Chapter 11: Organizational Structure and Controls 371
on unit pricing. Third, the strategic center firm enables engineers in upstream compa-
nies (suppliers) to have better communications with those companies with whom it has
contracts for services. As a result, suppliers and the strategic center firm become more
interdependent and less independent.
The lean production system (a vertical complementary strategic alliance) pioneered
by Toyota and others has been diffused throughout many industries.^105 In vertical comple-
mentary strategic alliances, such as the one between Toyota and its suppliers, the strategic
center firm is obvious, as is the structure that firm establishes. However, the same is not
always true with horizontal complementary strategic alliances where firms try to create
value in the same part of the value chain. For example, airline alliances are commonly
formed to create value in the marketing and sales primary activity segment of the value
chain. Because air carriers commonly participate in multiple horizontal complemen-
tary alliances, such as the Oneworld alliance among American Airlines, British Airways,
Iberia, Japan Airlines, TAM Airlines, and others, it is difficult to determine the strategic
center firm. Moreover, participating in several alliances can cause firms to question part-
ners’ true loyalties and intentions. Also, if rivals band together in too many collabora-
tive activities, one or more governments may suspect the possibility of explicit collusion
among partnering firms (see Chapter 9). For these reasons, horizontal complementary
alliances are used less often and less successfully than their vertical counterpart, although
there are examples of success, such as some of the collaborations among automobile and
aircraft manufacturers.
11-5 Implementing Corporate-Level Cooperative Strategies
Some corporate-level strategies are used to reduce costs. This was the objective with the
collaboration that was formed initially between Walgreens and Swiss-based Alliance
Boots, a pharmacy-led health and beauty group. This partnership helped the firms
negotiate lower prices with drug suppliers, reducing their overall costs as a result of
doing so.^106
Unilever is partnering with some firms to reach a different objective. Committed
to decoupling its growth from negative environmental and social effects from its oper-
ations, Unilever formed an alliance with Jacobs Engineering Group Inc. in 2010 to
reduce the company’s carbon, water, and waste footprint across its manufacturing loca-
tions throughout the world. Through a partnership with NGO Rainforest Alliance,
Unilever was able to source “100 percent of all tea for its Lipton and PG Tips products
from certified growers.”^107 (Additional information about Unilever and its commitment
to sustainability is provided in this chapter’s Mini-Case.) Still other corporate-level
cooperative strategies (such as franchising) are used to facilitate product and market
diversification. As a cooperative strategy, franchising allows the firm to use its compe-
tencies to extend or diversify its product or market reach without completing a merger
or acquisition.^108
The potential to create synergy is a key reason corporate-level cooperative strat-
egies, such as those involving Walgreens, Unilever, and active franchisers includ-
ing McDonald’s, are formed.^109 Historically, McDonald’s approach to franchising as a
corporate-level cooperative strategy found the firm emphasizing a limited value-priced
menu. However, as mentioned in an earlier Strategic Focus, the firm’s structure is being
changed. One objective of these structural changes is to strip over $300 million from the
firm’s costs by the end of 2017. Selling 3,500 company-owned restaurants to franchisees
by 2018 is an action being taken to help reduce costs. With these sales, global franchise
