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What is the definition of cooperative strategy, and why is this strategy
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Strategic Management

Session:

Questions and Answers

Dr. Noel Jones, PhD

International Business

& Management

Consultant

 

 

 

Ch. 9 REVIEW QUESTIONS &

ANSWERS

1.

What is the definition of cooperative

strategy, and why is this strategy

important to firms competing in the

twenty-first century competitive

landscape? (pp. 254-255)

A

cooperative strategy

is a strategy in

which

firms work together to achieve a

shared objective

.

Cooperative strategy

is the third major alternative (internal

growth and mergers and acquisitions

are the other two

) firms use to grow,

develop value-creating competitive

advantages, and create differences

between them and competitors. Thus,

cooperating with other firms is another

strategy that is used to create value for a

customer that exceeds the cost of creating

that value and to create a favorable

position in the marketplace. The

increasing importance of cooperative

strategies as a growth engine shouldn’t be

underestimated. This means that effective

competition in the twenty-first century

landscape results when the firm learns

how to cooperate with, as well as compete

against, competitors.

2

Dr. Noel Jones

 

 

 

Ch. 9 REVIEW QUESTIONS &

ANSWERS

2.

What is a strategic

alliance?

What are the

three types of strategic

alliances firms use to

develop a competitive

advantage?

(pp. 255-256)

•.

A

strategic alliance

is a

partnership between firms whereby

each firm’s resources and

capabilities are combined to create

a competitive advantage.

•.

The three types of

explicit

cooperative strategies mentioned

are

(1) joint ventures, (2) equity

strategic alliances, and (3)

nonequity strategic alliances

.

However, tacit collusion and mutual

forbearance (the latter being a form

of tacit collusion) are also included

as

implicit

cooperative

arrangements.

•.

A

joint venture

is an alliance

where a new, independent firm is

formed by two or more partners

who share some of their resources

and capabilities to develop a

competitive advantage.

•.

An

equity strategic alliance

is an

alliance where partner

firms share

resources and capabilities, but

own unequal shares of equity in

a new venture

. Many foreign direct

investments are completed through

equity strategic alliances, such as

those involving Japanese or U.S.

companies operating in China.

•.

A

nonequity strategic alliance

is

an alliance where

a contract is

granted to a company to supply,

produce, or distribute a firm’s

products or services

.

No equity

sharing is involved

. Other types

of cooperative contractual

arrangements concern marketing

and information sharing. Because

they do not involve the forming of

separate ventures or equity

investments, nonequity strategic

alliances are less formal and

demand fewer commitments from

partners as compared to both joint

ventures and equity strategic

alliances. However, the attributes

of nonequity alliances make them

unsuitable for complex projects

where success is to be influenced

by effective transfer of tacit

knowledge between partners.

3

Dr. Noel Jones

 

 

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