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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.

trategic Manage!ent

Part II: Strategic Actions:Strategy Formulation

Chapter 9: Cooperative Strategy

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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.

"he trategic Manage!ent #rocess

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Chapter $% Cooperative trategy

&'verview% even content areas( Cooperative strategies and why )ir!s use the!( "hree types o) strategic alliances( *usiness+level cooperative strategies their use( Corporate+level strategies in diversi)ied )ir!s( Cross+border strategic alliances- i!portance as an

international cooperative strategy( Co!petitive ris s with cooperative strategies

( "wo approaches to !anage cooperative strategies

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Cooperative trategies at /*M

&*y cooperating with others /*M can leverage coreco!petencies to grow and i!prove per)or!ance

&*usiness yste!s roup( evelop leading+edge technology( or!ed )ive alliances( #artners provide over 230 scientists and engineers that

wor with /*M-s own to )uel innovation

& *usiness Analytics roup

( Created unit to !anage data and i!prove decisions( o)tware solutions through s!all )ir! partnerships

&'verall shi)t to hardware, solutions, so)tware

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/ntroduction

&Cooperative strategy( ir!s wor together to achieve a shared ob4ective

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#ri!ary "ype o) Cooperative trategy%trategic Alliances

&/ntroduction% trategic Alliance( Cooperative strategy in which )ir!s co!bine resources

and capabilities to create a co!petitive advantage

&"hree types o) strategic alliances( 1. 5oint venture( 2. 67uity strategic alliance( 8. 9one7uity strategic alliances, which include

&Licensing agree!ents& istribution agree!ents& upply contracts& 'utsourcing co!!it!ents

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7/282011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

#ri!ary "ype o) Cooperative trategy%trategic Alliances :Cont-d;

&1. 5oint venture( "wo or !ore )ir!s create a legally independent co!pany

to share resources and capabilities to develop aco!petitive advantage

&2. 67uity strategic alliance( "wo or !ore )ir!s own a portion o) the e7uity in the

venture they have created

& 8. 9one7uity strategic alliance( "wo or !ore )ir!s develop a contractual relationship to

share so!e o) their uni7ue resources and capabilities tocreate a co!petitive advantage

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&Many reasons )ir!s i!ple!ent cooperativestrategies and speci)ically, strategic alliances

&Co!petitive !ar et conditions would include( 1. low+cycle !ar ets( 2. ast+cycle !ar ets( 8. tandard+cycle

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&ation; can reduce environ!ental uncertainty( Alliances can ?

&provide a new source o) revenue&be a vehicle )or )ir! growth

& enhance the speed o) responding to !ar et opportunities,technological changes, and global conditions

&allow )ir!s to gain new nowledge and e@periences to increaseco!petitiveness

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&/n su!!ary, strategic alliances ?( ?can reduce co!petition and enhance a )ir!-s

co!petitive capabilities and( ?create avenue )or )ir! to gain access to resources

( ?allows )ir! to ta e advantage o) opportunities, buildstrategic )le@ibility and innovate

& "he co!petitive conditions ++( 1. low+cycle !ar ets( 2. ast+cycle !ar ets( 8. tandard+cycle !ar ets

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& 1. low+cycle !ar ets ( beco!ing rare do to%( #rivati>ation o) industries and econo!ies( Rapid e@pansion o) the /nternet=s capabilities( uic disse!ination o) in)or!ation( peed with which advancing technologies per!it i!itation o) even

co!ple@ products( Mar ets in which the )ir!=s co!petitive advantages are shielded )ro!

i!itation )or long periods o) ti!e, and in which i!itation is costly

& 2. ast+cycle !ar ets Mar ets in which the )ir!=s capabilities thatcontribute to co!petitive advantages are not shielded )ro! i!itation

and where i!itation is o)ten rapid and ine@pensive

& 8. tandard+cycle Mar ets where )ir!-s co!petitive advantages are!oderately shielded )ro! i!itation and where i!itation is !oderatelycostly

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*usiness+Level Cooperative trategy

&/ntroduction&Co!ple!entary strategic alliances :C A;&2 "ypes o) C A% :1; vertical :2; hori>ontal& Co!petition response strategy&Bncertainty+reducing strategy&Co!petition+reducing strategy&*usiness+level cooperative strategies assess!ent

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*usiness+Level Cooperative trategy :Cont-d;

&/ntroduction% *usiness level cooperativestrategies used to grow and i!prove )ir!per)or!ance in individual product !ar ets.Achieved through?

&Co!ple!entary trategic Alliances :C A;

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( 2 "ypes o) C A% :1; vertical :2; hori>ontal& 1. ertical C A

( partnering )ir!s share resources capabilities )ro! di))erent stages o)the value chain to create a co!petitive advantage.

&2. Dori>ontal C A

( partnering )ir!s share resources capabilities )ro! the sa!e stage o)the value chain to create a co!petitive advantage( co!!only used )or long+ter! product develop!ent and distribution

opportunities

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&Co!petition response strategy( Co!petitors

&initiate co!petitive actions to attac rivals& launch co!petitive responses to their co!petitor-s actions

( trategic alliances : A;& can be used at the business level to respond to co!petitor-s

attac s&pri!arily )or!ed to ta e strategic vs. tactical actions& can be di))icult to reverse&e@pensive to operate

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& Bncertainty+reducing strategy( or e@a!ple, entering new product !ar ets, e!ergingecono!ies and establishing a technology standard areun nown areas so by partnering with a )ir! in therespective industry, a )ir!-s uncertainty :ris ; isreduced

( Bncertainty reduced by co!bining nowledge capabilities

&Co!petition+reducing strategy( Collusive strategies :C ; di))er )ro! strategic alliances

in that C are usually illegal( "wo types o) C %

&6@plicit collusion& "acit collusion

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&Co!petition+reducing strategy% "wo Collusivetrategies

( 1. 6@plicit collusion( irect negotiation a!ong )ir!s to establish output levels and pricing

agree!ents that reduce industry co!petition

( 2. "acit collusion( i/ndirect coordination o) production and pricing decisions by several

)ir!s, which i!pacts the degree o) co!petition )aced in the industry

& Mutual )orbearance ( )ir!s do not ta eco!petitive actions against rivals they !eet in!ultiple !ar ets

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& *usiness+level cooperative strategy ( assess!ent( Bsed to develop co!petitive advantages :CA; )or

contributing to success)ul positions per)or!ance inindividual product !ar ets

( eveloping a CA using a strategic alliance, theintegrated resources and capabilities !ust be valuable,rare, i!per)ectly i!itable and nonsubstitutable

( ertical alliances have greatest probability o) creatingCAE hori>ontal are so!eti!es di))icult to !aintain sincethey are usually between co!petitors

( A-s designed to respond to co!petition and reduceuncertainty are !ore te!porary than co!ple!entary:hori>ontal and vertical; strategic alliances

( Co!petition+reducing has lowest probability o) creatinga sustainable CA

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Corporate+Level Cooperative trategies :Cont-d;

&/ntroduction( Corporate+level cooperative strategies :CLC ; help )ir!

to diversi)y itsel) in ter!s o) products o))ered, !ar etsserved or both

( Co!!on CLC )or!s

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&Co!!on CLC )or!s( 1. iversi)ying strategic alliance

& ir!s share so!e o) their resources capabilities to diversi)yinto new product or !ar et areas

( 2. ynergistic strategic alliance& ir!s share so!e o) their resources capabilities to createecono!ies o) scope

( 8. ranchising& ir! uses a )ranchise as a contractual relationship to describe

and control the sharing o) its resources and capabilities withpartners

( ranchise% contractual agree!ent between two legally independentco!panies whereby the )ranchisor grants the right to the )ranchisee tosell the )ranchisor=s product or do business under its trade!ar s in agiven location )or a speci)ied period o) ti!e

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&Assess!ent o) corporate+level cooperativestrategies( Costs incurred regardless o) type selected

&/!portant to !onitor e@pendituresF

( /n co!parison wG business+level strategies&Bsually broader in scope&More co!ple@ and there)ore !ore costly

( Can develop use)ul nowledge ? and, in order to gain!a@i!u! value should organi>e and veri)y proper

distribution with those involved in )or!ing and usingalliances

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/nternational Cooperative trategy

&Cross+*order trategic Alliance( /nternational cooperative strategy in which )ir!s with

head7uarters in di))erent nations co!bine so!e o) theirresources and capabilities to create a co!petitiveadvantage

&

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/nternational Cooperative trategy :Cont-d;

&Ris s( #artners !ay choose to act opportunistically( #artner co!petencies !ay be !isrepresented( #artner !ay )ail to !a e available the co!ple!entary

resources and capabilities that were co!!itted( 'ne partner !ay !a e invest!ents speci)ic to the

alliance while the other partner !ay not

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Managing Co!petitive Ris s in Cooperativetrategies

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Managing Cooperative trategy

&"wo pri!ary approaches( 1. Cost !ini!i>ation( 2. 'pportunity !a@i!i>ation

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Managing Cooperative trategy :Cont-d;

&1. Cost !ini!i>ation( Relationship with partner is )or!ali>ed with contracts( Contracts speci)y how cooperative strategy is to be

!onitored and how partner behavior is to be controlled

( oal is to !ini!i>e costs and prevent opportunisticbehaviors by partners

( Costs o) !onitoring cooperative strategy are greater( or!alities tend to sti)le partner e))orts to gain

!a@i!u! value )ro! their participation

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Managing Cooperative trategy :Cont-d;

&2. 'pportunity Ma@i!i>ation( ocus% !a@i!i>ing partnership=s value+creation

opportunities( /n)or!al relationships and )ewer constraints allow

partners to&ta e advantage o) une@pected opportunities& learn )ro! each other&e@plore additional !ar etplace possibilities

( #artners need a high level o) trust that each party will

act in the partnership=s best interest, which is !oredi))icult in international situations

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Ch 09