Chapter 9

Cooperative Strategy
Michael A. Hitt R. Duane Ireland Robert E. Hoskisson
©2000 South-Western College Publishing
Ch9-1

Strategic Alliances Partnerships between firms where their Resources Firm A Firm B Capabilities are combined to pursue mutual interests to Develop Goods Manufacture Distribute Services Ch9-2 Core Competencies .

produce or distribute a firm¶s goods or services (without equity sharing) Example: Chrysler¶s supplier network Ch9-3 .Types of Strategic Alliances Joint Venture Independent firm is created by the joining assets from two other firms where each contributes 50% of the total Example: Dow Corning from Dow Chemical and Corning Inc. Equity Strategic Alliance Partnership where the two partners do not own equal shares Example: Chrysler and Mitsubishi Automotive NonNon-Equity Strategic Alliance Contract is given to supply.

service or market entry Maintain market leadership Form an industry technology standard Share risky R&D expenses Overcome uncertainty Standard Cycle Market Fast Cycle Market Ch9-4 .Reasons for Alliances by Market Type Slow Cycle Market Gain access to a restricted market Establish franchise in a new market Maintain market stability Gain market power Gain access to complementary resources Overcome trade barriers Meet competitive challenge Pool resources for large projects Learn new business techniques Increase speed of product.

Types of Strategic Alliances Complementary Alliances BusinessBusinessLevel Competition Reduction Alliances Competition Response Alliances Uncertainty Reduction Alliances Diversification Alliances CorporateCorporateLevel Synergistic Alliances Franchising Ch9-5 .

supplier or outsourcing alliances where firms rely on upstream or downstream partners to build competitive advantage Buyer Value Chain Vertical Alliance Example: Japanese manufacturers rely on close relationships among suppliers to implement Just-In-Time Just-Ininventory systems Ch9-6 .Types of Business-Level Strategic Alliances BusinessComplementary Strategic Alliances Supplier Value Chain Partnerships that build on the complementarities among firms that make each more competitive Include distribution.

Types of Business-Level Strategic Alliances BusinessComplementary Strategic Alliances Used to increase the strategic competitiveness of the partners Supplier Value Chain Buyer Value Chain Horizontal Alliance Example: Product development agreements between Microsoft and Dreamworks SKG or Joint ventures between BMG Entertainment and Universal Music Ch9-7 .

Types of Business-Level Strategic Alliances BusinessCompetition Reduction Strategies Avoiding competition by using tacit collusion such as price fixing Example: OPEC petroleum cartel Competition Response Strategies Firms join forces to respond to a strategic action of another competitor Example: DirecTV has agreement with Time Warner for exclusive programming Uncertainty Reduction Strategies Alliances can be used to hedge against risk and uncertainty Example: ATT acquires Teleport. a provider of telecommunications services to business customers Ch9-8 .

creating synergy across multiple businesses between firms Example: Sony shares development with many small firms Franchising Allows firms to grow and relatively strong centralized control without significant capital investments Example: McDonald¶s or Century 21 Ch9-9 .Types of Corporate-Level Strategic Alliances CorporateDiversifying Alliances Allows a firm to expand into a new product or market area with an acquisition Example: Samsung Group joins with Nissan to build new autos Synergistic Strategic Alliances Create economies of scope between two or more firms.

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