Cooperative Strategy Advantages and Disadvantages; with Types

The philosophy behind the cooperative strategy is that a company cannot always stand or go alone. Reasonably, it can make stronger its effectiveness through bring into being partnerships with other companies. In recent years, the need for cooperative strategy advantages and disadvantages heights. Because of the following:

  • Intensified competition in the domestic market.
  • Opening up a vast market in different parts of the world.
  • Advanced in telecommunication and information technology.
  • Globalization of business.
  • Trade liberalization in many countries since the emergence of the World Trade Organization (WTO) is.

Collaborative partnerships contemplate an obligation in hostile against the rivals to build a stable existence in international and domestic markets. They have turn out to be so essential to the attractiveness of companies in numerous trades. That they are a core element of today’s business strategies. Let us cite some examples of cooperative strategy partnerships of a few giant business conglomerates. There is a table. Such as:-

Companies Collaborative Partnerships
General Electric 100+
IBM 400+
Oracle 15,000+

A vast network of partnerships with all of its suppliers of parts and components is the Toyota Motor Company of Japan. Microsoft Corporation has strategic alliances with numerous software developers.

The cooperative alliance is prevalent in those industries where there are rapid changes in the different sectors. For instance:- technology, business environment, customer needs, etc. An example of such an industry is the computer industry. A large number of companies produce computer components and software. Producers are mostly different for microprocessors, motherboards, monitors, disk drives, memory, etc. Therefore, there is a requirement for close collaboration among the manufacturers of all these assorted products.

Types of Cooperative Strategy:

The types of cooperative strategies are two. Such as:-

  1. Strategic Alliance
  2. Joint Venture

With the types of cooperative strategy, also include the cooperative strategy advantages and disadvantages in this article.

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Cooperative Strategy Advantages and Disadvantages; with Types

Strategic Alliance:

Also known as a strategic partnership, a strategic alliance is a collaborative arrangement between two or more organizations. The strategic alliance is the first cooperative strategy. It is a non-equity cooperation agreement between two or more firms for promoting their joint competitive advantage. The strategic alliance is formed to help each other in organizational or business functions for mutual benefits. It doesn’t entail creating a new organizational entity. The partners in strategic alliances have no formal ownership ties like a joint venture. The partners instead work cooperatively under an agreement.

The collaborative arrangement must outcome in win-win consequences for all partners to confirm ultimate achievement. None of the parties lose; instead, all gain. Strategic alliances form good earth for the allies to execute joint research, improve products, and share technology. In sharing R & D information, they cooperate on technological development, develop new products that complement each other in the marketplace, and build networks of dealers and distributors to handle their products. Examples of strategic alliances include HP and Intel, Microsoft, AT&T, and UPS; Merck and J&J; IBM and Dell; Pfizer. And also have Warner-Lambert, Grameen Phone and five mobile phone operators; and Dutch-Bangla Bank and few other commercial banks.

Japan’s Toyota has developed a network of over 34,000 alliances with its suppliers of parts and components. In the USA, General Electric Company has formed over 100, IBM over 400, and Oracle over 15,000 Strategic alliances. On average, each big company in the USA involves in around thirty alliances. The monsters in mobile phone technology such as Motorola, Erickson, and Nokia. They have industrialized strategic alliances to sustain worldwide marketplace leadership. Here includes the joint venture of cooperative strategy advantages and disadvantages. Such as:-

Significant Reasons for Strategic Alliances:

Firms enter into strategic alliances for many reasons. They can achieve various benefits if they do cooperate within the national boundary or outside the national border. The main motives for strategic alliances, outside and inside the country, are as follows:-

Within National Boundary:

The following within the national boundary for the strategic alliances:

  1. Avoiding a more costly process of building its capabilities by a company to access new opportunities.
  2. Collaborating on technology or development of a new product.
  3. Substantially improve competitiveness.
  4. Improving supply chain efficiency.
  5. Acquiring new competencies altogether.
  6. To open up expanded opportunities in the industry through collaboration with partners.
  7. Lastly, improving market access through joint marketing agreements.

Outside the National Boundary:

The following outside the national boundary for the strategic alliances:

  1. Assembling more diverse skills, resources, technological expertise, and competitive capabilities, a company can assemble alone.
  2. Capitalizing on the technological and information age revolution through collaborative partnerships with other sound companies.
  3. Acquiring valuable resources or capabilities through alliances that a company could not otherwise obtain on its own.
  4. Bundling competencies and resources across the countries that are more valuable in a joint effort than when dept. Separate.
  5. Accessing valuable skills that concentrate in particular countries.
  6. Finally, gaining inside knowledge about unfamiliar markets and cultures in foreign countries.

Causes for Failure of Strategic Alliances:

A study in the USA revealed that about two-thirds of the strategic alliances were not successful. The most critical reasons for uneasy alliances are as follows:

  • Failure or delay in responding and adapting to changes in the internal and external environment.
  • The inability of the partners to work together.
  • The rivalry between partners in the marketplace happens.
  • If circumstances require, the partner’s failure or unwillingness negotiate.
  • Lastly, the inability of the partners to ensure win-win outcomes from the cooperative agreements.

The above discussions unveil the fact that strategic alliances. Strategic alliances will sustain if the partners become serious in ongoing commitment, mutual learning, and close collaboration continuingly. Also, high dependence on the alliance for essential skills and capabilities may prove fatal for a company. Every single company must improve its expertise in getting market leadership.

Joint Venture:

The joint venture is the second type of cooperative strategy. A joint venture denotes a new organization recognized by two or more groups. It is an agreement where two or more firms hold equity capital in a venture. In this venture, all the partner companies have some degree of a switch. The equity arrangement between independent enterprises results in the creation of a new organizational entity. It means that the supporting organizations’ formula a distinct organization. And have shared proprietorship in the anew created organization. The partner-companies own the newly created firm. Two businesses must agree to establish a new firm jointly to form a joint venture.

The joint venture is preferred when two or more firms lack a necessary component for new business success. In the case of construction of Jamuna Bridge (Bangabandhu Setu), for example, no lone construction firm had essential resources to construct the bridge single-handedly. The solution was a set for joint ventures. There are many joint ventures in Dhaka EPZ and Chittagong EPZ, both national and international. Numerous firms’ similar joint ventures to the overwhelmed resource. The restraints and or take benefit of the distinctive competencies of the partner-companies. There are many countries like India, where the government makes it mandatory for foreign companies to do business on joint ownership basis. It is done to decrease the ‘threat of foreign dominion and increase skills, employment, growing and revenues of local business.’ Here includes the joint venture of cooperative strategy advantages and disadvantages. Such as:-

The advantages of the joint venture:

Including here that the joint venture of cooperative strategy advantages and disadvantages. Such as:

  1. It creates an opportunity to combine the skills and assets of partner-companies necessary to establish a successful new venture.
  2. A joint venture is a formidable way to enter into a foreign market when the market entry restricts by govt./joint venture with a local partner in a foreign country. It is accommodating to overcome import quotas and tariff barriers.
  3. The international joint venture is a fruitful means for strengthening a company’s competitiveness in the world market.
  4. Both local and international joint venture helps facilitate joint research efforts, technology sharing, joint use of production facilities, marketing one another’s products, and joining forces to produce components or assemble finished products.

Situations Suitable for Joint Venture:

The following positions are suitable for the joint venture of cooperative strategy advantages and disadvantages. Such as:-

  1. All the conditions are ideal for strategic partnerships.
  2. Business activity was pursuing an opportunity is complicated or risky. A joint venture is a decent way to assume that opportunity.
  3. Entry to a foreign market needs a local international partner, the difficulty in the listing may arise from restrictions by the government or local culture and socio-political situations.

Difficulties with Joint Venture:

The following challenges for the joint venture of cooperative strategy advantages and disadvantages. Such as:-

  • The difficulty arises in dividing the share of control between the partners.
  • The joint venture firms may begin to compete more with one of the partners than the other does when all partners are in a similar business.
  • Glitches may arise when the supporting firms do not offer support to the joint venture as well.
  • Finally, struggle over how to route the joint venture. It can rent it not together and result in a business blow.

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