Chapter 9 Cooperative Strategy Hitt, Ireland, and Hoskisson

Chapter 9

Cooperative Strategy

Hitt, Ireland, and Hoskisson

Copyright © 2008 Cengage

Cooperative strategies

Strategic alliances Collusive alliances


Cooperative strategy: 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.


Cooperative strategy: Collusive strategies Collusive strategies

Explicit collusive strategies Illegal unless sanctioned by government policies. Reduced by increasing globalization

Tacit collusion - also called mutual forbearance A cooperative strategy through which firms tacitly

cooperate to reduce industry output below the potential competitive output level, thereby raising prices above the competitive level.


Reasons to use cooperative strategiesMarket ReasonSlow-Cycle • Gain access to a restricted market

• Establish a franchise in a new market• Maintain market stability (such as establishing standards)

Fast-Cycle • 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

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• Learn new business techniques


Business-level cooperative strategies Complementary strategic alliances

Vertical Horizontal

Competition-responding strategies Competition-reducing strategies Uncertainty-reducing strategies


Corporate-level cooperative strategies Diversifying alliances Synergistic alliances Franchising


International cooperative strategy Cross-border alliance

Used for several reasons, including the performance superiority of firms competing in markets outside their domestic market and governmental restrictions on growth through mergers and acquisitions.

Are riskier than their domestic counterparts, particularly when partners aren’t fully aware of each other’s purpose for participating in the partnership.


Network cooperative strategy Definition

A cooperative strategy in which several firms form multiple partnerships to achieve shared objectives.

Primary benefit A firm has the opportunity to gain access to its

partner’s other partnerships.


Alliance networks

Stable alliance networks Formed in mature industries primarily to exploit the

economies (scale and/or scope) that exist between the partners

Dynamic alliance networks Used in industries characterized by frequent product

innovations and short product life cycles. In dynamic alliance networks, partners typically explore new ideas and possibilities with the potential to lead to product innovations, entries to new markets, and the development of new markets.


Competitive risks in cooperative strategies


Trust and partnerships

With trust Trust is an increasingly

important aspect of successful cooperative strategies.

Firms recognize the value of partnering with companies known for their trustworthiness.

When trust exists, a cooperative strategy is managed to maximize the pursuit of opportunities between partners.

Without trust Formal contracts and

extensive monitoring systems must be usedto manage cooperative strategies.

In this case, the interestis to minimize costs rather than to maximize opportunities by participating in a cooperative strategy.

Documents

Chapter 9 Cooperative Strategy Hitt, Ireland, and Hoskisson