Chapter 9

Cooperative Implications For Strategy

Objectives
• Develop an understanding about Corporate Strategy, its roles and
functions in the global context.
• Understand the relationship between cooperative strategy and
strategic alliances.
• Significance of various strategic alliances including cross-border
alliances such as merger and acquisitions, clusters and networks.
• Able to grasp the meaning and importance for developing
strategic alliances selective in choosing business partners and
building a corporate partnership.
• Developing an insight on the factors that affect alliances, how they
evolve and how they should be handled strategically.
Introduction
Success organizations as a rule develop through a blend of natural
development and vital mergers and acquisitions and helpful
procedures. The two alternatives are joined with advantages and
risks and choice of one of them relies upon numerous variables. On
one hand there are not many organizations that have enough
advantages for contend successfully as single elements in the
worldwide commercial scenario. Along these lines numerous
organizations search for choices that permit them to be more serious.
Meaning of Cooperative Strategies

Cooperative Strategy alludes to a planning approach

where at least two firms cooperate so as to accomplish
common target.
Importance of Cooperative Strategies

• Improving access to capital

• Development of new innovation and technology

• Giving access to new business sectors

• Sharing risk and responsibility

Reasons For Cooperative Strategies

The requirement for cooperative strategy has been

grown because of following reasons:

• Intensified rivalry in the local market.

• Market expansion in different parts of the world.

• Latest developments in the field of IT and data science

and communication.
Reasons For Cooperative Strategies

• Globalization of market places in business.

• Trade progression in numerous nations since the rise of

the World Trade Organization (WTO).
Merits of Cooperative Strategies

• Lower Costs

• Better Possibility of Marketing Reach

• Advantages inside the national boundary

• Advantages outside the national boundary

Demerits of Cooperative Strategies

• Obtaining Capital through Investors

Due to some obvious reasons, the cooperatives might

suffer from slower cash flow. This as a result compels
the small investor to choose some other companies for
the investment purpose.
Demerits of Cooperative Strategies

• Lack of Membership and Participation

All the members in a group are not the same. If the some
members in a group are dormant and not at all participating,
this will ultimately lead to the downfall of any group Lack of
participation is an ongoing issue of cooperatives. This can
lead to serious repercussions and even losing out members.
Types Of Cooperative Strategies

Corporate Strategy can be well categorised into two

types. Such as:-

• Strategic Alliance

• Joint Venture
Strategic Alliance
Strategic Alliance is also termed as Strategic Partnership.
It is a collaborative arrangement between two or more
organizations. Being first of the Cooperative Strategy, it
is a non-equity cooperative arrangement between two or
more firms to promote their joint competitive advantage.
One of the basic Strategic Alliance is to help the firms for
their mutual benefits.
Basic Reasons for the Formation of
Strategic Alliance
• Collaborating on technology or development of a new product

• Improve Competitiveness

• Improve Supply Chain efficiency

• To better acquire and develop new competencies.

• Improve market accessibility through joint market

agreements.
Reasons for the failure of Strategic
Alliances
• Failure or delay in adopting a change environment.

• Failure to cope up and needs to understand the needs

of foreign customers.

• Proving inability and inefficiency to collaborate with

Partner Company.
Reasons for the failure of Strategic
Alliances
• The conflict or rivalry between the partner companies.

• Failure to resolve conflict and rigidness to negotiate.

• Poor communication resulting in widening the gap and

creating more confusions and misunderstandings.
Joint Venture

• There is a mutual consent or agreement where two or

more firms hold equity capital in a venture. In simple
words, it means that the supporting partner companies
come in collaboration with each other and own the newly
created firm. In the Joint Venture, the collaborating firms
mutually agree to come together and form an independent
organizational unit.
Advantages of Joint Venture

• It creates an opportunity to combine the skills and

assets of partner companies to establish a successful
new venture.

• Joint venture also provide a pathway to enter into the

foreign markets and cater to the needs and
requirements of the foreign investors.
Advantages of Joint Venture

• Collaborating and joining hands with the international firms

proves to be fruitful for strengthening a company’s
competitiveness in the foreign market.

• A joint venture will help in facilitating joint research and

efforts, technology sharing, joint use of production facilities,
marketing products and coming together to assemble and
produce components for final products.
Disadvantages of Joint Venture
• The difficulties come when there is division of share of control
between the partners.

• The level of competition may occur between the two companies in

the joint venture.

• Difficulties aggravate when the supporting companies fail to or

refuse to extend help to their partner firms.

• Major problems arise how to route the joint venture. They cannot
rent it out together and this might lead to serious repercussions.
Levels of Strategies and Their
Significance
Three levels of strategies are:

• Corporate Level

• Business Level

• Functional Level
Corporate Level Strategy

Corporate Strategy can be explained as the management

plan formulated by the highest level of organization, to
direct and formulate the entire business organization. It
acts as an essence of strategic planning process, as it
determines the growth objective of the company i.e.
direction, timing, extent and pace of organization’s growth.
Business Level Strategy

The strategy at this level involves the plan of action,

which are crafted to attain the goal of the organization.
Being formulated at the corporate level, any firm makes
extensive use of business strategy to grow and improve
its performance in the individual product markets.
Functional Level Strategy
Functional level strategy is related to the different
functional areas and business units including marketing,
production, finance and human resources of any
organization. At this level the strategies being formulated
and implemented at the Corporate and Business level are
put into actions. The strategies involve setting up short-
term objectives and attainment of goals.
Network Alliances
An alliance network is collaboration between two or more
firms that bind together on a loose or contractual basis. It
has been observed that many firms do not manufacture
their product themselves, but they have their partner
companies, which make the supply of the desired products.
Collaboration generally involves manufacturing process, but
it can also include R&D process and marketing.
 Network Alliances
There are seven different network alliance
topologies including
• Ring
• Line
• Mesh
• Tree
• Star (Hub and Spoke)
• Bus
• Fully Connected