Cooperative Strategy. BA 495.009. Chapter Nine. Today’s Agenda. Strategic Alliances Business-level Cooperative Strategies Corporate-level Cooperative Strategies Other Types of Cooperative Strategies International Network Risks & Managerial Problems Wrap-up. Strategic Alliances.
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“If you think you can go it alone in today’s global economy, you are highly mistaken.”
Jack Welch, former CEO of General Electric
“Not all the smart people work for Sun.”
William Joy, Vice President of R&D, Sun Microsystems
Slow-Cycle • Gain access to a restricted market• Establish a franchise in a new market• Maintain market stability (e.g., 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
Westin Hotelsand Resorts(Coffee servedthroughout hotel)
Dreyer’s(premium coffeeice cream)
New products,marketing andsales partners
United Airlines(in-flight coffee)
Barnes & Noble(in-store stores)
Host Marriott Services(worldwide airport kiosksand in-hotel coffee cafes)
Include distribution, supplier or outsourcing alliances where firms rely on upstream or downstream partners to build competitive advantage.
AlliancesBusiness-Level Cooperative Strategies
Because they can be difficult to reverse and expensive to operate, strategic alliances are primarily formed to respond to strategic rather than tactical actions.
Competition Response AlliancesCompetition Response Strategy
These alliances are most prevalent in fast-cycle markets
An alliance may be formed to reduce the uncertainty associated with developing new product or technology standards.
Competition Response Alliances
UncertaintyReducing AlliancesUncertainty-Reducing Strategy
Explicit collusion: when firms directly negotiate production output and pricing agreements in order to reduce competition (illegal).
Tacit collusion: when firms in an industry indirectly coordinate their production and pricing decisions by observing other firm’s actions and responses.
Competition Response Alliances
CompetitionReducing AlliancesCompetition-Reducing Strategy
Provides some of the potential synergistic benefits of a merger or acquisition, but with less risk and greater levels of flexibility.
Permits a “test” of whether a future merger between the partners would benefit both parties.
DiversifyingStrategic AllianceDiversifying Strategic Alliances
Creates synergy across multiple functions or multiple businesses between partner firms.
SynergisticStrategic AllianceSynergistic Strategic Alliances
A contractual relationship (the franchise) is developed between two parties, the franchisee and the franchisor.
An alternative to pursuing growth through mergers and acquisitions.
Dynamic AllianceNetworkNetwork Cooperative Strategies