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An overview of strategic alliance: Competitive Advantages in Alliance

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Advances In Management
An Overview of Strategic Alliance: Competitive Advantages in
Alliance Constellations
Mowla Mohammad Masrurul
Department of Business Administration, International Islamic University Chittagong, Chittagong, BANGLADESH
mmm_iiuc@yahoo.com
Abstract
Strategic alliances which are cooperative strategies in
which firms combine some of their resources to create
competitive advantages, are the primary form of
cooperative strategies. Strategic alliances are an
important source of resources, learning and thereby
competitive advantage. Few firms have all of the
resources needed to compete effectively in the current
dynamic landscape. Thus, firms seek access to the
necessary resources through alliances. Research on
strategic alliance in the past few decades has suggested
that strategic alliance dramatically reshaped the
dynamic of competition. This study provides an
important and useful perspective on strategic alliances.
Approaches, examples, models and other tools are
discussed to develop a deeper understanding of how
competitive advantage of the alliance can be achieved.
Keywords: Competitive Advantage, Alliance, Joint Venture,
Merger, Acquisition, Constellations.
Introduction
In today's environment, creating sustainable value for
customers and shareholders requires creating effective
alliances. Alliances are essential building blocks for
companies to achieve stronger and more effective market
presence. Alliances are now a fact of life for business, an
important piece of current operations as well as future
strategy.
During the past decades, we witnessed the widespread
phenomenon of strategic alliances across all types of firms
competing in every imaginable industry. Hardly a day goes
by without the media reporting the signing of an agreement
between two or more firms. As costs and risks of new product
and process development are sky-rocking, strategic alliances
become even more commonplace in the economic landscape,
especially those with cross-national borders and cultures.
Alliances provide access to external resources, by providing
synergies and by fostering rapid learning and change. Large
and fast-growing enterprises, Microsoft, Philips or Unilever
rely heavily on alliances to support their growth strategy.
The historical data clearly show that now companies are
becoming more and more dependents on strategic alliances. It
is important to investigate why the companies are intent to
engage in such a strategic relationship and how it yields
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Vol. 5 (12) Dec. (2012)
competitive advantages. Doing so necessitates the
identification and implementation of the key elements of
successful strategic alliance strategy and points out how it
reshapes the dynamic of competitive advantage.
Rationale of the study
There is not a sector of the economy that has not witnessed a
dramatic increase in the number of alliances used by its firms
to improve their competitive positions. Despite the fact that
an alliance is formed nearly every 90 seconds, failure rates
appear to occur in nearly 60 percent of all alliances. 2 In most
instances, failure is not a function of the alliance being a bad
strategic option; rather, failure is attributable to managerial
error. These errors can occur at any phase in the
development, nurturing, or management of the alliance.
Alliances fail because managers do not understand the
complex interplay of a number of factors that can cause even
the most well intended alliance to experience problems.
Businesses striving to enhance its competitive advantages by
building a successful strategic alliance and changed
competitive environment could be missing a major element
by not focusing on understanding the key operational
determinants of successful alliance and the best way to
achieve excellent strategic relationship in the light of new
modified competitive environment. This study is guided by
the rationale of exploring these determinants.
An Overview of Strategic Alliance
Strategic alliances are agreements between companies
(partners) to reach objectives of common interest. Strategic
alliances are among the various options which companies can
use to achieve their goals; they are based on cooperation
between companies17. Strategic alliances are agreements
between companies that remain independent and are often in
competition. In practice, they would be all relationships
between companies, with the exception of (a) transactions
(acquisitions, sales, loans) based on short-term contracts
(while a transaction from a multi-year agreement between a
supplier and a buyer could be an alliance); (b) agreements
related to activities that are not important, or not strategic for
the partners, for example a multi-year agreement for a service
provider (outsourcing).18 Strategic alliance can be described
as a process wherein participants willingly modify their basic
business practices with a purpose to reduce duplication and
waste while facilitating improved performance.19
Wheelen and Hungar20 defined strategic alliance as "an
Advances In Management
agreement between firms to do business together in ways that
go beyond normal company-to-company dealings, but fall
short of merger or a full partnership‖. Others define these
more restrictively; for example, Professor Benjamin Gomes-
Casseres of Brandeis University views them as open-ended,
incomplete agreements with shared control that create value
by combining the capabilities of separate firms. An
"incomplete" agreement means that the full terms or
conditions of the alliance are not fully established at its
conception because if they were, the need for a strategic
alliance would not exist.8
A strategic alliance has to contribute to the successful
implementation of the strategic plan; therefore, the alliance
must be strategic in nature. The relationship has to be
supported by executive leadership and formed by lower
management at the highest, macro level. While the following
does not represent a comprehensive definition for a strategic
alliance, at this stage, one might define a strategic alliance as
a relationship between organizations for the purposes of
achieving successful implementation of a strategic plan.
In simple words, a strategic alliance is sometimes just
referred to as ―partnership‖ that offers businesses a chance to
join forces for a mutually beneficial opportunity and
sustained competitive advantage.
A strategic alliance is a contractual, temporary relationship
between companies remaining independent, aimed at
reducing the uncertainty around the realization of the
partners‘ strategic objectives (for which the partners are
mutually dependent) by means of coordinating or jointly
executing one or several of the companies‘ activities. Each of
the partners are able to exert considerable influence upon the
management or policy of the alliance. the partners are
financially involved, although by definition not through
Definition of ―Alliance‖
Arm‘s Length
Contract
1. creates values by combining capabilities
2. of separate firms
3. which share control
4. in an open-ended (incomplete) agreement.
Source: Gomes-Casseres8, 9, 21
www.alliancestrategy.com
Strategic Alliances Vs Traditional Relationship
To understand the power of an alliance, a comprehensive
comparison has been shown making it clear how it differs
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Vol. 5 (12) Dec. (2012)
participation and share the costs, profits and risks of the
strategic alliance.23
An alliance is a cooperative agreement or association
between two or more independent enterprises which will
manage one specific project, with a determined duration, for
which they will be together in order to improve their
competences. It is constituted to allow its partners to pool
resources and coordinate efforts in order to achieve results
that neither could obtain by acting alone. the key parameters
surrounding alliances are opportunism, necessity and speed. 22
A strategic alliance is a particular mode of inter-
organizational relationship in which the partners make
substantial investments in developing a long-term
collaborative effort and common orientation.24
Strategic alliances are voluntary arrangements between firms
involving exchange, sharing, or co-development of products,
technologies, or services.25
Alliances are long-term, trust-based relationships that entail
highly relationship-specific investments in ventures that
cannot be fully specified in advance of their execution. 20
Strategic alliances are long-term agreements between firms
that go beyond normal market transactions but fall short of
merger. Forms include joint ventures, licenses, long-term
supply agreements and other kinds of inter-firm
relationships.26
A strategic alliance is a partnership between two or more
firms that unite to pursue a set of agreed upon goals but
remain independent subsequent to the formation of the
alliance to contribute and to share benefits on a continuing
basis in one or more key strategic areas, e.g. technology,
products.27
Merger or
Acquisition
from traditional relationships. Seven differences might stand
out:
Cost: Alliances understand the sources of cost and then
Advances In Management
eliminate them. Traditional relationships push costs onto
others. This is the outcome of classical win-lose negotiating
the zero-sum game.
Value: Alliances focus on the ultimate customer and partners
add value that customers pay for. Traditional relationships
view value as a cost, where there is a perceived tradeoff.
Low-cost bids usually win, resulting in process and product
problems.
Productivity: Alliances understand failures, bottlenecks and
variability. They optimize systems to achieve flow at the
customers demand. By partnering with a critical few
suppliers, alliances reduce variability of the source of flow
problems. Traditional relationships increase variability by
introducing more suppliers into the mix.
Information: Alliances practice open communications and
encourage transparency throughout the supply chain. They
understand that knowledge shared is more powerful than
knowledge protected. Traditional relationships use
information as a weapon in win-lose negotiations.
Resources: Alliance partners invest resources to design and
operate the partnership. They engage people, since human
resources make the process work. They provide resources to
improvement initiatives jointly including people, time and
money to ensure the alliance meets its potential. Traditional
relationships view people, time and money as resources to
protect on their own side and extract from the other.
Relations: Alliance partners structure the relationship with
operating principles that survive the people assignments.
Traditional relationships are personality-dependent systems
that reflect the agendas of the people in the system.
Risks and Rewards: Alliance partners share risks and
rewards. The traditionalist assigns the risks and keeps the
rewards.
Motives underlying Entry of Firms into
Alliances
1. Market entry and market position-related motives:
(a) to gain access to new international markets: (b) to
circumvent barriers to entering international markets
posed by legal. Regulatory and/or political factors: (c) to
defend market position in present markets: and (d) to
enhance market position in present markets.
2. Product-related motives: (a) to fill gaps in present
product line and (b) to broaden present product line.
3. Product-market-related motives: (a) to enter new
product-market domains and (b) to enter or maintain the
option to enter evolving industries whose product
offerings may emerge as either substitutes for or
complements to the firm‘s product offerings.
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Vol. 5 (12) Dec. (2012)
4. Market structure modification-related motives: (a) to
reduce potential threat of future competition. (b) to raise
entry barriers/erect entry barriers and (c) to alter the
technological base of competition.
5. Market entry timing-related motives: to accelerate
pace of entry into new product-market domains by
accelerating pace of RandD, product development and/or
market entry.
6. Resource Utilization Efficiency-related motives: (a) to
lower manufacturing costs and (b) to lower marketing
costs.
7. Resource extension and risk reduction-related
motives: (a) to pool resources in light of large outlays
required and (b) to lower risk in the face of large
resource outlays required, technological uncertainties,
market uncertainties and/or other uncertainties.
8. Skills enhancement-related motives: (a) to team new
skills from alliance partners and (b) to enhance present
skills by working with alliance partners.
Underlying Philosophies and Relevant Theories
The two basic philosophies which underlie the theories of
firm behavior are that companies either adapt to their
environment or that companies attempt to influence their
environment. In reality, companies develop and implement
strategies constantly and rarely follow either of these two
approaches alone. For explanatory purposes, the two
philosophies can be seen as anchor points on a continuum on
which various theories of firm behavior can be examined.
Several theories of firm behavior can be used as a basis for
explaining strategic alliance formation: transaction cost
theory, resource dependency theory, organizational theory,
relationship marketing and strategic behavior theory. These
theories of rational behavior can be positioned with respect to
the underlying philosophies as shown in figure 2. Non
rational theories such as mimetic behavior or convenience are
not included in this framework.
Transaction cost theory suggests that companies form
alliances in order to minimize their costs and/or risks.
Forming a strategic alliance represents an internalization
process for a firm, thereby removing it from the price
vagrancies of the market place, accompanying negotiation
and risk. Thus, forming an alliance represents one way a firm
adapts to an uncertain world.
Resource dependency theory states that firms have specific
resources but that few companies are self sufficient in these
resources and therefore must depend on others for important
resources. A deficiency in one or more strategic resource (i.e.
Advances In Management Vol. 5 (12) Dec. (2012)

core competencies) is seen as the driving force for resource dependency theories can be summarized into a
collaboration and a means of reducing uncertainty and broader theory of structure and governance which implies
managing this dependency. Transaction cost economics and that companies adapt or react to their environment.

Fig. 1: Purpose of Alliance

Underlying Philosophies Relevant Theories

Transaction Costs

Companies Adapt to their Resource Dependency

Environment
Organizational Learning

Relationship Marketing
Companies Attempt to Influence
their Environment Strategic Behavior

Underlying Philosophies Relevant Theories

Fig. 2: Positioning the Underlying Philosophies and Theories Relevant to Strategic Alliance Formation

Organizational learning differentiates between tacit and transferred by learning alongside the individual. It cannot be
specific knowledge. Whereas specific knowledge can be bought or licensed. This theory sits at the midpoint of the two
transferred through licensing, tacit knowledge is that underlying philosophies: companies could be seen to view
knowledge embedded in an individual and which can only be knowledge as a means of retaining or acquiring

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Advances In Management
competencies, in a similar approach to resource dependency
theory and therefore adapting to their environment.
Alternatively, companies could be seen as acquiring
knowledge in order to compete at different points in the value
chain, thereby changing the industry structure in which they
operate.
Relationship marketing can be traced back to the notion of
domesticated markets which refers to the tendency of firms in
industrial markets to form strong relationships with their
customers and suppliers. The focus of relationship marketing
is that firms act in order to provide superior customer value.
Within this new approach to marketing, marketing alliances
are seen as the least risky and most effective means of
providing services/products that will enhance the relationship
with the customer base.
Strategic behavior theory addresses the issue of a firm‘s
behavior from a managerial, rather than a marketing
approach. Companies are expected to form cooperative
agreements if they believe that these arrangements will better
enable them to meet their strategic objectives with the focus
being on maximizing profits. Both relationship marketing and
strategic behavior theory propose that firms form strategic
alliances as a means of acting proactively and in so doing,
altering their environment
Types of Strategic Alliances
Strategic alliances take many forms, including contractual
arrangements (such as license agreements, marketing
agreements and development agreements), minority equity
investments and joint ventures that are operated as separate
legal entities (such as corporations, limited liability
companies, or partnerships). Regardless of the form, strategic
alliances share common features such as: (i) defined scope
and strategic objectives; (ii) interdependent contractual
arrangements within the defined scope and to achieve the
strategic goals; (iii) specifically defined responsibilities and
commitments for each party; (iv) independence of the parties
outside of the defined scope of the alliance; and (v) a fixed
time period in which to achieve the strategic goals.
The simplest form of strategic alliance is a contractual
arrangement. Contractual-based strategic alliances generally
are short-term arrangements that are appropriate when a
formal management structure is not required. While the
specific provisions of the contract will depend upon the
business arrangement, the contract should address: (i) the
duties and responsibilities of each party; (ii) confidentiality
and non-competition; (iii) payment terms; (iv) scientific or
technical milestones; (v) ownership of intellectual property;
(vi) remedies for breach; and (vii) termination. Examples of
contractual strategic alliances are license agreements,
marketing, promotion and distribution agreements,
development agreements and service agreements.
The most complex form of strategic alliance is a joint
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Vol. 5 (12) Dec. (2012)
venture. A joint venture involves creating a separate legal
entity (generally a corporation, limited liability company, or
partnership) through which the business of the alliance is
conducted. A joint venture may be appropriate if: (i) the
parties intend a long-term alliance; (ii) the alliance will
require a significant commitment of resources by each party;
(iii) the alliance will require significant interaction between
the parties; (iv) the alliance will require a separate
management structure; or (v) if the business of the alliance
may be subject to unique regulatory issues. In addition, a
joint venture will be appropriate if the parties expect that the
alliance ultimately may be able to function as a separate
business that could be sold or taken public.
Historically, information technology and life sciences
companies have sought minority equity investments from
strategic commercial partners. This form of strategic alliance
has gained increased popularity in the current economic
climate. In many cases, the equity investment will also be
accompanied by a contractual arrangement between the
parties such as a license agreement or a distribution
agreement. From the company‘s perspective, an equity
investment from a strategic commercial partner may be
structured on more favorable terms than those obtained from
venture capitalists and it may increase the company‘s
valuation and enhance the company‘s ability to secure future
rounds of funding.
Venture capitalists and underwriters generally view these
types of strategic alliances as validating an early stage
company‘s technology and business model. In some cases,
they have even become a condition to an underwriter taking a
life science company public. The strategic commercial
partner may desire this form of alliance to gain a competitive
advantage through access to new technologies and to share in
the upside of the other party‘s business through equity
ownership.
Strategic alliances can be considered on a spectrum ranging
from informal collaboration (which hardly merits the term
strategic alliance) to group structures and finally merger.
Alliances at the left hand end of the spectrum allow
organizations to maintain a great deal of autonomy. Moving
across the different types (to the right) requires greater
commitment and leads to greater integration. Following
alliances are identified:
Joint marketing/promotion 55%
Joint selling or distribution 42%
Production 26%
Design Collaboration 23%
Technology Licensing 22%
Research and Development Contracts 19%
Other Outsourcing Purposes 19%
Advances In Management Vol. 5 (12) Dec. (2012)

not only on ‗doing the deal‘ but also on ‗an overall alliance
strategy‘ that is tied to overall business strategy. Superior
performance comes from managing this whole array of
issues. To help keep track of these issues, the Arc of Alliance
Strategy has been designed shown in figure 3. The four
elements of the alliance strategy arc rest on a foundation that
is the general strategy and organization of the firm. This arc
represents an integrated view of what it takes to succeed with
alliances.

Although mastery of these individual elements of alliance

The type of alliance chosen for a particular venture needs to
suit the circumstances.
The Arc of Alliance Strategy
For generating competitive advantage it is important to focus
strategy is essential, it is the overall workings of the arc that
drive success. Within the arc, the strongest links are between
alliance design and management. The success of one clearly
depends on the other. The design must set the stage for
management and management must strive to bring to fruition
the goals set at design. These two elements apply to every
alliance of the firm and carry roughly equal weight in the
success of any given alliance.

Informal Strategic Joint Shared Federal Group

Merge
collaboration partnership venture Box-office structure structure
r
Greater autonomy Greater integration

Source: www.compasspartnership.co.uk
Crafting Alliance Strategy
It should now be clear that an alliance strategy is so much
more than a strategic alliance, in that it creates the very
context for successful partnerships. According to Gomes-
Casseres8, success of any given alliance typically depends on
10 key factors.
1. Have a clear strategic purpose - alliances never end in
themselves, they are always used as tools in service of a
business strategy.
2. Find a fitting partner - a partner with compatible goals
and complementary capabilities.
3. Specialize - allocate tasks and responsibilities in the
alliances in a way that enables each party to do what they
do best.
4. Create incentives for cooperation - working together
never happens automatically, particularly when partners
were formerly rivals.
5. Minimize conflicts between partners - the scope of the
alliance and of partners' roles should avoid pitting one
against the other in the market.
6. Share information – continual communication develops
trust and keeps joint projects on target.
7. Exchange personnel - regardless of the form of the
alliance, personal contact and site visits are essential for
maintaining communication and trust.
8. Operate with long time-horizons - mutual forbearance in
solving short-run conflicts is enhanced by the
expectation of long-term gains.
9. Develop multiple joint projects - successful cooperation
on one project can help partners weather the storm in less
successful joint projects.
10. Be flexible - alliances are open-ended and dynamic
relationships that need to evolve in pace with their
environment and in pursuit of new opportunities.
To craft a successful alliance strategy, one needs to establish
an internal culture that views alliances as simply another
business option, not as a panacea; they have risks and rewards
and they will work for some things but not for others.
Effective management of alliances also relies on the ability to
cope with change.
If the market changes, will the production schedule not
change? The same thinking should be applied for alliances. It
is unlikely that a company will get everything it wants out of
an alliance, but it can also obtain much that it did not expect.
The secret is to grab opportunities for change, not ignore
them.

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Advances In Management
Goal, Partner
Alliance
Selection, Design
Structure
Alliance
Constellation
Design and
Management of
Alliance
Portfolio
Industry and Company Context
STRATEGY
Fig. 3: The Arc of Alliance Strategy
With such elements in place, the number of deals in which
your company is engaged can be expected to grow and will
need to be managed. This means prioritizing alliances and
creating an organizational hierarchy responsible for
optimizing the portfolio. This will call for making trade-offs
among partners or even among the goals of different business
units. Remember that ad hoc growth of your alliance portfolio
is costly to your alliance strategy.
As your alliances grow in numbers, the importance of a
supportive internal infrastructure will also become evident.
Suddenly, tending to alliances will begin to place substantial
demands on scarce resources. When the organization is taxed,
it will either resist change or find new ways to accommodate
and support the alliance strategy. Only the latter route offers a
hope of success. The companies of today and tomorrow will
not survive if they try to do everything themselves, nor will
they be saved by a strategic alliance here or there. But having
a real alliance strategy will at the very least give them a
strong fighting chance.
Competitive Advantages in Alliance
Constellations
In today's environment, creating sustainable value for
customers and shareholders requires creating effective
alliances. Alliances are essential building blocks for
companies to achieve stronger and more effective market
presence. Alliances are now a fact of life for business, an
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Vol. 5 (12) Dec. (2012)
Relationship
Alliance
Management,
Management Alliance
Alliance
Capability
Internal
Organization,
Knowledge
Management
ORGANIZATION
important piece of current operations as well as future
strategy.
There are many ways to build a competitive advantage which
depend a lot on management of the alliance. Some firms place
alliance management under a centralized organization while
others prefer to distribute responsibility for alliances across
all business units. Furthermore, the competitive advantage of
a strategic alliance also depends on its organizational and
strategic circumstances.
The Nature of Group-Based Advantage
The group-based advantage of a constellation differentiates it
from rival constellations and determines the share of the
industry profits that it can earn. Analogous to the traditional
model based on firms, group-based advantage stems from the
relative value of the resources controlled by the constellation.
Let us focus on the two elements in this statement: first, the
nature of the resources in each constellation; and second, how
the constellation controls these resources. Because
constellations are groups of allied firms, the resources in the
constellation are the sum of the resources contributed to the
group by member firms. But these resources are not
controlled as tightly as they would be inside a firm, because
of the incomplete contracts (and possibly partial ownership)
in the alliances that tie the member firms together. Just like in
a single alliance, therefore, the potential of a constellation to
Advances In Management
create joint value is realized only by how well the
constellation is structured and managed. Research and
anecdotal evidence suggests that group-based advantage is
affected by the factors shown in table 1.
Table 1
Some factors shaping group-based advantages
Resources assembled: how valuable in the domain?
Total scale of operations
Technological capabilities
Market reach
Presence in key value chain segments
Organizational structure: how effective are the
resources combined?
Unifying vision
Limited internal rivalry
Leadership at the core—one or a few firms
Limited membership, or norms and rules for similar
members
The table shows an illustrative set of resources (‗Resources
assembled‘), the value of which clearly depends on the nature
of the competitive domain. This listing is not exhaustive; but
the point is that a constellation can potentially gain group
advantage only to the extent that it assembles those resources
that are critical for success in its domain.
Even when it does so, however, it is not assured of success,
because the resources need to be deployed and integrated
effectively. The second set of table represents four factors of
‗Organizational structure‘. They are consistent with theory. A
unifying vision is important to bring together disparate
partners. A corollary of this is that competition among
members erodes the cohesion of the constellation.
Leadership is important in making collective decisions and in
disciplining constellation members that stray from the
collective goals; constellations that are weak at the center
tend to be pulled in multiple directions by their members.
Group size is a self-evident factor: the larger the group, the
harder it is to manage, all else being equal.
Those constellations that have grown large and successful
managed their size by issuing norms and rules that make
management of the group more of a routine. Again, this list is
not exhaustive, but the point should be clear: a constellation
only gains advantage from member resources if it is able to
combine and govern them effectively.
This first cut at a theory of group-based advantage raises
many research questions. First, what is the relative
importance of assembled resources and organizational
structure? As a constellation grows, it often faces a trade-off
between the added resources from new members and the
added management burden. Second, when compared with a
single firm, is the organizational structure of the constellation
in itself an advantage or disadvantage? In many domains, the
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Vol. 5 (12) Dec. (2012)
tight control that a firm can exercise over its resources is an
advantage; but in others, the looser arrangements in a
constellation may offer gains from flexibility. Third, how is
group-based advantage affected when members participate in
more than one constellation?
When membership is not exclusive, constellation boundaries
overlap and resources from one can benefit a competing unit.
Fourth, what organizational approaches are helpful in
managing a constellation‘s resources? No doubt the
management of these loosely controlled resources is subject
to special techniques, perhaps analogous to techniques that
have proven useful in managing resources inside a firm.
Forces Shaping a Firm’s Claim on Group
Advantage
Although constellations are created to generate group-based
advantages, they must yield value at the level of the firm in
order to attract and retain members. The game of competition
may have changed, but we still keep score the old way. What
determines the value that a firm can actually appropriate from
participation in a constellation?
Two strands of work on alliances and networks are relevant to
this question. These different approaches are related to the
debate in social network analysis between the roles of
structural position and identity.
As with many such debates, it is likely that both perspectives
are important. The two sets of factors are often
interdependent. A firm with unique and high value-added can
often bargain for a central position in a constellation. A
synthesis of these approaches might lead to factors such as in
table 2.
Table 2
Some factors shaping a firm’s claim on value created
by its constellation
Value-Added Perspective: What is the bargaining power
of the firm within the group?
The firm controls scarce, valued and well-protected assets
Competition among the firm‘s suppliers of complements
Lack of competition between the firm and its partners
Structural Perspective: What is the position of the firm
within the network of allies?
Centrality of the firm‘s position
The firm occupies structural holes
The firm participates in multiple constellations
These factors in table 2 suggest some questions for future
research. First, what are the relative roles of the value-added
and structural explanations? Firms in standards battles often
find themselves at the center of a network of licensees, but
may have to yield bargaining power to get there. Second, how
does bargaining among members of a constellation affect the
Advances In Management
overall governance of the organization? The group
advantages discussed above may well be influenced by the
internal dynamics discussed here. Third, how are entries and
exits from a constellation affected by the distribution of
benefits within the group? Presumably, firms weigh their
private costs and benefits in these moves, but they may also
be influenced by their benefits relative to other members.
Conclusion
A balance between a cooperative and a competitive
interaction among the same firms, so that neither one of the
two ways of conduct will harm the other is a strategic
challenge or dilemma for many firms. This research proposes
a way to think about the interaction between alliances and
competition. The competition increasingly takes the form of
groups of allied firms against other groups instead of the
traditional battle of firm versus firm. This kind of competition
is different from that assumed in standard models of industrial
organization and of strategy. Understanding this new kind of
competition dictates to broaden unit of analysis and to
consider explicitly the various ways in which competition and
cooperation interact.
The strategic dilemma of cooperation and competition is a
very intriguing question for managers. The context specific
factors will have a great impact on the decision as well as the
manager‘s perceptions of benefits and drawback. The present
strategic focus on core competence and outsourcing indicates
a need for cooperation. In addition, many markets are
stagnating and mature which might indicate a need for
cooperation. And also the basic question who is your
competitor and who is your cooperative partner need to be
enlightened. Another strategic dilemma that needs to be
discussed is the managerial problems occurring on the
individual level caused by different types of role conflicts.
These conflicts are caused by the firms having various roles
in towards each other i.e. as buyer, supplier, competitor and
cooperative partner.
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(Received 5th July 2012, accepted 18th September 2012)

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