Published by MBA Skool Team, Last Updated: September 02, 2021
What is Cooperative Strategies?
Cooperative Strategies are used when two or more firms want to partner in and work together to achieve a common shared objective. With combined resources, firms can together create value which otherwise is not possible by working independently. But there are certain risks associated with such a coalition especially when the firms are competitors. They are called as competitive risks of cooperative strategy.
Some of the Competitive risks are:
1.When the contract is not stated properly, there are chances that firms will find loopholes and try to take advantage of the situation over the other partner firms
2.Companies could falsely represent their competencies by wrongly stating their knowledge about certain conditions which are crucial to meet the objective
3.After a deal is struck, companies can also withhold itself by not providing the necessary support and resources which was agreed upon
4.When one of the firms in the alliance alone makes investments while the other firm does not. This makes the firm as hostage about its investments
Apart from the above stated risks, there are many other competitive risks related to managing the venture and ability to find trustworthy partners. When there is mutual trust & faith between the firms, fewer resources are only required to control the alliance.
1. Economies of Scale – Placing a bulk order of supplies for a group of firms is cheaper than placing individual supply orders 2. Bargaining Power – Cooperative marketing can ensure more bargaining power through bulk purchasing agreements with retailers 3. Continuous flow of Products - A group of firms engaged in cooperative marketing can ensure a continuous flow of a large amount of products to a retailer 4. Preserving Markets – Businesses prefer cutting costs by procuring all their products or services from a single outlet 5. Access to expertise – For a cooperative group of firms access to professional expertise becomes cheaper 6. Increasing the Financial Income – This can come by tapping new markets and reducing the cost of supplies through bulk purchasing
Example of Cooperative Strategy
Star Alliance is one of the examples where multiple aviation companies have partnered with each other to work together to serve international customers across sectors. Customer travelling from Europe to Australia can travel through connecting flights of different airlines working together.
Hence, this concludes the definition of Cooperative Strategies along with its overview.
This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.
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