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 competitors.
A primary type of cooperative strategy in which firms combine some of their resources and capabilities to create a mutual competitive advantage Involves the exchange and sharing of resources and capabilities to co-develop or distribute goods and services,Requires cooperative behavior from all partners.
Strategic Alliance Behaviors
Examples of cooperative behavior known to contribute to alliance success are Actively solving problems, Being trustworthy, Consistently pursuing ways to combine partners resources and capabilities to create value.Competitive advantage developed through a cooperative strategy is called a collaborative or relational advantage.
Three 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.
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.
- 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.
Network Cooperative Strategy
A cooperative strategy wherein several firms agree to form multiple partnerships to achieve shared objectives
Stable alliance network:- Long term relationshipsmature industries where demand is relatively constant & predictable.
Stable networks exploiteconomies (scale and/or scope) available between the firms.
Dynamic alliance network:- Primarily used to stimulate rapid, value-creating product innovation and subsequent successful market entries. Purpose is often exploration of new ideas.
Keys to a successful network cooperative strategy
- Effective social relationships
- Interactions among partners
Competitive Risks of Cooperative Strategies
Partners may act opportunistically.
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.
Managing Cooperative Strategies
Cost minimization management approach
Formal contracts with partners
a) How strategy is to be monitored
b) How partner behavior is to be controlled
Goals that minimize costs and prevent opportunistic behavior by partners
Opportunity maximization approach
Maximize partnership’s value-creation opportunities.
learn from each other
explore additional marketplace possibilities
less formal contracts, fewer constraints.