Chapter 9: Cooperative Strategy 299
SUMMARY
■ A cooperative strategy is one through which firms work
together to achieve a shared objective. Strategic alliances,
where firms combine some of their resources for the purpose
of creating a competitive advantage, are the primary form
of cooperative strategies. Joint ventures (where firms create
and own equal shares of a new venture), equity strategic
alliances (where firms own different shares of a newly
created venture), and nonequity strategic alliances
(where firms cooperate through a contractual relationship)
are the three major types of strategic alliances. Outsourcing,
discussed in Chapter 3, commonly occurs as firms form
nonequity strategic alliances.
■ Collusive strategies are the second type of cooperative strate-
gies (with strategic alliances being the other). In many econo-
mies, explicit collusive strategies are illegal unless sanctioned
by government policies. Increasing globalization has led to
fewer government-sanctioned situations of explicit collusion.
Tacit collusion, also called mutual forbearance, is a coopera-
tive strategy through which firms tacitly cooperate to reduce
industry output below the potential competitive output level,
thereby raising prices above the competitive level.
■ The reasons firms use strategic alliances vary by slow-cycle,
fast-cycle, and standard-cycle market conditions. To enter
restricted markets (slow cycle), to move quickly from one
competitive advantage to another (fast cycle), and to gain
market power (standard cycle) are among the reasons firms
choose to use strategic alliances.
■ Four business-level cooperative strategies are used to help
the firm improve its performance in individual product
markets:
■ Through vertical and horizontal complementary alliances,
companies combine some of their resources to create
value in different parts (vertical) or the same parts
(horizontal) of the value chain
■ Competition response strategies are formed to respond to
competitors’ actions, especially strategic actions
■ Uncertainty-reducing strategies are used to hedge against
the risks created by the conditions of uncertain competi-
tive environments (such as new product markets)
■ Competition-reducing strategies are used to avoid exces-
sive competition while the firm marshals its resources to
improve its strategic competitivenessComplementary alliances have the highest probability of
helping a firm form a competitive advantage; competition-
reducing alliances have the lowest probability.
■ Firms use corporate-level cooperative strategies to engage
in product and/or geographic diversification. Through diver-
sifying strategic alliances, firms agree to share some of their
resources to enter new markets or produce new products.
Synergistic alliances are ones where firms share some of their
resources to develop economies of scope. Synergistic alliances
are similar to business-level horizontal complementary alli-
ances where firms try to develop operational synergy, except
that synergistic alliances are used to develop synergy at the
corporate level. Franchising is a corporate-level cooperative
strategy where the franchisor uses a franchise as a contractual
relationship to specify how resources will be shared with
franchisees.
■ As an international cooperative strategy, a cross-border
strategic alliance is used for several reasons, including the
performance superiority of firms competing in markets out-
side their domestic market and governmental restrictions
on a firm’s efforts to grow through mergers and acquisitions.
Commonly, cross-border strategic alliances are riskier than
their domestic counterparts, particularly when partners
aren’t fully aware of each other’s reason for participating in
the partnership.
■ In a network cooperative strategy, several firms agree to form
multiple partnerships to achieve shared objectives. A firm’s
opportunity to gain access “to its partner’s other partner-
ships” is a primary benefit of a network cooperative strategy.
Network cooperative strategies are used to form either a sta-
ble alliance network or a dynamic alliance network. In mature
industries, stable networks are used to extend competitive
advantages into new areas. In rapidly changing environments
where frequent product innovations occur, dynamic networks
are used primarily as a tool of innovation.
■ Cooperative strategies aren’t risk free. If a contract is not
developed appropriately, or if a partner misrepresents its
resources or fails to make them available, failure is likely.
Furthermore, a firm may be held hostage through asset-
specific investments made in conjunction with a partner,
which may be exploited.
■ Trust is an increasingly important aspect of successful coop-
erative strategies. Firms place high value on opportunities
to partner with companies known for their trustworthiness.
When trust exists, a cooperative strategy is managed to max-
imize the pursuit of opportunities between partners. Without
trust, formal contracts and extensive monitoring systems are
used to manage cooperative strategies. In this case, the
interest is “cost minimization” rather than “opportunity
maximization.”