Exam 9: Cooperative Implications for Strategy

Offshore Oil Exploration Partners (OOEP) has entered into a cooperative strategy with Malay Petroleum. The resulting documents are long, formal, and detailed. They specify detailed responsibilities of each partner and include methods of monitoring accounting and technical procedures. OOEP and Malay Petroleum are using the ____ management approach.

Some cooperative strategies fail when it is discovered that a firm has misrepresented the competencies it can bring to the partnership.

Nonequity strategic alliances exist when two or more firms join together to create an independent firm.

Firms in ____ markets cooperate to pool resources and gain market power.

The cooperation between Fiat and Chrysler to produce a Fiat-designed car in Chrysler's Illinois factory is a(n) _________ alliance because it allows the firms to share resources and capabilities across multiple functions.

Tacit collusion is not explicitly illegal in the United States even though it results in higher prices for consumers.

____ strategic alliances have stronger focus on value creation than do ____ alliances.

Research in the airline industry suggests that tacit collusion reduces service quality and on-time performance.

Identify the competitive risks associated with cooperative strategies.

Announced in February 2011, the alliance between Nokia and Microsoft calls for Nokia to transition its smartphone portfolio to Microsoft's Windows phone platform. This is an example of using an alliance in a standard-cycle market to speed up the development of new products and services. (Chapter 9 Strategic Focus)

A cooperative agreement between a hotel chain and a casino operator would be viewed as a horizontal complementary strategic alliance because as separate entities, the two firms would compete for the same customer.

In a vertical complementary alliance, firms share some of their resources and capabilities from the same stage of the value chain to create a competitive advantage.

The probability of alliance success is increased when partnering firms internalize successful alliance experiences.

All of the following are business-level cooperative strategic alliances EXCEPT

Identify and define the different types of strategic alliances.

DDD Partners, a U.S. business consulting firm is considering a cooperative alliance with an Indian business consulting firm that has a wide practice in the Middle East and Asia. DDD has some European clients, but it sees the Middle East and Asia as growth opportunities. It hopes to learn how to navigate the different cultures and business practices in this part of the world from its alliance with the Indian firm. DDD's greatest risk here is that the Indian firm will

Horizontal business-level strategic alliances have greater probability of creating sustainable competitive advantage than do vertical business-level strategic alliances.

Case Scenario 2: ERP Inc ERP, Inc., (ERPI) is a leading provider of enterprise integration software (EIS). EIS essentially allows a firm to connect and integrate processes across all aspects of its business. To fuel its dramatic growth, ERPI has focused its organization entirely on product development (software programming for a suite of EIS products) and selling (making the sale and then moving onto a new target), while outsourcing the installation and consulting aspects to the world's largest accounting firms. This also makes ERPI basically a "product company," whereas most competitors like Oracle and PeopleSoft in its market space operate as "solutions companies." One benefit of this focused strategy is that ERPI's product is generally recognized as being 200% to 300% better than competitors' software, and thus adopters are thus likely to have a one to two year advantage. In further contrast to the competition, ERPI has used its partnerships with the accounting firms to deliver a turn-key solution, and has focused this solution on a market comprised of the world's largest, global manufacturers and consumer product companies. The accounting firms, in turn, coordinate a comprehensive collection of hardware, operating systems, and complementary software firms. Installation and related consulting for EIS typically cost between $100 and $200 million, with the ERPI software component accounting for only about 20% of the installed cost (the remaining 80% is spent on the actual installation, not counting the value of the customer's time). To incentivize the accounting firms to help sell its product (since, at least initially, the accounting firms had better reputations and controlled access to the target customers), ERPI told its partners that it will never enter the installations and consulting side of the business (aside from installation and consulting that ERPI does as part of its software support). Dangling such a large carrot in front of the accounting firms provided the continuing benefit of encouraging their continued support of ERPI with their customers. -(Refer to Case Scenario 2) The approach used to manage the ERPI network of alliances is closest to an opportunity-maximization approach which makes it possible which for the partners to explore how their resources and capabilities can be shared in multiple value-creating ways.

Firms in a standard-cycle market may form alliances in order to

Which of the following statements is TRUE?