SM05b - COOPERATIVE STRATEGIES.pdf

7/27/2019 SM05b - COOPERATIVE STRATEGIES.pdf

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STRATEGY AND COMPETITIVE ADVANTAGE

S

TRATEGIC

MAN

AGEMENT

5

The essence of strategy lies in creating tomorrows competitive advantages

faster than competitors mimic the ones you possess today.Gary Hamel and C.K. Prahalad

Strategies for taking the hill wont necessarily hold it.

Amar Bhide


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Competitive Strategies:

Michael Porters Generic Strategies:

Low-Cost Leadership Strategy.

Broad Differentiation Strategies.

Best-Cost Provider Strategies.

Focused Low-Cost Strategies.

Focused Differentiation Strategies.

Vertical Integration Strategies.

Merger and Acquisition Strategies.

Co-operative Strategies.

Offensive & Defensive Strategies.

First-Mover Advantages & Disadvantages.

STRATEGY

&

COMPETI

TIVEADVANTAGE

Chapter Outline


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S

TRATEGIC

MAN

AGEMENT

5-B

CO-OPERATIVE STRATEGIES


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Cooperative Strategies

Companies sometimes use strategic alliances or collaborative partnerships to

complement their own strategic initiatives, and strengthen their competitiveness.

Such cooperative strategies go beyond normal company-to-company dealings

but fall short of merger or formal joint venture.

STRATEGY

&

COMPETI

TIVEADVANTAGE

COOP


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S

TRATEGIC

MANAGEMENT

CO-OPERATIVE STRATEGIES

High Collaboration

Low Collaboration

Organizational Combination

Strategic AlliancePreferred Supplier Arrangements

Strategic Business Partnering

Joint Ventures

Mergers

Acquisitions


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S

TRATEGIC

MANAGEMENT

STRATEGIC ALLIANCES


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Why are Strategic-Alliances Formed?

To collaborate on technology development or new product development.

To fill gaps in technical or manufacturing expertise.

To acquire new competencies.

To improve supply chain efficiency, and fill gaps.

To gain economies-of-scale in production and/or marketing.

To acquire or improve market access via joint marketing agreements.STRATE

GY

&

COMPETITIVEADVANTAGE

COOP


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Collaborative arrangements can help a company lower its costs or gain access to

needed expertise and capabilities.

Firms often lack the resources & competitive skills to be successful in very

demanding competitive races:

Allies can be useful in helping a company establish a stronger presence in global

markets and helping it win the race for global market leadership.

Allies with competitively useful technological know-how or expertise can greatly

aid a company racing against rivals for leadership in the industries of the future

now being created by todays technological and information age revolution.

Collaborative arrangements with foreign partners can be very helpful in

pursuing opportunities in unfamiliar national markets.

STRATE

GY

&


COOP

Why Cooperative Strategies are Integral to a Firms Competitiveness


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Above Depends on

Capacity of partners to defuse organizational frictions.

Ability to collaborate effectively over time, and work through challenges:

Technological and competitive surprises.

New market developments.

Changes in their own priorities & competitive circumstances.

Competitive advantage that emerges when a company acquires valuable

capabilities via alliances, it could not obtain on its own, providing an edge over

rivals.

STRATE

GY

&


COOP

Competitive-Value of Strategic-Alliances to the Partners


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Get into critical country markets quickly to accelerate process of building a global

presence.

Gain inside knowledge about unfamiliar markets & cultures.

Access valuable skills & competencies concentrated in particular geographic

locations.

Master new technologies and build new expertise faster than would be possible

internally benefit from IPLC.

Open up expanded opportunities in target industry by combining firms

capabilities with resources of partners.STRATE

GY

&


COOP

Potential Benefits of Alliances to Achieve Global/Industry Leadership

IPLCInternational Product Life Cycle.


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How well partners work together.

The success of partners, in responding & adapting to the changing conditions.

Willingness of partners to renegotiate the bargain - flexibility.

STRATE

GY

&


COOP

Why Alliances Fail?

Ability of an Alliance to Endure Depends on:

Reasons Why Alliance Fail, include:

Diverging objectives & priorities of the partners.

Inability of the partners to work well together.

Emergence of more attractive technological paths / partners.

Marketplace rivalry between the allies.


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STRATEGIC

MANAGEMENT

MERGERS & ACQUISITIONS


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Merger - Combination & pooling of equals, with newly created firm often taking

on a new name (but there is no restriction on keeping one of the old names).

Acquisition - One firm (the acquirer), purchases & absorbs the operations of

another firm (the acquired).

Merger & Acquisition are:

Much-used strategic option.

Especially suited for situations where alliances do not provide a firm with

needed capabilities or cost-reducing opportunities.

Ownership allows for tightly integrated operations, creating more control &

autonomy than is possible in alliances.

STRATE

GY

&


COOP

Merger & Acquisition Strategies


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More or better competitive capabilities.

More attractive line-up of products / services.

Greater ability to launch next-wave products / services.

Wider geographic coverage.

Greater financial resources to invest in R&D, add capacity, or expand.

Cost-saving opportunities EoScale, EoScope.

Filling in of the resource or technological / skill gaps.STRATE

GY

&

COMPETITIVEADVANTA

GE

COOP


Benefits


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STRATE

GY

&

COMPETITIVEADVANTA

GE

COOP


Risks

Resistance from Rank-and-File employees.

Tough problems in combining & integrating operations of the once-different

companies.

Greater-than-anticipated difficulties in..

Achieving expected cost-savings,

Sharing of expertise, and

Achieving enhanced competitive capabilities.

Hard-to-resolve conflicts in management styles & corporate cultures.


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STRATEGIC

MANAGEMENT

INTEGRATION


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Vertical integration extends a firms competitive scope within the same industry:

Backward into sources of supply.

Forward toward end-users of final product.

Vertical Integration Strategies can aim at either full or partial integration.

STRATE

GY

&

COMPETITIVEADVANTA

GE

A vertical integration strategy has appeal

only if it significantly strengthens a firms competitive position! INTEG

Activities,

Costs, &

Margins of

Forward ChannelAllies & Strategic

Partners

Internally

Performed

Activities,

Costs, &Margins

Activities,

Costs, &

Margins ofSuppliers

Buyer/User

Value

Chains

Vertical Integration Strategies


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Generates cost savings only if the volume needed is big enough to capture

efficiencies of suppliers.

Potential to reduce costs exists when:

The suppliers have sizable profit margins.

The item(s) supplied is/are a major cost component(s).Resource requirements for the integrated function are easily met.

Vertical Integration can produce a differentiation-based competitive advantage

when it results in a better quality part.

Reduces risk of depending on suppliers of crucial raw materials / parts /

components.

STRATE

GY

&

COMPETITIVEADVANTA

GE

INTEG

Strategic Worth of Backward Integration


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Advantageous for a firm to establish its own distribution network if:

Undependable distribution channels undermine steady production operations.

Lacking a broad enough product line to justify integrating forward into stand-

alone distributorships or retail outlets, a firm may sell directly to end users.

Direct sales and Online Retailing may:

Lower distribution costs.

Produce a relative cost advantage over rivals.

Enable lower selling prices to end users.

STRATE

GY

&

COMPETITIVEADVANTA

GE

INTEG

Strategic Worth of Forward Integration


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Boosts resource requirements.

Locks firm deeper into same industry.

Results in fixed sources of supply and less flexibility in accommodating buyer

demands for product variety.

Poses problems of balancing capacity at each stage of value chain.

May require radically different skills / capabilities.

Reduces manufacturing flexibility, lengthening design time and ability to introduce

new products.STRATE

GY

&

COMPETITIVEADVANTA

GE

INTEG

Strategic Disadvantages of Vertical Integration


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Whether vertical integration is a viable or attractive strategy depends on:

How much it can lower cost, build expertise, increase differentiation, or otherwise

enhance performance of strategy-critical activities.

Its impact on investment cost, flexibility, & administrative overhead.

The contribution it makes to strengthening a company market position or helping it

create competitive advantage.

Many companies are finding that de-integrating, unbundling, and out-sourcing value

chain activities are a better strategic option when it comes to lowering cost, improving

their competitiveness, or gaining added operating flexibility.

STRATE

GY

&

COMPETITIVEADVANTA

GE

INTEG

Pros & Cons of Integration & De-Integration


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STRATEGIC

MANAGEMENT

OUTSOURCING


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De-Integration or unbundling involves narrowing the scope of the firms

operations, focusing on performing certain core value chain activities and

relying on outsiders to perform the remaining value chain activities.

Internally

Performed

ActivitiesSuppliers

Support

Services

Functional

Activities

Distributors

or Retailers

STRATE

GY

&

COMPETITIVEADVANTA

GE

OUT

Unbundling & Outsourcing Strategies


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Activity can be performed better or more cheaply by outside specialists.

Activity is not crucial to achieve a sustainable competitive advantage.

Risk exposure to changing technology and/or changing buyer preferences is

reduced.

Operations are streamlined to:

Cut cycle time.

Speed decision-making.

Reduce coordination costs.

Firm can concentrate on doing those core value chain activities that best suit

its resource strengths and capabilities.

STRATE

GY

&

COMPETITIVEADVANTA

GE

OUT

When Does Outsourcing Makes Strategic Sense?


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Improves firms ability to obtain high quality and/or cheaper components or services.

Improves firms ability to innovate by interacting with best-in-world suppliers.

Enhances firms flexibility should customer needs and market conditions suddenly

shift.

Increases firms ability to assemble diverse kinds of expertise speedily and

efficiently.

Allows firm to concentrate its resources on performing those activities internally

which it can perform better than outsiders.

STRATE

GY

&

COMPETITIVEADVANTA

GE

OUT

Strategic Advantages of Outsourcing


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STRATE

GY

&

COMPETITIVEADVANTA

GE Outsourcing too many (or the wrong) activities, thus

Hollowing out organizations own capabilities.

Losing touch with activities & expertise that determine organizations overall

long-term success.

OUT

Pitfalls of Outsourcing

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SM05b - COOPERATIVE STRATEGIES.pdf