Chapter Review
Failing to Obtain Desired Levels of
Success with Cooperative Strategies
Mini-Case
The complexity associated with most cooperative strategies increases the
difficulty of successfully using them. One cause of this complexity is the fact
that often, firms collaborating on certain projects are simultaneously
competing with each other as well. As explained earlier, this reality
describes the relationship between Cisco and IBM as well as those existing
with airline companies that have joined alliance networks (such as Star,
Oneworld, and SkyTeam). Another complication is that firms sometimes
form a partnership with a company that is itself a collaboration between
other companies. For example, Ford Motor Company formed a joint
venture with carbon manufacturer DowAksa, a firm that is a joint venture
organized by Dow Chemical Company and Istanbul-based Aksa Akrilik
Kimya Sanayii A.S. The purpose of the Ford/DowAksa collaboration is to
find ways to develop cheaper grades of carbon fiber components that can
be integrated into Ford’s automobiles and trucks. Because it is much lighter
than steel, carbon fiber helps auto manufacturers reduce the weight of
their products, which in turn facilitates their efforts to increase products’
gas mileage. We see then that, for multiple reasons, the complexities of
cooperative strategies increase the challenge of effectively implementing
them and may contribute to alliance failure.
Redbox and Verizon terminated their relationship that was originally
developed to become the streaming subscription components of Redbox’s
rental business after only two years. (Outerwall founded Redbox in
partnership with McDonald’s Ventures, LLC. McDonald’s hoped to
distribute DVDs through rental kiosks at its restaurants as a means of
attracting customers and providing them with a unique service.)
Competing against the likes of Netflix and Hulu Plus, Redbox’s streaming
service failed to attract a sufficient number of customers, perhaps in part
because it was able to stream to customers only items that its competitors
were also streaming. Unlike Netflix and Hulu Plus, Redbox was not
developing its own original content as a means of creating unique value for
customers. Because the service made available through the Redbox and
Verizon collaboration was losing money and was not gaining a sufficient
number of subscribers, the partners chose to terminate their relationship.
Carefully executing the operational details of a planned cooperative
strategy is foundational to its performance and influences if it will succeed
or fail. In mid-2015 for example, First Solar, Inc. and SunPower
Corporation, the two largest U.S. solar-panel manufacturers, were in the
planning stages to form a joint venture that would own and operate some
of the firms’ projects. The proposed partners believed that the
collaboration would create value by combining “SunPower’s polysilicon
technology with First Solar’s thin-film panels.” However, SunPower
recorded a loss in the first quarter of 2015, partly because of costs it was
incurring to structure the proposed relationship with First Solar. This
demonstrates the importance of identifying efficient as well as effective
ways to structure a proposed collaboration between companies as a means
of increasing the likelihood of operational success.
Earlier, we noted that MillerCoors, the joint venture formed between
Molson Coors and SABMiller, is encountering difficulties. Some analysts
believe that a reason for this is that, while the partnership had been very
successful during its first six years in terms of substantially reducing costs
by creating economies of scale, it had failed to increase the market shares
held by two of its important products, Miller Lite and Coors Light. The
situation with the MillerCoors partnership suggests that long-term
cooperative strategy success results when partners find unique ways to
create value for customers in addition to finding ways to reduce operating
costs.
Case Discussion Questions
1. What are some of the major complexities encountered in developing
cooperative strategies such as strategic alliances and joint ventures?
2. What role does competition from rivals play in the eventual success of
cooperative strategies? Please explain.
3. What costs are incurred in developing strategic alliances? How can these costs
be managed?
4. Should cost minimization or opportunity maximization be the primary goal of a
cooperative strategy? Can both be achieved simultaneously? Why or why not?
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Failing to Obtain Desired Levels of
Success with Cooperative Strategies
Mini-Case
The complexity associated with most cooperative strategies increases the
difficulty of successfully using them. One cause of this complexity is the fact
that often, firms collaborating on certain projects are simultaneously
competing with each other as well. As explained earlier, this reality
describes the relationship between Cisco and IBM as well as those existing
with airline companies that have joined alliance networks (such as Star,
Oneworld, and SkyTeam). Another complication is that firms sometimes
form a partnership with a company that is itself a collaboration between
other companies. For example, Ford Motor Company formed a joint
venture with carbon manufacturer DowAksa, a firm that is a joint venture
organized by Dow Chemical Company and Istanbul-based Aksa Akrilik
Kimya Sanayii A.S. The purpose of the Ford/DowAksa collaboration is to
find ways to develop cheaper grades of carbon fiber components that can
be integrated into Ford’s automobiles and trucks. Because it is much lighter
than steel, carbon fiber helps auto manufacturers reduce the weight of
their products, which in turn facilitates their efforts to increase products’
gas mileage. We see then that, for multiple reasons, the complexities of
cooperative strategies increase the challenge of effectively implementing
them and may contribute to alliance failure.
Redbox and Verizon terminated their relationship that was originally
developed to become the streaming subscription components of Redbox’s
rental business after only two years. (Outerwall founded Redbox in
partnership with McDonald’s Ventures, LLC. McDonald’s hoped to
distribute DVDs through rental kiosks at its restaurants as a means of
attracting customers and providing them with a unique service.)
Competing against the likes of Netflix and Hulu Plus, Redbox’s streaming
service failed to attract a sufficient number of customers, perhaps in part
because it was able to stream to customers only items that its competitors
were also streaming. Unlike Netflix and Hulu Plus, Redbox was not
developing its own original content as a means of creating unique value for
customers. Because the service made available through the Redbox and
Verizon collaboration was losing money and was not gaining a sufficient
number of subscribers, the partners chose to terminate their relationship.
Carefully executing the operational details of a planned cooperative
strategy is foundational to its performance and influences if it will succeed
or fail. In mid-2015 for example, First Solar, Inc. and SunPower
Corporation, the two largest U.S. solar-panel manufacturers, were in the
planning stages to form a joint venture that would own and operate some
of the firms’ projects. The proposed partners believed that the
collaboration would create value by combining “SunPower’s polysilicon
technology with First Solar’s thin-film panels.” However, SunPower
recorded a loss in the first quarter of 2015, partly because of costs it was
incurring to structure the proposed relationship with First Solar. This
demonstrates the importance of identifying efficient as well as effective
ways to structure a proposed collaboration between companies as a means
of increasing the likelihood of operational success.
Earlier, we noted that MillerCoors, the joint venture formed between
Molson Coors and SABMiller, is encountering difficulties. Some analysts
believe that a reason for this is that, while the partnership had been very
successful during its first six years in terms of substantially reducing costs
by creating economies of scale, it had failed to increase the market shares
held by two of its important products, Miller Lite and Coors Light. The
situation with the MillerCoors partnership suggests that long-term
cooperative strategy success results when partners find unique ways to
create value for customers in addition to finding ways to reduce operating
costs.
Case Discussion Questions
1. What are some of the major complexities encountered in developing
cooperative strategies such as strategic alliances and joint ventures?
2. What role does competition from rivals play in the eventual success of
cooperative strategies? Please explain.
3. What costs are incurred in developing strategic alliances? How can these costs
be managed?
4. Should cost minimization or opportunity maximization be the primary goal of a
cooperative strategy? Can both be achieved simultaneously? Why or why not?
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