Chapter 9: Cooperative Strategy 279We examine several topics in this chapter. First, we define and offer examples of dif-
ferent strategic alliances as primary types of cooperative strategies. We focus on strategic
alliances because firms use them more frequently than other types of cooperative relation-
ships. In succession, we describe business-level, corporate-level, international, and network
cooperative strategies. The chapter closes with a discussion of the risks of using cooperative
strategies as well as how effectively managing the strategies can reduce these risks.9-1 Strategic Alliances as a Primary Type of Cooperative Strategy
A strategic alliance is a cooperative strategy in which firms combine some of their
resources to create a competitive advantage. Strategic alliances involve firms with some
degree of exchange and sharing of resources to jointly develop, sell, and service goods or
services.^6 In addition, firms use strategic alliances to leverage their existing resources
while working with partners to develop additional resources as the foundation for new
competitive advantages.^7 To be certain, the reality today is that strategic alliances are a
vital strategy that firms use as a means to try to outperform rivals.^8
An alliance involving Juniper and Aruba Networks is an example of a partnership that
has been formed to combine individual firms’ unique resources in order to create compet-
itive advantages as a path to outperforming rivals. To enhance their ability to innovate as a
way to solve complex enterprise problems, Juniper and Aruba formed an alliance through
which they are collaborating at both the product development stage and the sales stage by
leveraging their client relationships and reseller networks. Commenting about this alliance,
one analyst indicated that Juniper will contribute “its expertise in wired infrastructure
(enterprise switches and routers) (while) Aruba provides its wireless mobility solutions.”^9
Before describing three types of major strategic alliances and reasons for their use, we
need to note that, for all cooperative strategies, success is more likely when partners behave
cooperatively. Actively solving problems, being trustworthy, and consistently pursuing
ways to combine partners’ resources to create value are examples of cooperative behavior
known to contribute to alliance success.^10
9-1a Types of Major Strategic Alliances
Joint ventures, equity strategic alliances, and nonequity strategic alliances are the three
major types of strategic alliances that firms use. The ownership arrangement is a key
difference among these alliances.
A joint venture is a strategic alliance in which two or more firms create a legally inde-
pendent company to share some of their resources to create a competitive advantage.
Typically, partners in a joint venture own equal percentages and contribute equally to the
venture’s operations. Often formed to improve a firm’s ability to compete in uncertain
competitive environments, joint ventures can be effective in establishing long-term rela-
tionships and in transferring tacit knowledge between partners.
GM and China-based SAIC Motor Corp., China’s largest automobile manufacturer by
sales volume, recently formed a joint venture to develop new cars that cater specifically to
Chinese tastes. Called Shanghai GM Co., each partner owns 50 percent of this cooperative
strategy. The partners intend to invest a total of 100 billion yuan, or approximately $16.4
billion, between 2016 and 2020 for the purpose of developing at least “10 all-new or face-
lift” models during each of the five years included within the investment time horizon.
Part of the investment is to be allocated to bring green technologies to China. Using some
green technologies to produce automobiles is a key way the joint venture’s products are to
be differentiated from those produced by competitors.^11 Demonstrating the complexitiesA strategic alliance is
a cooperative strategy in
which firms combine some
of their resources to create a
competitive advantage.
A joint venture is a strategic
alliance in which two or
more firms create a legally
independent company to
share some of their resources
to create a competitive
advantage.