Back To: BUSINESS STRATEGY
What is a Cooperative Strategy?
A cooperative strategy (or cooperation strategy) concerns an attempt by an organization to cooperate with other firms in the achievement of its objectives. The cooperation may serve to reduce costs, sure up supply chains, reduce competition, add resources/knowledge/skillsets, and create other synergies.
The cooperation can be between suppliers, buyers, unrelated businesses, or even competitors – the antitrust law may be implicated. Generally, this cooperation is carried out in the form of a strategic alliance. The three common structures for a strategic alliance are as follows
- Joint Venture – A joint venture is similar to a general partnership. Two or more companies come together for a specific purpose for a specific period of time. The companies work together as partners in promoting their business interests. The result is a separate and new legal entity with each company serving as an owner.
- Equity Strategic Alliance – This is an alliance through which two companies invest money in the other. As such, there is co-ownership between the companies. Generally, the arrangement is a merger of equals and each equity partner receives equal control, authority, recognition, and ownership interest.
- Non-Equity Strategic Alliance – This is a contractual relationship whereby two or more companies coordinate efforts and share resources. It can also include a commitment concerning operations and the relationship between the companies. Generally, there is no co-ownership between the firms. Any sums of money exchanged or invested are earned as part of service or supply contracts between the companies.