Michael_A._Hitt,_R._Duane_Ireland,_Robert_E._Hosk

290 Part 2: Strategic Actions: Strategy Formulation

and competitiveness and decide if pursuing such a strategy facilitates or inhibits their

competitive success.

9-2e Assessing Business-Level Cooperative Strategies

Firms use business-level cooperative strategies to develop competitive advantages that

can contribute to successful positions in individual product markets. Evidence suggests

that complementary business-level strategic alliances, especially vertical ones, have the

greatest probability of creating a competitive advantage and possibly even a sustainable

one.^60 Horizontal complementary alliances are sometimes difficult to maintain because

often they are formed between firms that compete against each other at the same time

they are cooperating. Airline companies, for example, want to compete aggressively

against others serving their markets and customers. However, the need to develop scale

economies and to share resources (such as scheduling systems) dictates that alliances

be formed so the companies can compete by using cooperative actions and responses

while they simultaneously compete against one another through competitive actions

and responses. The challenge in these instances is for each firm to find ways to cre-

ate the greatest amount of value from their simultaneous competitive and cooperative

actions.

Although strategic alliances designed to respond to competition and to reduce uncer-

tainty can also create competitive advantages, these advantages often are more temporary

than those developed through complementary (both vertical and horizontal) alliances.

The primary reason for this is that complementary alliances have a stronger focus on

creating value than do competition-reducing and uncertainty-reducing alliances, which

are formed to respond to competitors’ actions or reduce uncertainty rather than to attack

competitors.

9-3 Corporate-Level Cooperative Strategy

A corporate-level cooperative strategy is a strategy through which a firm collaborates

with one or more companies to expand its operations. Diversifying alliances, synergistic

alliances, and franchising are the most commonly used corporate-level cooperative strat-

egies (see Figure 9.4).

Firms use diversifying and synergistic alliances to improve their performance by

diversifying their operations through a means other than or in addition to internal organic

growth or a merger or acquisition.^61 When a firm seeks to diversify into markets in which

the host nation’s government prevents mergers and acquisitions, alliances become an

especially appropriate option. Corporate-level strategic alliances are also attractive com-

pared with mergers, and particularly acquisitions, because they require fewer resource

commitments^62 and permit greater flexibility in terms of efforts to diversify partners’

A corporate-level
cooperative strategy is
a strategy through which a
firm collaborates with one or
more companies to expand
its operations.

Figure 9.4 Corporate-Level Cooperative Strategies

Corporate-Level Cooperative Strategies

Diversifying

alliances

Synergistic

alliances Franchising