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Marielle A.

Macatangay
45167

1. What is the definition of cooperative strategy, and why is this strategy important to firms competing in the twenty-first
century competitive landscape?
A cooperative strategy is a means by which firms work together to achieve a shared objective. In today’s
competitive landscape, cooperating with other firms is a strategy firms employ in order to create value for a customer at
a lower cost than it would do independently and to enter markets more quickly and with greater market penetration
possibilities. Firms form strategic alliances to reduce competition, enhance their competitive capabilities, gain access to
resources, take advantage of opportunities, build strategic flexibility, and innovate which indicates that partnering with
others will increase the probability of reaching firm-specific performance objectives.
2. What is a strategic alliance? What are the three types of strategic alliances firms use to develop a competitive
advantage?
A strategic alliance is a cooperative strategy in which firms combine some of their resources and capabilities
to create a competitive advantage. Strategic alliances involve firms with some degree of exchange and sharing of
resources and capabilities to co-develop, sell, and service goods or services. The three major types of strategic alliances
include joint venture, equity strategic alliance, and non-equity strategic alliance. These alliance types are classified by
their ownership arrangements. A joint venture is a strategic alliance in which two or more firms create a legally
independent company to share some of their resources and capabilities to develop a competitive advantage. An equity
strategic alliance is an alliance in which two or more firms own different percentages of the company they have formed
by combining some of their resources and capabilities to create a competitive advantage. A nonequity strategic alliance
is an alliance in which two or more firms develop a contractual relationship to share some of their unique resources and
capabilities to create a competitive advantage.
3. What are the four business-level cooperative strategies, and what are the differences among them?
A firm uses a business-level cooperative strategy to grow and improve its performance in individual product
markets. There are four business-level cooperative strategies namely complementary strategic alliances, competition
response strategy, uncertainty-reducing strategy, and competition-reducing strategy.
 Complementary strategic alliances are business-level alliances in which firms share some of their resources
and capabilities in complementary ways to develop competitive advantages. Vertical and horizontal are the
two types of complementary strategic alliances. Vertical complementary strategic alliance, firms share their
resources and capabilities from different stages of the value chain to create a competitive advantage. A
horizontal complementary strategic alliance is an alliance in which firms share some of their resources and
capabilities from the same stage (or stages) of the value chain to create a competitive advantage.
 Competition response strategy. Competitors initiate competitive actions to attack rivals and launch
competitive responses to their competitors’ actions. Strategic alliances can be used at the business level to
respond to competitors’ attacks.
 Uncertainty-reducing strategies are used where uncertainty exists, such as in entering new product markets or
emerging economies.
 Competition-reducing strategy. Used to reduce competition, collusive strategies differ from strategic alliances
in that collusive strategies are often an illegal type of cooperative strategy. Two types of collusive strategies
are explicit collusion and tacit collusion. When two or more firms negotiate directly with the intention of
jointly agreeing about the amount to produce and the price of the products that are produced, explicit
collusion exists. Tacit collusion exists when several firms in an industry indirectly coordinate their
production and pricing decisions by observing each other’s competitive actions and responses.

4. What are the three corporate-level cooperative strategies? How do firms use each one to create a competitive
advantage?
A firm uses a corporate-level cooperative strategy to help it diversify in terms of products offered or markets
served, or both. Diversifying alliances, synergistic alliances, and franchising are the most commonly used corporate-
level cooperative strategies.
 A diversifying strategic alliance is a corporate-level cooperative strategy in which firms share some of their
resources and capabilities to diversify into new product or market areas.
 A synergistic strategic alliance is a corporate-level cooperative strategy in which firms share some of their
resources and capabilities to create economies of scope.
 Franchising is a corporate-level cooperative strategy in which a firm (the franchisor) uses a franchise as a
contractual relationship to describe and control the sharing of its resources and capabilities with partners (the
franchisees).
5. Why do firms use cross-border strategic alliances?
Several reasons explain the increasing use of cross-border strategic alliances, including the fact that in
general, multinational corporations outperform domestic-only firms. Limited domestic growth opportunities and
foreign government economic policies are additional reasons firms use cross-border alliances.
6. What risks are firms likely to experience as they use cooperative strategies?
Firms face different risks as they use cooperative strategies. One cooperative strategy risk is that a partner
may act opportunistically. Opportunistic behaviors surface either when formal contracts fail to prevent them or when an
alliance is based on a false perception of partner trustworthiness. Another risk is a firm failing to make available to its
partners the resources and capabilities (such as the most sophisticated technologies) that it committed to the cooperative
strategy. A final risk is that one firm may make investments that are specific to the alliance while its partner does not.
7. What are the differences between the cost-minimization approach and the opportunity-maximization approach to
managing cooperative strategies?
In the cost minimization management approach, the firm develops formal contracts with its partners. These
contracts specify how the cooperative strategy is to be monitored and how partner behavior is to be controlled while the
focus of the second managerial approach—opportunity maximization—is on maximizing a partnership’s value-creation
opportunities. In this case, partners are prepared to take advantage of unexpected opportunities to learn from each other
and to explore additional marketplace possibilities.