Cooperative Strategy,Michael A. Hitt R. Duane Ireland Robert E. Hoskisson,Chapter 9,1,2003 Southwestern Publishing Company,Strategy Implementation,Chapter 11 Organizational Structure and Controls,Chapter 10 Corporate Governance,Chapter 12 Strategic Leadership,Strategy Formulation,Strategic Competitiveness Above-Average Returns,Strategic Intent Strategic Mission,Chapter 2 The External Environment,Chapter 3 The Internal Environment,The Strategic Management Process,Feedback,Strategic Inputs,Strategic Actions,Strategic Outcomes,Chapter 13 Strategic Entrepreneurship,Chapter 6 Corporate- Level Strategy,Chapter 9 Cooperative Strategy,Chapter 5 Competitive Rivalry and Competitive Dynamics,Chapter 8 International Strategy,Chapter 4 Business-Level Strategy,Chapter 7 Acquisition and Restructuring Strategies,2,Cooperative Strategy,Cooperative strategy is a strategy in which firms work together to achieve a shared objective Cooperating with other firms is a strategy that creates value for a customer exceeds the cost of constructing customer value in other ways establishes a favorable position relative to competition,3,Strategic Alliance,A strategic alliance is a cooperative strategy in which firms combine some of their resources and capabilities to create a competitive advantage A strategic alliance involves exchange and sharing of resources and capabilities co-development or distribution of goods or services,4,Strategic Alliance,5,Types of Cooperative Strategies,Joint venture: two or more firms create an independent company by combining parts of their assets Equity strategic alliance: partners who own different percentages of equity in a new venture Nonequity strategic alliances: contractual agreements given to a company to supply, produce, or distribute a firms goods or services without equity sharing,6,Market,Reason,Slow Cycle,Gain access to a restricted market Establish a franchise in a new market Maintain market stability (e.g., establishing standards),Reasons for Strategic Alliances by Market Type,7,Market,Reason,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,Reasons for Strategic Alliances by Market Type,8,Market,Reason,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,Reasons for Strategic Alliances by Market Type,9,Business-Level Cooperative Strategies:,complementary strategic alliances are designed to take advantage of market opportunities by combining partner firms assets in complementary ways to create new value,these include distribution, supplier or outsourcing alliances where firms rely on upstream or downstream partners to build competitive advantage,Complementary Strategic Alliances,10,Business-Level Cooperative Strategies:,Vertical Alliance,Supplier,vertical complementary strategic alliance is formed between firms that agree to use their skills and capabilities in different stages of the value chain to create value for both firms outsourcing is one example of this type of alliance,Buyer,Complementary Strategic Alliances,11,Business-Level Cooperative Strategies:,Horizontal Alliance,Buyer,Potential Competitors,horizontal complementary strategic alliance is formed between partners who agree to combine their resources and skills to create value in the same stage of the value chain focus on long-term product development and distribution opportunities the partners may become competitors requires a great deal of trust between the partners,Buyer,Complementary Strategic Alliances,12,Business-Level Cooperative Strategies:,competition response strategic alliances occur when firms join forces to respond to a strategic action of another competitor because they can be difficult to reverse and expensive to operate, competition response strategic alliances are primarily formed to respond to strategic rather than tactical actions,Competition Response Alliances,13,Business-Level Cooperative Strategies:,uncertainty reducing strategic alliances are used to hedge against risk and uncertainty these alliances are most noticed in fast-cycle markets alliance may be formed to reduce the uncertainty associated with developing new product or technology standards,Uncertainty Reducing Alliances,14,Business-Level Cooperative Strategies:,competition reducing strategic alliances may be created to avoid destructive or excessive competition explicit collusion exists when firms directly negotiate production output and pricing agreements in order to reduce competition (illegal) tacit collusion exists when several firms in an industry indirectly coordinate their production and pricing decisions by observing each others competitive actions and