Cooperative Strategy

Critically discuss the underlying motivations and associated competitive advantages that explain why MNEs enter into cooperative structures and strategies, using examples. In recent years there has been an upsurge in the number of MNEs entering cooperative structures and strategies. According to Jones cooperative structure is a means of a substitute or complementary to multinational strategies. It is a strategy in which firms work together to achieve shared objectives. They form partnerships once they believe a local firm had the competitive advantage in the industry or engaged in contractual agreements with public firms.Cooperative strategies and structures have become larger and more complex and crucial more central to the core strategies and competitive advantages of participating firms as a response to the pressures of competing in a global market. In this essay I will firstly discuss the underlying factors which forces MNEs to partake in cooperative strategies. I will then menti on the different types of cooperative structures and strategies. Thirdly using examples I will discuss the motives and disadvantages which arise from MNEs entering into cooperative structure and strategies.After which I will close of with some points to consider in building a successfully cooperative strategies. Cooperative structure and strategy was first coined by firm pre World War 1. In the international business environment in the 21st century there are very few companies which possess all the resources or capabilities they need to develop strategies and organizational capabilities to gain competitive advantage on their own. Firms in the European nations were free to engage in cooperation. The US firms were bound by legislation which causes them not to be free to collaborate.According to Bartlett et al. the key challenge facing companies is their ability to maintain independence by maintaining firm control over its activities which led to the building of strong external relatio nships which may be with their customers, suppliers, competitors or even other institutions. Factors which trigger firms to shift towards cooperative strategy and structures (cooperation) stems from rising cost in R&D, shortened life cycle due to constant technological evolution, growing barriers to market entry (where some firms may lack the now-how), capital shortage, increasing needs for global scale economies and expanding importance of global standards as the world have now become a global market with greater demands and competition being placed on firms. Increasingly they must collaborate with others to meet the need of the global environment. Firms may undertake co-operation such as strategic alliances in this type of cooperation the participating firms agree to collaborate specific aspects of their business combining some of their resources and capabilities to create a mutual competitive advantage.Another form of cooperation is joint ventures which is the most formal mode of cooperation. It involves two or more participating firms taking joint equity in separate entities distinct from the parent company. It may take the form of an entirely new enterprise or one that the joint venture come together and acquire. Eg Fuji-Xerox. During the interwar years the sharing of risk and reduction of financial pressure was the basis for joint ventures, cartels and collaborations.Licensing and Franchising are also forms of cooperation they are contractual relationships between firms they offer ways of reducing capital necessary to engaging in international business. Networks as cooperation are found in many different industries and take many different forms they have no formal existence and are rooted in sustained ongoing commercial relationships where partners have learnt to trust and rely on one another. They exist to link forms operating in different stages of the value chain.All these are different forms in which a firm may undertake to acquire the skills and res ources they lack all in effort of creating value. MNEs engaging in cooperation can benefit from a range of motives giving them competitive advantage over the competitor or sustainability. Such advantages/motives are learning and resource transfer this is where the cooperative structure formal informal networks through licensing agreement to formal joint venture which can form conduits for information flows, knowledge and other tangible and intangible resources.This means that cooperation become a route through which firms gain access to resources they do not possess and either cannot or do not wish to do develop internally. This is because more and more firms are now focusing on narrow sets of core capabilities and innovation (R&D) depends on interdisciplinary work. Firms narrowing their capabilities forces firms to look at external sources of competencies and resource that they no longer possess internally. Example: The requirements imply that todays MNEs must develop the skills t o not only manage assets and resources under their