Chapter 9 - Cooperative strategy

Question 1

Cooperative strategy

Answer 1

Def: is a strategy in which firms work together to achieve a shared objective
A firm uses a cooperative strategy to:
-Create value for its customer when its likely couldn’t create by itself
-Try to create competitive advantage (also called collaborative or relational advantage )
-outperforms its rivals in terms of strategic competitiveness
-Earn above-average returns

Question 2

Strategic alliance

Answer 2

Def: primary type of a cooperative strategy in which firms combine some of their resources to create a competitive advantage. Firms share and exchange their resources to jointly develop, sell, and service goods or services. (Ex: Disney and Hewlett-Packard packard to use its technology)

Question 3

Joint venture

Answer 3

Def: is a strategy alliance in which 2 or more firms create a legally independent company to share some of their resources to create a competitive advantage.
(a and b becomes one company c)
-Partners own equal % and contribute equally to the venture operation

Question 4

Type of strategy alliance (3)

Answer 4

-Non-equity strategic alliance
-Equity strategic alliance
-Joint venture
Key difference: ownership

Question 5

Equity strategic alliance

Answer 5

When one company purchases a certain equity percentage of the other company. (Ex: Panasonic entered into agreement to supply Tesla motors with lithium-ion battery cells and invested 30$ m in Tesla to support the growth of the electric car)

Def: is an alliance in which 2 or more firms own different % of a company that they have formed by combining some of their resources to create a competitive advantage (ex: when a developed countries enters less developed country)

Question 6

Nonequity strategy alliance

Answer 6

2 or more firms develop a contractual relationship to share some of their unique resources and capabilities (ex: Starbucks and Kroger: Starbucks has a kiosk in many Kroger supermarkets. Starbucks pays for Kroger space, and Kroger customers have the opportunity to sit down and relax with a coffee while shopping)

Def: is an alliance in which 2 or more firms develop a contractual relationship to share some of their resources to create a competitive advantage. Firms do not establish a separate independent company and therefore do not take equity positions. Therefore, less formal, fewer partner commitment .
-low commitment make them unsuitable for complex projects where you effectively transfer tacit knowledge to each other
Ex: Apple and Foxconn tech that builds MacBooks for apple , outsourcing

Question 7

Business-level cooperative strategy

Answer 7

Is a strategy through which firms combine some of their resources to create a competitive advantage by competing in one or more product markets.

Question 8

Complementary Strategic alliances

Answer 8

Are business-level alliances in which firms share resources in complementary ways to create a competitive advantage/ value. [rely on upstream or downstream]
-Vertical : share some of their resources from different stages of the value chain to create a competitive advantage
-Horizontal: share some of their resources from the same stage of the value chain for creating a competitive advantage

Question 9

Competition response alliances

Answer 9

Are business-level alliances where its used to respond to a strategic action of another competitor.
Because they can be difficult to reverse and expensive to operate, strategic alliances are primarily formed to respond to strategic rather than tactical actions.

Question 10

Uncertainty reducing alliances

Answer 10

Are business-level alliances to hedge against risk and uncertainty, especially in fast-cycle markets. This strategy is also used where uncertainty exist, ex: new product markets

Question 11

Competition reducing alliances

Answer 11

Are business-level alliances created to avoid destructive or excessive competition.
Tacit collusion: when firms indirectly coordinate their production and pricing decisions by observing other firm’s actions and responses. [I don’t attack you, you don’t attack me].

Question 12

Corporate-level cooperative strategy

Answer 12

Is a strategy through which a firm collaborates with one or more companies to expand its scope

Question 13

Corporate-level strategic alliances are attractive:

Answer 13

-When a firm seeks to diversify into markets in which the host-nation’s government prevents mergers and acquisitions
-Because they can be used as a “test” to determine whether partners might benefit from a future merger or acquisition between them

Question 14

Compared to merger and acquisitions, corporate-level strategic alliances:

Answer 14

-require fewer resources commitments
-permit greater flexibility in terms of efforts to diversify partners’ operations

Question 15

Diversifying strategic alliance

Answer 15

Is a strategy in which firms share some of their resources to engage in product and/ or geographic diversification
-companies using this strategy seek to enter new markets [either domestic or foreign] with existing products or with newly developed products
-Managing diversity gained through alliances has a fewer financial costs but often requires more managerial expertise

Question 16

Synergistic strategic alliance

Answer 16

Is a strategy in which firms share some of their resources to create economies of scope

Question 17

Franchise