Strategic Management-II: Cooperative Strategy

Strategic Management-II
Cooperative Strategy
Presented by Group 3
Ankit Panda 19P187

Yash Dave 19P196
Sushant Manda 19P203
Nithin Kothapalli 19P205
Shreya Jain 19P223
Yashvardhan Chamoli 19P238
OVERVIEW & INTRODUCTION
 Cooperative strategies and why firms use them
 Three types of strategic alliances
 Business-level cooperative strategies & their use
 Corporate-level strategies in diversified firms
 Cross-border strategic alliances’ importance as an international cooperative strategy
 Competitive risks with cooperative strategies
 Two approaches to manage cooperative strategies

COOPERATIVE STRATEGY
Companies, firms use three means to grow and improve their performance  internal
development, mergers and acquisitions, and cooperation.
Firms work together to achieve a shared objective
PRIMARY TYPE OF COOPERATIVE STRATEGY: STRATEGIC
ALLIANCES
Introduction: Strategic Alliance

Cooperative strategy in which firms combine resources and capabilities to create a competitive advantage
Three types of strategic alliances
1. Joint venture- Two or more firms create a legally independent company to share resources and capabilities to develop
a competitive advantage
2. Equity strategic alliance- Two or more firms own a portion of the equity in the venture they have created
3. Nonequity strategic alliances, which include
 Licensing agreements
 Distribution agreements
 Supply contracts
 Outsourcing commitments
Two or more firms develop a contractual relationship to share some of their unique resources and capabilities to
create a competitive advantage
Why firms might develop strategic alliances ?
 Most firms lack the full set of resources and capabilities needed to reach their objectives
 Cooperative behavior allows partners to create value that they couldn't develop by acting independently
 Aligning stakeholder interests (both inside and outside of the organization) can reduce environmental
uncertainty
Alliances can …
1. Provide a new source of revenue
2. Enhance the speed of responding to market opportunities, technological changes, and global conditions
3. Allow firms to gain new knowledge and experiences to increase competitiveness
– Can reduce competition and enhance a firm’s competitive capabilities and

– Allows firm to take advantage of opportunities, build strategic flexibility and innovate
Reasons for Strategic Alliances by Market Type
Market Reason
Slow-Cycle • Gain access to restricted market
• Establish a franchise in a new market
• Maintain market stability (e.g., establishing standard)
• Speed up development of new goods or services
• Speed up new market entry
Fast-Cycle
• Maintain market leadership
• Form an industry technology standard
• Share risky R&D expenses
• Overcome uncertainty
• Gain market power (reduce industry overcapacity)
• Gain access to complementary resources
Standard-Cycle • Establish better economies of scales

• Overcome trade barriers
• Meet competitive challenges from other competitors
• Pool resources for very large capital project
• Learn new business techniques
BUSINESS-LEVEL COOPERATIVE STRATEGY: TO GROW AND
IMPROVE FIRM PERFORMANCE IN INDIVIDUAL PRODUCT
MARKETS
1. Complementary Strategic Alliances
(CSA)
– Firms share some of their resources and Types of CSA:
capabilities in complementary ways to develop Vertical CSA
competitive advantages
Partnering firms share resources & capabilities
– Partners may have different from different stages of the value chain to
create a competitive advantage.
• Learning rates
Horizontal CSA
• Capabilities to leverage complementary
resources Partnering firms share resources & capabilities
from the same stage of the value chain to
• Marketplace reputations create a competitive advantage
• types of actions they can legitimately take Commonly used for long-term product
development and distribution opportunities
– Some firms are more effective at managing
alliances and deriving benefits from them
– Two forms include vertical and horizontal
BUSINESS-LEVEL COOPERATIVE STRATEGY: TO GROW AND
IMPROVE FIRM PERFORMANCE IN INDIVIDUAL PRODUCT
MARKETS
2. Competition response strategy 4. Competition-reducing strategy: Two

Collusive Strategies
Competitors initiate competitive actions to attack rivals
Collusive strategies (CS) differ from
Launch competitive responses to their competitor’s actions
strategic alliances in that CS are usually
Strategic alliances (SA) can be used at the business illegal
level to respond to competitor’s attacks primarily formed
to take strategic vs. tactical actions Explicit collusion
Direct negotiation among firms to establish
output levels and pricing agreements that reduce
3. Uncertainty-reducing strategy industry competition
Uncertainty reduced by combining knowledge & Tacit collusion
capabilities
Indirect coordination of production and pricing
For example, entering new product markets, emerging decisions by several firms, which impacts the
economies and establishing a technology standard are degree of competition faced in the industry
unknown areas so by partnering with a firm in the
respective industry, a firm’s uncertainty (risk) is
reduced
BUSINESS-LEVEL COOPERATIVE STRATEGY – ASSESSMENT
 Used to develop competitive advantages (CA) for contributing to successful positions &
performance in individual product markets
 Developing a CA using a strategic alliance, the integrated resources and capabilities
must be valuable, rare, imperfectly imitable and non substitutable
 Vertical alliances have greatest probability of creating CA; horizontal are sometimes
difficult to maintain since they are usually between competitors
 SA’s designed to respond to competition and reduce uncertainty are more temporary than
complementary (horizontal and vertical) strategic alliances
 Competition-reducing has lowest probability of creating a sustainable CA
CORPORATE LEVEL COOPERATIVE STRATEGIES (CLCS)
 CLCS help firm to diversify itself in terms of products offered, markets served or both
 Common CLCS forms
 1. Diversifying strategic alliance
 Firms share some of their resources & capabilities to diversify into new product or market areas
 2. Synergistic strategic alliance
 Firms share some of their resources & capabilities to create economies of scope
 3. Franchising
 Firm uses a franchise as a contractual relationship to describe and control the sharing of its resources and
capabilities with partners
– Franchise: contractual agreement between two legally independent companies whereby the franchisor grants
the right to the franchisee to sell the franchisor's product or do business under its trademarks in a given
location for a specified period of time
INTERNATIONAL COOPERATIVE STRATEGY
 Cross-Border Strategic Alliance

 International cooperative strategy in which firms with headquarters in different nations combine some of their resources and
capabilities to create a competitive advantage
 Ex: IMG Worldwide Inc. has international JV with other broadcasting firms
 Why cross-border strategic alliances?

 Multinational corporations outperform firms that operate only domestically
 Due to limited domestic growth opportunities, firms look outside their national borders to expand business
 Some foreign government policies require investing firms to partner with a local firm to enter their markets
COMPETITIVE RISKS IN COOPERATIVE STRATEGIES
 Risks
 Partners may choose to act opportunistically
 Partner competencies may be misrepresented
 Partner may fail to make available the complementary resources and capabilities that were committed
 One partner may make investments specific to the alliance while the other partner may not
Risk and Asset Management

Competitive Risks Desired Outcome
Approaches
•Inadequate contracts
•Misrepresentation of Competencies
•Detailed contracts and
•Partners fail to use complementary manufacturing •Creating Value
resources
•Developing trusting relationships
•Holding alliance partners specific
investments hostage
MANAGING COOPERATIVE STRATEGY
 Opportunity Maximization
 Cost Minimization
 Focus: maximizing partnership's value-creation
 Relationship with partner is formalized with contracts
opportunities
 Contracts specify how cooperative strategy is to be
 Informal relationships and fewer constraints allow
monitored and how partner behavior is to be
partners to
controlled
 take advantage of unexpected opportunities
 Goal is to minimize costs and prevent opportunistic
 learn from each other
behaviors by partners
 explore additional marketplace possibilities
 Costs of monitoring cooperative strategy are greater
 Partners need a high level of trust that each party will
 Formalities tend to stifle partner efforts to gain
act in the partnership's best interest, which is more
maximum value from their participation
difficult in international situations
HAVE AMAZON AND FUTURE GROUP MADE THE RIGHT DECISION WITH
RESPECT TO SELECTING EACH OTHER AS ALLIANCE PARTNERS?
WHAT ARE THE PROBABLE RISKS FACED BY AMAZON AND FUTURE GROUP?
WHAT CAN THEY DO TO SAFEGUARD AGAINST THOSE RISKS?
WHAT ACTIONS WOULD YOU RECOMMEND FOR THE AMAZON-FUTURE
GROUP PARTNERSHIP? WHAT ARE THE IMPLICATIONS OF YOUR
RECOMMENDATIONS?
Price Negotiation, Sales Margin and Discounting Strategy

• Focus on Customer experience and increase market penetration to achieve the target of 60 billions for the next 3 year
• Strategy for Discounting : Consensus and make a contract for maximum discount % for each category of future products on amazon platform
Sale of Exclusive Collection

• In case there is a
• Conflict on consensus of maximum discount %
• Introduction of new product
• Products whose costs and prices change frequently
• In all the cases product will available only online/offline, no competition between online and offline selling
Collaboration and leveraging the supply chain and logistics

• Complete use of each others Supply Chain, Logistics and Operations for faster delivery and better customer experience.
• Initiatives where the orders can be placed on Amazon and pickup option can be the nearest Future group outlet based on availability.
Early stages of collaboration-invest time

• Amazon and Future group have been collaborating only for 2 years.
• More time can be given to get better results and make it a win-win situation for both.
Thank You.

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Strategic Management-II

Ankit Panda 19P187

 Cooperative strategies and why firms use them

 Three types of strategic alliances

 Business-level cooperative strategies & their use

 Corporate-level strategies in diversified firms

 Cross-border strategic alliances’ importance as an international cooperative strategy

 Competitive risks with cooperative strategies

 Two approaches to manage cooperative strategies

Introduction: Strategic Alliance

– Can reduce competition and enhance a firm’s competitive capabilities and

Standard-Cycle • Establish better economies of scales

2. Competition response strategy 4. Competition-reducing strategy: Two

 Cross-Border Strategic Alliance

 Why cross-border strategic alliances?

Risk and Asset Management

Price Negotiation, Sales Margin and Discounting Strategy

Sale of Exclusive Collection

Collaboration and leveraging the supply chain and logistics

Early stages of collaboration-invest time

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