Chapter 9: Cooperative Strategy
Teaching Note
Guide students in understanding Ford’s motives for partnering with India-based
9-5 NETWORK COOPERATIVE STRATEGY
Rather than cooperative alliances between two or very few firms, alliances can also be
expanded to include a larger number (or network) of partners as a complement to other
forms of cooperative strategy. This is a network cooperative strategy.
A network cooperative strategy is particularly effective when it is formed by
However, disadvantages to participating in networks include:
• Becoming locked into partnerships that preclude the development of alliances with others
Teaching Note
The strategic approach of networks is discussed in this chapter, and the structural
characteristics of network organizations are covered in Chapter 11.
9-5a Alliance Network Types
An important advantage of a network cooperative strategy is that firms gain access to the
partners of their partners.
Chapter 9: Cooperative Strategy
Stable alliance networks often appear in mature industries with predictable market cycles
Teaching Note
An example of a U.S. firm’s stable network is Nike’s long-established relationships
between the firm and its global network of suppliers and distributors.
6
Explain cooperative strategies’ risks.
9-6 COMPETITIVE RISKS WITH COOPERATIVE
STRATEGIES
Many cooperative strategies fail. Evidence suggests that two-thirds of cooperative
The risks associated with cooperative strategies are significant because the cooperating
firms may also be competing with each other. These risks include:
• Poor contract development that may result in one (or more) of the partners acting
opportunistically and taking advantage of other venture partners
Figure Note
Competitive risks of cooperative strategies, as well as risk management approaches, are
summarized in Figure 9.5.
Chapter 9: Cooperative Strategy
FIGURE 9.5
Managing Competitive Risks in Cooperative Strategies
As Figure 9.5 indicates, the competitive risks of cooperative strategies are:
• Inadequate contracts
These risks can be managed by:
9-7 MANAGING COOPERATIVE STRATEGIES
Cooperative strategies are an important option for firms competing in the global economy;
however, they are complex and challenging to manage.
The two basic approaches to managing cooperative strategies are:
• Cost minimization
Chapter 9: Cooperative Strategy
Firms can successfully use both approaches to manage cooperative strategies. However,
the costs to monitor the cooperative strategy are greater with cost minimization, in that
writing detailed contracts and using extensive monitoring mechanisms can be expensive,
even though the approach is intended to reduce alliance costs.
ANSWERS TO REVIEW QUESTIONS
1. What is the definition of cooperative strategy, and why is this strategy important to
firms competing in the current competitive landscape?
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
2. What is a strategic alliance? What are the three major types of strategic alliances
that firms form for the purpose of developing a competitive advantage?
A strategic alliance is a partnership between firms whereby each firm’s resources and
capabilities are combined to create a competitive advantage.
Chapter 9: Cooperative Strategy
3. What are the four business-level cooperative strategies? What are the key
differences among them?
Complementary strategic alliances are partnerships that are designed to take advantage
of market opportunities by combining partner firms’ assets in complementary ways so
that new value is created. These are classified as either vertical or horizontal
Chapter 9: Cooperative Strategy
but to increase learning, facilitate growth, or increase returns and strategic
competitiveness. Cooperative agreements may also be explicitly collusive, but this is
illegal in the United States unless regulated by the government (e.g., the
telecommunications industries prior to deregulation). Mutual forbearance is tacit
recognition of interdependence, but it has the same effect as explicit collusion in that it
reduces output and increases prices.
4. What are the three corporate-level cooperative strategies? How do firms use each of
these strategies for the purpose of creating a competitive advantage?
Strategic alliances used to facilitate product or market diversification are called
corporate-level cooperative strategies. Three types of strategic alliances are used at the
corporate level to facilitate cooperation among diversified companies. As shown in
Chapter 9: Cooperative Strategy
Synergistic strategic alliances allow firms to share resources and capabilities to create
joint economies of scope. Similar to the horizontal complementary strategic alliance that
Franchising is a cooperative strategy a firm uses to spread risk and to use resources and
capabilities productively, but without merging with or acquiring another company. As a
cooperative strategy, franchising is based on a contractual relationship concerning a
5. Why do firms use cross-border strategic alliances?
The first reason firms decide to use cross-border strategic alliances is that multinational
corporations usually outperform firms operating in domestic-only markets. In the context
Chapter 9: Cooperative Strategy
6. What risks are firms likely to experience as they use cooperative strategies?
Because firms that are cooperating may also be competing with each other, four
significant risks accompany cooperative strategies. As summarized in Figure 9.5, the
primary competitive risks associated with cooperative strategies are:
7. What are the differences between the cost-minimization approach and the
opportunity-maximization approach to managing cooperative strategies?
Two primary approaches are used to manage cooperative strategies. In one instance, the
firm develops formal contracts with its partners. These contracts specify how the
Chapter 9: Cooperative Strategy
MINI CASE
Failing to Obtain Desired Levels of Success with Cooperative Strategies
Note: To prepare students for class discussion and to introduce them to the
fundamentals of the Strategic Management process, each chapter Mini-Case is
prepared as an auto-graded Guided Case Analysis activity in MindTap™. More
information below.
As attractive and promising as a strategic alliance may appear, it is always fraught with
Teaching Note
The Mini-Case profiles the cooperative strategies (strategic alliances) that have been
established by several automobile manufacturers. Students should realize that
cooperative strategies allow firms to combine resources and capabilities that contribute
Chapter 9: Cooperative Strategy
Answers to Case Discussion Questions
1. What are some of the major complexities encountered in developing cooperative
strategies such as strategic alliances and joint ventures?
Cooperative strategies, even between committed, trusting partners, always face myriad
2. What role does competition from rivals play in the eventual success of cooperative
strategies? Please explain.
Ultimately, an alliance must give one or both partners access to resources or knowledge
3. What costs are incurred in developing strategic alliances? How can these costs be
managed?
From financial restructuring to operational changes to investments in resources and
4. Should cost minimization or opportunity maximization be the primary goal of a
cooperative strategy? Can both be achieved simultaneously? Why or why not?
Students’ answers will vary on this opinion-based question. Arguments can be made in
Chapter 9: Cooperative Strategy
ADDITIONAL QUESTIONS AND EXERCISES
The following questions and exercises can be presented for in-class discussion or assigned as
homework.
Application Discussion Questions
1. Ask students to visit the website for Financial Times (http://www.ft.com). Find three or
four articles that discuss different firms’ use of cooperative strategies. What types of
cooperative strategies are revealed in each article? What objective is each firm pursuing
as it uses a particular cooperative strategy?
3. Each student should choose a Fortune 500 firm that has a significant need to outsource a
primary or support activity (such as information technology). Given the activity the firm
can outsource, should the firm form a nonequity strategic alliance to outsource the focal
activity?
Ethics Questions
1. From an ethical perspective, how much information is a firm obliged to tell a potential
strategic alliance partner about what it expects to learn from the cooperative
arrangement?
Chapter 9: Cooperative Strategy
29
5. Firms with a reputation for ethical behavior in strategic alliances are likely to have more
opportunities to form cooperative strategies than will companies that have not earned this
reputation. What actions can firms take to earn a reputation for behaving ethically as a
strategic alliance partner?
INSTRUCTOR’S NOTES FOR MINDTAP
Cengage offers additional online activities, assessments and resources inside MindTap,
our online learning platform. Here is a comprehensive listing of the activities available
within each chapter of MindTap for Hitt, Ireland Hoskisson’s Strategic Management:
Competitiveness and Globalization, 13th edition:
Course Level Resource: Cornerstone to Capstone Diagnostic- features short quizzes in
Chapter Level Resources:
• What Would You Do Video
• MindTap Reader (eBook)
• Assignments:
o Multiple Choice Quiz
o Video Quiz
Chapter 9: Cooperative Strategy
• Group Case Activities (Group Case Assignments)
• Supplemental Cases (Readings)
Site for this title.
ADDITIONAL INFORMATION FOR SELECT MINDTAP RESOURCES:
WHAT WOULD YOU DO? JAGUAR LAND ROVER
This exercise introduces students to strategic decisions as they are made in the real world.
Students should come to class prepared to discuss this exercise, and why they chose the
answer they did. All answers are graded as correct – the point of the exercise is to engage
your student’s interest.
VIDEO QUIZ: JAGUAR LAND ROVER
The media quiz offers additional opportunities for students to apply the concepts in the
chapter to a real-world scenario as it is described in news reports.
Title: Jaguar Land Rover
RT: 1:37
Topic Key: Cooperative Strategy, Growth Industry, Global Economy
British carmaker Jaguar Land Rover and leading Chinese carmaker Chery Automobile
have established a joint venture. The companies are building a factory together in China as
Chapter 9: Cooperative Strategy
middle class.
Suggested Discussion Questions and Answers
• What is a joint venture?
Chapter 9: Cooperative Strategy
• If you were an executive at Jaguar Land Rover, why might a joint venture be a safer
option over another entry mode?
• By entering into a joint venture with Chery’ Automobile, Jaguar Land Rover will be
depending on some of Chery’s distinct competencies. What is one of those competencies
GUIDED CASE: COOPERATIVE STRATEGIES
This auto-graded activity asks students to read the short end-of-chapter case on
Cooperative Strategies, and answer questions in the areas of Analysis, Strategy, and
Implementation & Performance.
Strategic alliances often hold the promise of many benefits, but they are always challenging.
In answering the Guided Case Questions, students will review these concepts:
• Strategic alliances
Chapter 9: Cooperative Strategy
GROUP PROJECT: FLYING THE FRIENDLY SKIES:
STRATEGIC ACTIONS WITH AIRLINES AND ALLIANCES
The text says a strategic alliance “is a cooperative strategy in which firms combine some
of their resources to create a competitive advantage.” The first airline alliance was formed
Students will be asked to:
• Research their alliance, including:
• Why airlines form alliances?
In this group project, students will have the opportunity to practice valuable strategic
management skills, including team building, data analysis, critical thinking, and research
management.