Strategic Management

1. 0 © 2006 by Nelson, a division of Thomson Canada Limited. Cooperative Strategy Chapter Ten

2. The Strategic Management Process Chapter 8: Acquisition & Restructuring Chapter 9: International Strategy Chapter 10: Cooperative Strategy Strategy Formulation Strategic  Actions  Chapter 3: The External Environment Strategic Competitiveness Strategic Mission & Strategic Intent Strategic Objectives & Inputs Chapter 1: Strategic Management Ch. 2: Strat. Mgmt . & Performance Chapter 3: The External Environment Chapter 3: The External Environment Chapter 4: The Internal Environment Chapter 5: Bus.-Level Strategy Chapter 6: Competitive Dynamics Chapter 7: Corp.-Level Strategy Chapter 10: Cooperative Strategy Chapter 11: Corporate Governance Ch. 12: Org. Structure & Controls Chapter 13: Strategic Leadership Chapter 14: Org. Renewal & Innovation Strategy Implementation Strategic Competitiveness

5. Strategic Alliances Develop Manufacture Distribute Goods Services where their are combined to pursue mutual interests to Core Competencies Capabilities Resources Partnerships between firms Firm A Firm B

6. Types of Strategic Alliances Alstream Inc. Microcell & NR Communications RIM - Research in Motion’s “Blackberry” services used on wireless devices worldwide. Domtar & Cascades formed Norampac Independent firm is created by the joining assets from two other firms where each contributes 50% of the total Joint Venture Partnership where the 2 partners don’t own equal shares Equity Strategic Alliance Contract is given to supply, produce or distribute a firm’s goods or services (without equity sharing) Non-Equity Strategic Alliance

7. Reasons for Alliances by Market Type Standard Cycle Market Fast Cycle Market Slow Cycle Market * Gain market power * Gain access to complementary resources * Overcome trade barriers * Meet competitive challenge * Pool resources for large projects * Learn new business techniques * Form an industry technology standard * Share risky R&D expenses * Overcome uncertainty * Maintain market leadership * Speed-up product, service or market entry * Gain access to a restricted market * Establish franchise in a new market * Maintain market stability

8. Types of Strategic Alliances Complementary Alliances Diversification Alliances Synergistic Alliances Franchising Competition Reduction Alliances Competition Response Alliances Uncertainty Reduction Alliances Business-Level Corporate-Level

9. Complementary Strategic Alliances Partnerships that build on the complementarities among firms that make each more competitive Include distribution, supplier or outsourcing alliances where firms rely on upstream partners or downstream partners to build competitive advantage Supplier Value Chain Buyer Value Chain Japanese manufacturers rely on close relationships with and among suppliers to implement Just-In-Time inventory systems Vertical Alliance

10. Complementary Strategic Alliances Used to increase the strategic competitiveness of the partners Horizontal Alliance Buyer Value Chain Buyer Value Chain For example: Marketing agreements between Various Airlines

11. Types of Business-level Strategic Alliances Explicit Collusion: When firms directly negotiate production output & pricing agreements in order to reduce competition. Competition Reduction Strategies Often illegal types of cooperative strategy which are used to reduce competition. e.g. the OPEC petroleum cartel e.g. gas stations Tacit Collusion: When several firms in an industry indirectly coordinate their production & pricing decisions by observing each others competitive actions & responses.

12. Types of Business-Level Strategic Alliances Mega Bloks agreement with Disney. Siemens & Fujitsu – “Fujitsu Siemens Computers” sharing technical resources & capabilities Firms join forces to respond to a strategic action of another competitor Competition Response Strategies Alliances can be used to hedge against risk & uncertainty Uncertainty Reduction Strategies

13. Types of Corp.-level Strategic Alliances Boston Pizza with 200 restaurants in Western Canada. Cisco Systems has many synergistic strategic alliances. Flynn Canada created strategic alliances with U.S. contractors. Create economies of scope between 2 or more firms, creating synergy across multiple businesses between firms. Synergistic Strategic Alliances Allows firms to grow with relatively strong centralized control without significant capital investments. Franchising Allows a firm to expand into a new product or market area without an acquisition. Diversifying Alliances

15. Network Strategies Network strategies involve a group of interrelated firms that work for the common good of all The types of networks are: Built for the exploitation of economies available between firms Used in industries characterised by frequent product innovations & short product life cycles Dynamic Networks Stable Networks

16. Competitive Risks with Cooperative Strategies While cooperative systems 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 partner’s strategic intent

17. Managing Risks in Cooperative Strategies Competitive Risks Inadequate contracts * Holding alliance partner’s specific investments hostage * Risk & Asset Management Approaches Detailed contracts and monitoring * Misrepresentation of competencies * Partner fails to use complementary resources * Developing trusting relationships * Outcome Value Creation Detailed contracts and monitoring * Developing trusting relationships * Holding alliance partner’s specific investments hostage * Inadequate contracts * Misrepresentation of competencies * Partner fails to use complementary resources *

18. The Strategic Management Process Chapter 8: Acquisition & Restructuring Chapter 9: International Strategy Chapter 10: Cooperative Strategy Strategy Formulation Strategic  Actions  Chapter 3: The External Environment Strategic Competitiveness Strategic Mission & Strategic Intent Strategic Objectives & Inputs Chapter 1: Strategic Management Ch. 2: Strat. Mgmt . & Performance Chapter 3: The External Environment Chapter 3: The External Environment Chapter 4: The Internal Environment Chapter 5: Bus.-Level Strategy Chapter 6: Competitive Dynamics Chapter 7: Corp.-Level Strategy Chapter 10: Cooperative Strategy Chapter 11: Corporate Governance Ch. 12: Org. Structure & Controls Chapter 13: Strategic Leadership Chapter 14: Org. Renewal & Innovation Strategy Implementation Strategic Competitiveness