296 Part 2: Strategic Actions: Strategy Formulation
Failing to Obtain Desired Levels of Success with Cooperative Strategies
Strategic Focus
The complexity associated with most cooperative strategies
increases the difficulty of successfully using them. One com-
plexity is the fact that often, firms collaborating to complete
certain projects are simultaneously competing with each
other as well. As explained earlier, this reality describes the
relationship between Cisco and IBM as well as those existing
with airline companies that have joined one of the three major
alliance networks (Star, Oneworld, and SkyTeam). Another
complication is that firms sometimes form a partnership with
a company that is itself a collaboration between other com-
panies. Recently, for example, Ford Motor Company formed a
joint venture with carbon manufacturer DowAksa, a firm that
is itself a joint venture organized by Dow Chemical Company
and Istanbul-based Aksa Akrilik Kimya Sanayii A.S. The purpose
of the Ford/DowAksa collaboration is to find ways to develop
cheaper grades of carbon fiber components that can be
integrated into Ford’s automobiles and trucks. Because it is
much lighter than steel, carbon fiber helps auto manufacturers
reduce the weight of their products which in turn facilitates
their efforts to increase products’ gas mileage. We see then
that, for multiple reasons, the complexities of cooperative strat-
egies increase the challenge of effectively implementing them
and may contribute to alliance failure.
Redbox and Verizon terminated their relationship that was
organized to become the streaming subscription components
of Redbox’s rental business after only two years. (Outerwall
founded Redbox in partnership with McDonald’s Ventures,
LLC. McDonald’s interest was to distribute DVDs through rental
kiosks at its restaurants as a means of attracting customers and
providing them with a unique service.) Competing against the
likes of Netflix and Hulu Plus, Redbox’s streaming service failed
to attract a sufficient number of customers, perhaps in part
because it was able to stream to customers only items that its
competitors were also streaming. Unlike Netflix and Hulu Plus,
Redbox was not developing its own original content as a means
of creating unique value for customers. Because the service
made available through the Redbox and Verizon collaboration
was losing money and was not gaining a sufficient number of
subscribers, the partners chose to terminate their relationship.
Carefully executing the operational details of a planned
cooperative strategy is foundational to its performance and
influences if it will succeed or fail. In mid-2015 for example,
First Solar, Inc. and SunPower Corporation, the two largest U.S.
solar-panel manufacturers were in the planning stages to form
a joint venture that would own and operate some of the firms’
projects. The proposed partners believed that the collaboration
would create value by combining “SunPower’s polysilicon tech-
nology with First Solar’s thin-film panels.” However, SunPower
recorded a loss in the first quarter of 2015, partly because of
costs it was incurring to structure the proposed relationship
with First Solar. This demonstrates the importance of identify-
ing efficient as well as effective ways to structure a proposed
collaboration between companies as a means of increasing the
likelihood of operational success.Earlier, we noted that MillerCoors, the joint venture formed
between Molson Coors and SABMiller, is encountering difficul-
ties. Some analysts believe that a reason for this is that, while
the partnership had been very successful during its first six
years in terms of substantially reducing costs by creating econ-
omies of scale, it had failed to increase the market shares held
by two of its important products, Miller Lite and Coors Light.
The situation with the MillerCoors partnership suggests that
long-term cooperative strategy success results when partners
find unique ways to create value for customers in addition to
finding ways to reduce operating costs.
Sources: M. Armental, 2015, SunPower swings to loss on costs related to
planned joint venture, Wall Street Journal Online, http://www.wsj.com, April 30;
D. Harris, 2015, China joint ventures: How not to get burned, Above the Law,
http://www.abovethelaw.com, February 9; Molson Coors, U.S. joint venture MillerCoors
facing stiff challenges, Wall Street Journal Online, http://www.wsj.com, May 7; J. D. Stoll,
2015, Ford to develop carbon-fiber material for cars, Wall Street Journal Online,
http://www.wsj.com, April 17; P. E. Farrell, 2014, The 7 deadly sins of joint ventures,
Entrepreneur, http://www.entrepreneur.com, September 2; Q. Plummer, 2014, Redbox
instant will be killed Oct. 7: A failed joint venture, Tech Times, http://www.techtimes.
com, October 6.Who is Danny/Shutterstock.com
The handshake between partners suggests the
cooperation that is needed between parties
for business collaborations to succeed.