Assignment 8

1. Explain why the car industry seems to have so many strategic alliances.

Car making may be one of the world’s most competitive big industries, but rival producers have
always been ready to cooperate on expensive new technologies and products when the cost or risk of
going it alone was too high. The hunt for partners is now intensifying as automakers seek to build
scale, cut costs and pool efforts in areas like small cars, vehicle electrification and emerging markets.

A strategic alliance is an agreement between two or more partners to share knowledge or resources,
which could be beneficial to all parties involved.
Strategic alliances provide an opportunity for large and small high-technology companies to expand
into new markets by sharing skills and resources. It is beneficial for both parties, since it allows large
firms to access the subset of expertise and resources that they desire in the smaller firm, whilst the
smaller company is given access to its larger partner’s massive capital and organisational resources.
2. What is meant by ‘leveling out of knowledge’? How can firms prevent this happening when engaging
in strategic alliances?
To stay at a steady level of development or progress after a period of sharp rises or fails.

The only way to prevent this from happening is to ensure effective learning for both parties to build
knowledge sharing routines. This will involve sharing information, know-how and skills.

3. Considering the case study, discuss some of the wider strategic reasons why firms may wish to enter
a strategic alliance.
Alliances help firms strengthen their competitive position by enhancing market power, increasing
efficiencies, accessing new or critical resources or capabilities, and entering new markets. And in
many instances, they are not only the preferred method, but the only feasible method for achieving
growth.
4. Apple seems to have many strategic alliances and supplier relations. Discuss the extent to which
these contribute to its success.
This can be regarded as simply a ‘good customer’ relationship, where a supplier will provide
additional discounts and services for a good customer, such as obtaining unusual equipment
requests, making special deliveries, holding additional stock, etc. The next level may involve a closer
working relationship where a supplier becomes more involved in the firm’s business and they share
experience, expertise, knowledge and investment, such as developing a new product.
5. Explain some of the risks involved with all strategic alliances.
With high alliance failure rates, the viability of such growth strategies is critically dependent on a
firm’s alliance capability.
6. Explain why the repeated game of the prisoner’s dilemma is considered to be more useful in
predicting behavior.
It has a close relative, which is the repeated game. This is a more realistic interpretation of
reality, as few business relationships are one-off events. For example, BMW competes with
Volkswagen in a variety of markets now and, most likely, in the future. With the knowledge that
one is to repeat any game played, the options are likely to be different. To return to the criminals

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 locked up in prison: if they both realize that squealing on a fellow-prisoner may bring with it
some form of revenge, such as death, from the prisoner’s friends, the range of outcomes
changes significantly. The dominant solution is now to play, do not confess.

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