Cooperative Strategy (Chapter 9)

Question 1

What is a cooperative strategy?

Answer 1

A strategy through which independent firms choose to work together to achieve a shared objective.

Firms execute cooperative strategy by forming → STRATEGIC ALLIANCES

Question 2

What are strategic alliances?

Answer 2

A strategic alliance is a cooperative strategy in which firms combine some of their resources and capabilities in an attempt to create a competitive advantage.

• For strategic alliances to be formed and carry on, they must benefit every side involved.
• In other words, strategic alliances are mutually lucrative partnerships.

Question 3

What is a diversifying alliance?

Answer 3

Corporate level, non-equity

Question 4

What is a synergistic alliance?

Answer 4

Corporate level, non-equity

Question 5

Why do companies enter into strategic alliances?

Answer 5

• By forming alliances firms can gain access to resources and capabilities they don’t possess internally.
• Firms can enter multiple alliances with different partners for different purposes: creating a portfolio of ongoing alliances.
• Alliances don’t require a large investment like M&A, don’t have the same integration challenges and are not permanent.
• While some alliances last for a long time, most are short-lived and cease to exist as soon as participating firms no longer gain value from the alliance.
• For firms to enter into an alliance, it must be lucrative for all sides.

Question 6

What are the types of strategic alliances?

Answer 6

Joint Venture

• a legally independent company created by two or more firms
• have partners who own equal percentages and contribute equally to the venture’s operations

Equity Alliance

• a legally independent company formed by firms who own different percentages of a company
• a greater (controlling) equity stake owned by partner who contributes more resources and capabilities to the alliance

Non-equity Alliance

• a contractual agreement, no separate legal entity is formed
• licensing agreements, distribution agreements, supply contracts, outsourcing agreements

Question 7

What are the types of complementary alliances?

Answer 7

• Business level, horizontal, joint venture
• Business level, vertical, non-equity
• Business level, horizontal, non-equity
• Business level, vertical, non-equity

Check slides for illustrated examples

Question 8

What is synergistic alliance?

Answer 8

Corporate-level, non-equity
Maximize sales by taking advantage of each other’s foot traffic

Question 9

What is franchising?

Answer 9

A franchise is a business whereby the owner licenses its operations—along with its products, branding, and knowledge—in exchange for a franchise fee. The franchisor is the business that grants licenses to franchisees. (GOOGLE)

Question 10

Discuss the IKEA franchising example

Answer 10

only read this slide

Question 11

Discuss the Eli Lilly and Ranbaxy example

Answer 11

Cross-border joint venture
Eli Lilly: Opportunity to get established in the Indian market
Ranbaxy: Opportunity to learn from a world class innovator

Question 12

Discuss the Air France-KLM & Delta example

Answer 12

Business level, horizontal, joint venture (contract)

Generate sales:

• Provide more route options to customers
• Customers’ frequent flier programs work across partnering airlines

Manage costs:

• Share costs on common routes

Overall benefit: maximize sales and share costs in a competitive industry

Question 13

Discuss the Cirque du Soleil & MGM Mirage example

Answer 13

Synergistic alliance, non-equity
CdS: Need venue to maximize ticket sales
MGM: Need entertainment to draw customers to the hotel