Ch9-1 Chapter 9 Chapter 9 Cooperative Strategy Cooperative Strategy Michael A. Hitt R. Duane Ireland Robert E. Hoskisson ©2000 South-Western College Publishing Ch9-2 Competitiveness Chapter 3 Internal Environment Chapter 2 External Environment The Strategic The Strategic Management Management Process Process The Strategic The Strategic Management Management Process Process Strategic Intent Strategic Mission Strategic Competitiveness Above Average Returns Feedback Strategy Formulation Chapter 4 Business-Level Strategy Chapter 5 Competitive Dynamics Chapter 6 Corporate-Level Strategy Chapter 8 International Strategy Chapter 9 Cooperative Strategies Chapter 7 Acquisitions & Restructuring Strategy Implementation Chapter 10 Corporate Governance Chapter 11 Structure & Control Chapter 12 Strategic Leadership Chapter 13 Entrepreneurship & Innovation Strategic Inputs Strategic Actions Strategic Outcomes Ch9-3 Partnerships between firms Partnerships between firms are combined to pursue are combined to pursue mutual interests to mutual interests to Develop Develop Manufacture Manufacture Distribute Distribute Goods Goods Services Services Firm A Firm B where their where their Core Competencies Capabilities Resources Strategic Alliances Strategic Alliances Ch9-4 Example: Example: Dow Corning from Dow Chemical and Corning Inc. Dow Corning from Dow Chemical and Corning Inc. Example: Example: Chrysler and Mitsubishi Automotive Chrysler and Mitsubishi Automotive Example: Example: Chrysler’s supplier network Chrysler’s supplier network Types of Strategic Alliances Types of Strategic Alliances Independent firm is created by the joining assets from two Independent firm is created by the joining assets from two other firms where each contributes 50% of the total other firms where each contributes 50% of the total Joint Venture Joint Venture Partnership where the two partners do not own equal shares Partnership where the two partners do not own equal shares Equity Strategic Alliance Equity Strategic Alliance Contract is given to supply, produce or distribute a firm’s Contract is given to supply, produce or distribute a firm’s goods or services (without equity sharing) goods or services (without equity sharing) Non-Equity Strategic Alliance Non-Equity Strategic Alliance Ch9-5 Reasons for Alliances by Market Type Reasons for Alliances by Market Type Slow Slow Cycle Cycle Market Market Gain access to a restricted market Gain access to a restricted market Establish franchise in a new market Establish franchise in a new market Maintain market stability Maintain market stability Standard Standard Cycle Cycle Market Market Gain market power Gain market power Gain access to complementary resources Gain access to complementary resources Overcome trade barriers Overcome trade barriers Meet competitive challenge Meet competitive challenge Pool resources for large projects Pool resources for large projects Learn new business techniques Learn new business techniques Fast Fast Cycle Cycle Market Market Maintain market leadership Maintain market leadership Form an industry technology standard Form an industry technology standard Share risky R&D expenses Share risky R&D expenses Overcome uncertainty Overcome uncertainty Increase speed of product, service or market entry Increase speed of product, service or market entry Ch9-6 Corporate- Corporate- Level Level Diversification Alliances Diversification Alliances Synergistic Alliances Synergistic Alliances Franchising Franchising Types of Strategic Alliances Types of Strategic Alliances Business- Business- Level Level Complementary Alliances Complementary Alliances Competition Reduction Alliances Competition Reduction Alliances Competition Response Alliances Competition Response Alliances Uncertainty Reduction Alliances Uncertainty Reduction Alliances Ch9-7 Partnerships that build on the complementarities Partnerships that build on the complementarities among firms that make each more competitive among firms that make each more competitive Complementary Strategic Alliances Complementary Strategic Alliances Supplier Value Chain Buyer Value Chain Include distribution, supplier or Include distribution, supplier or outsourcing alliances where outsourcing alliances where firms rely on upstream or firms rely on upstream or downstream partners to build downstream partners to build competitive advantage competitive advantage Types of Business-Level Strategic Alliances Types of Business-Level Strategic Alliances Vertical Vertical Alliance Alliance Example: Example: Japanese manufacturers Japanese manufacturers rely on close relationships among rely on close relationships among suppliers to implement Just-In-Time suppliers to implement Just-In-Time inventory systems inventory systems Ch9-8 Used to increase the strategic competitiveness of the partners Used to increase the strategic competitiveness of the partners Example: Example: Product development agreements between Microsoft Product development agreements between Microsoft and Dreamworks SKG and Dreamworks SKG Supplier Value Chain Buyer Value Chain Complementary Strategic Alliances Complementary Strategic Alliances Types of Business-Level Strategic Alliances Types of Business-Level Strategic Alliances Horizontal Horizontal Alliance Alliance or or Joint ventures between BMG Entertainment and Joint ventures between BMG Entertainment and Universal Music Universal Music Ch9-9 Example: Example: OPEC petroleum cartel OPEC petroleum cartel Example: Example: DirecTV has agreement with Time DirecTV has agreement with Time Warner for exclusive programming Warner for exclusive programming Example: Example: ATT acquires Teleport, a provider of ATT acquires Teleport, a provider of telecommunications services to business customers telecommunications services to business customers Types of Business-Level Strategic Alliances Types of Business-Level Strategic Alliances Avoiding competition by using tacit collusion such as price fixing Avoiding competition by using tacit collusion such as price fixing Competition Reduction Strategies Competition Reduction Strategies Firms join forces to respond to a strategic action of Firms join forces to respond to a strategic action of another competitor another competitor Competition Response Strategies Competition Response Strategies Alliances can be used to hedge against risk and uncertainty Alliances can be used to hedge against risk and uncertainty Uncertainty Reduction Strategies Uncertainty Reduction Strategies Ch9-10 Types of Corporate-Level Strategic Alliances Types of Corporate-Level Strategic Alliances Example: Example: Samsung Group joins with Nissan Samsung Group joins with Nissan to build new autos to build new autos Example: Example: McDonald’s or Century 21 McDonald’s or Century 21 Example: Example: Sony shares development with many small firms Sony shares development with many small firms Allows a firm to expand into a new product or market area Allows a firm to expand into a new product or market area with an acquisition with an acquisition Diversifying Alliances Diversifying Alliances Create economies of scope between two or more firms, Create economies of scope between two or more firms, creating synergy across multiple businesses between firms creating synergy across multiple businesses between firms Synergistic Strategic Alliances Synergistic Strategic Alliances Allows firms to grow and relatively strong centralized control Allows firms to grow and relatively strong centralized control without significant capital investments without significant capital investments Franchising Franchising [...]... with Cooperative Strategies While cooperative systems can offer many advantages, there are also significant risks associated with them Poor contract development Misrepresentation of partners’ competencies Failure of partners to make complementary resources available Being held hostage through specific investments made with partner Misunderstanding a partner’s strategic intent Ch9- Managing Risks in Cooperative. ..International Cooperative Strategies Allows risk sharing by reducing financial investment Host partner knows local market and customs However International alliances can be difficult to manage due to differences in . Average Returns Feedback Strategy Formulation Chapter 4 Business-Level Strategy Chapter 5 Competitive Dynamics Chapter 6 Corporate-Level Strategy Chapter 8 International Strategy Chapter 9 Cooperative Strategies Chapter. Ch9-1 Chapter 9 Chapter 9 Cooperative Strategy Cooperative Strategy Michael A. Hitt R. Duane Ireland Robert E. Hoskisson ©2000 South-Western. network Ch9-14 Competitive Risks with Cooperative Strategies Competitive Risks with Cooperative Strategies While cooperative systems can offer many advantages, While cooperative systems can offer many