Michael_A._Hitt,_R._Duane_Ireland,_Robert_E._Hosk

300 Part 2: Strategic Actions: Strategy Formulation

KEY TERMS

business-level cooperative strategy 284

complementary strategic alliances 284

cooperative strategy 278

corporate-level cooperative strategy 290

cross-border strategic alliance 292

diversifying strategic alliance 291

equity strategic alliance 280

franchising 291

joint venture 279

network cooperative strategy 293

nonequity strategic alliance 280

strategic alliance 279

synergistic strategic alliance 291

REVIEW QUESTIONS

1. What is the definition of cooperative strategy, and why is this
   strategy important to firms competing in the twenty-first cen-
   tury competitive landscape?


2. What is a strategic alliance? What are the three major types of
   strategic alliances that firms form for the purpose of develop-
   ing a competitive advantage?


3. What are the four business-level cooperative strategies? What
   are the key differences among them?


4. What are the three corporate-level cooperative strategies?
   How do firms use each of these strategies for the purpose of
   creating a competitive advantage?


5. Why do firms use cross-border strategic alliances?


6. What risks are firms likely to experience as they use coopera-
   tive strategies?


7. What are the differences between the cost-minimization
   approach and the opportunity-maximization approach to
   managing cooperative strategies?

Alliance Formation, Both Globally and Locally, in the

Global Automobile Industry

The academic literature on alliances has some interesting
recent findings, one of which is the rationale that because
firms are often located in the same country, and often
in the same region of the country, it is easier for them
to collaborate on major projects. As such, they compete
globally, but may cooperate locally. Historically, firms
have learned to collaborate by establishing strategic alli-
ances and forming cooperative strategies when there is
intensive competition. This interesting paradox is due to
several reasons. First, when there is intense rivalry, it is
difficult to maintain market power. As such, using a coop-
erative strategy can reduce market power through better
norms of competition; this pertains to the idea of “mutual
forbearance”. Another rationale that has emerged is based
on the resource-based view of the firm (see Chapter 3).

To compete, firms often need resources that they don’t

have but may be found in other firms in or outside of

the focal firm’s home industry. As such, these “comple-

mentary resources” are another rationale for why large

firms form joint ventures and strategic alliances within

the same industry or in vertically related industries.

Because firms are co-located and have similar needs,

it’s easier for them to jointly work together, for exam-

ple, to produce engines and transmissions as part of

the powertrain. This is evident in the European alliance

between Peugeot-Citroën and Opel-Vauxhall (owned by

General Motors). It is also the reason for a recent U.S.

alliance between Ford and General Motors in devel-

oping upgraded nine- and ten-speed transmissions.

Furthermore, Ford and GM are looking to develop,

Mini-Case