Group 9 Presentation
COOPERATIVE
STRATEGY
• Capitle, Kyla Paulyn
• Clemente, Denise Anne
• Nicanor, Rashel
CHAPTER 9: COOPERATIVE
STRATEGY
• OVERVIEW: SEVEN CONTENT AREAS
1. Define cooperative strategies and explain why firms
use them.
2. Define and discuss the three major types of strategic
alliances.
3. Name the business-level cooperative strategies and
describe their use.
4. Discuss the use of corporate-level cooperative
strategies.
5. Understand why firms use cross-border strategic
alliances as an international cooperative strategy.
6. Explain cooperative strategies' risks.
[Link] two approaches used to manage cooperative
strategies.
• COOPERATIVE STRATEGY
- 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.
STRATEGIC ALLIANCES AS A PRIMARY
TYPE OF COOPERATIVE STRATEGY
Strategic Alliance is a cooperative strategy in which firms combine some
of their resources to create competitive advantage. Strategic alliances
involve firms with some degree of exchange and sharing of resources to
jointly develop, sell, and service goods or services. Firms use strategic
alliances to leverage their existing resources while working with partners
to develop additional resources.
3 TYPES 1. JOINT VENTURE 2. EQUITY STRATEGIC ALLIANCE
OF STRATEGIC
3. NON-EQUITY STRATEGIC ALLIANCE
ALLIANCES
3 MAJOR TYPES OF
STRATEGIC ALLIANCES
1. JOINT VENTURE
- Two or more firms create a legally independent
company to share some of their resources to
create a competitive advantage.
2. EQUITY STRATEGIC ALLIANCE
- Two or more firms own different percentages of
a company that they have formed by combining
some of their resources to create a competitive
advantage.
3. NON-EQUITY STRATEGIC ALLIANCE
- Two or more firms develop a contractual
relationship to share some of their resources to
create a competitive advantage.
REASONS FIRMS DEVELOP
STRATEGIC ALLIANCES
1 2 3 4
To create value Most companies Aligning Alliances can
they couldn't lack the full set of stakeholder provide a new
generate by resources needed interests (both source of revenue
acting to pursue all inside and outside and gain new
independently identified of the organization) knowledge and
and entering opportunities and can reduce experiences to
markets more objectives. environmental increase
rapidly. uncertainty. competitiveness.
REASONS FOR STRATEGIC
ALLIANCES BY MARKET TYPE
MARKET TYPE REASON FOR USING A STRATEGIC ALLIANCE
• Gain access to restricted market.
SLOW- • Establish a franchise in a new market.
CYCLE • Maintain market stability(e.g., establishing standards).
• Speed up development of new • Form an industry technology
FAST- goods or services. standard.
• Speed up new market entry. • Share risky R&D expenses.
CYCLE • Maintain market leadership. • Overcome uncertainty.
• Gain market power(reduce industry • Overcome trade barriers.
STANDARD overcapacity).
• Meet competitive challenges from other
competitors.
-CYCLE • Gain access to complementary • Pool resources for very large capital
resources. projects.
• Establish better economies of • Learn new business techniques.
scale.
3 MARKET TYPE
1. SLOW-CYCLE MARKET
- In a slow cycle, a company’s competitive
advantages are shielded for relatively long periods
of time. Companies operates in a slow product life
cycle as the products are not developed yearly.
2. FAST-CYCLE MARKET
- In a fast cycle, the company’s competitive
advantages are not protected and companies
operating in a fast product lifecycle need to
constantly develop new products/services to
survive.
3. STANDARD-CYCLE MARKET
- In a standard cycle, the company launches a new
product every few years and may or may not be
able to maintain its leading position in an industry.
BUSINESS-LEVEL
COOPERATIVE STRATEGY
Business-Level Cooperative Strategy is a strategy through which firms
combine some of their resources to create a competitive advantage by
competing in one or more product markets. The firm forms a business-
level cooperative strategy when it believes that combining some of its
resources with those of one or more partners will create competitive
advantages that it can't create alone.
Complementary Strategic Alliances are business-
COMPLEMENTARY level alliances in which firms share some of their
STRATEGIC resources in complementary ways to create a
ALLIANCES competitive advantage.
COMPLEMENTARY STRATEGIC
ALLIANCES
COMPLEMENTARY STRATEGIC
• VerticalALLIANCES
CSA • Horizontal
CSA
COMPETITION-RESPONSE
STRATEGY
UNCERTAINTY-REDUCING STRATEGY
COMPETITION-REDUCING STRATEGY
VERTICAL COMPLEMENTARY STRATEGIC ALLIANCE
Vertical Complementary Strategic Alliance
partnering firms share resources & capabilities from
different stages of the value chain to create a
competitive advantage.
HORIZONTAL COMPLEMENTARY STRATEGIC
ALLIANCE
Partnering firms share resources & capabilities from
the same stage of the value chain to create a
competitive advantage
Commonly used for long-term product development
and distribution opportunities
VERTICAL AND HORIZONTAL COMPLEMENTARY
STRATEGIC ALLIANCE
OMPETITION RESPONSE STRATEGY
Competitors
• Initiate competitive actions to attack rivals
• Launch competitive responses to their
competitor's actions
Strategic alliances (SA)
•Can be used at the business level to respond
to competitor's attacks
•Primarily formed to take strategic [Link]
actions
•can be difficult to reverse expensive to
NCERTAINTY REDUCING STRATEGY
STRATEGIC FOCUS
• Entering new product markets,emerging
economies and establishing a technology
standard are unknown areas so by partnering
with a firm in the respective industry,a firm's
uncertainty (risk) is reduced
•Uncertainty reduced by combining knowledge
& capabilities
COMPETITION-REDUCING STRATEGY
Competition-Reducing Strategy is a business-level
cooperative strategy that firms use when they need to
reduce competition in the market.
2 TYPES 1. EXPLICIT
OF COLLUSIVE COLLUSION
2. TACIT COLLUSION
STRATEGIES
2 TYPES of cOLLUSIVE
STRATEGIES
1. EXPLICIT COLLUSION
Direct negotiation among firms to establish
output levels and pricing agreements that
reduce industry competition
2. TACIT COLLUSION
Indirect coordination of production and pricing
decisions by several firms, which impacts the
degree of competition faced in the industry
MUTUAL FORBEARANCE
Firms do not take competitive actions against
rivals they meet in multiple markets
CORPORATE LEVEL COOPERATIVE STRATEGIES
Corporate-level cooperative strategies (CLCS) help
firm to diversify itself in terms of products
offered,markets served or both.
CORPORATE LEVEL COOPERATIVE STRATEGIES
CORPORATE LEVEL COOPERATIVE
STRATEGIES
DIVERSIFYING SYNERGISTIC
FRANCHISING
ALLIANCE ALLIANCES
CORPORATE LEVEL COOPERATIVE
STRATEGIES FORMS
DIVERSIFYING STRATEGIC
ALLIANCE
Firms share some of their resources & capabilities to
diversify into new product or market areas
SYNERGISTIC STRATEGIC ALLIANCES
-is a strategy in which firms share some of their
resources to create economies of scope.
FRANCHISING
-uses a franchise as a contractual relationship to discribe
and control the sharing of its resources with its partners.
ASSESSMENT OF CORPORATE-LEVEL
COOPERATIVE STRATEGIES
• Compared to business-level strategies
⚬ Broader in scope
⚬ More complex
⚬ More costly
• Can lead to competitive advantage and value when:
⚬ Successful alliance experiences are internalized.
⚬ The firm uses such strategies to develop useful knowledge about
how to succeed in the future..
INTERNATIONAL COOPERATIVE
STRATEGIES
• Cross-border Strategic Alliance
⚬ A strategy in which firms with headquarters in different nations combine
their resources 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.
• Effective social relationships and interactions among partners are keys to a
successful network cooperative strategy.
STABLE ALLIANCE NETWORK
• Long term relationships that often appear in mature industries where
demand is relatively constant and predictable
• Stable networks are built for exploitation of the economies (scale and/or
scope) available between the firms
DYNAMIC ALLIANCE NETWORK
• Arrangements that evolve in industries with rapid technological change
leading to short product life cycles.
• Primarily used to stimulate rapid, value-creating product innovation and
subsequent successful market entries.
• Purpose is often exploration of new ideas
COMPETITIVE RISKS WITH 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 COMPETITIVE RISKS IN
COOPERATIVE STRATEGIES
• Inadequate
contracts
• Misrepresentation • Detailed
of competencies Risks and contracts
• Partner fail to use
and
Competitive their Asset Desired Creating
complementary monitoring
Risks resources
Managment • Developing
Outcome value
• Holding alliance Approaches trusting
partners’ specific
investments relationship
hostage
MANAGING COOPERATIVE
STRATEGIES
• Cost Minimization Management Approach
⚬ Have formal contracts with partners.
⚬ Specify how strategy is to be monitored.
⚬ Specify how partner behavior is to be controlled.
⚬ Set goals that minimize costs and to prevent
opportunistic behavior by partners.
• Opportunity Maximization Approach
⚬ Maximize partnership's value-creation
opportunities
⚬ Learn from each other
⚬ Explore additional marketplace possibilities
⚬ Maintain less formal contracts, fewer constraints
THANK
YOU!
END SLIDE
