Question

Should cost minimization or opportunity maximization be the primary goal of a cooperative strategy? Can both be achieved simultaneously? Why or why not?

original answer please not copy and paste from a previous answer

Answer 1

Cost minimization and opportunity maximization are primary goal of a cooperative strategy which is explained as below:-

In the cost-minimization approach:- the firm develops formal contracts with its partners. These contracts specify how the cooperative strategy is to be monitored and how partner behavior is controlled. The goal of this approach is to minimize the cooperative strategy’s cost and to prevent opportunistic behavior by partners.
The opportunity-maximization approach:- focuses on a partnership’s value-creation opportunities. In this case, partners are prepared to take advantage of unexpected opportunities to learn from each other and to explore additional market place possibilities. Less formal contracts, with fewer constraints on partners’ behaviors, makeit possible for partners to explore how their resources and capabilities can be shared in multiple value-creatingways.

Both be achieved simultaneously:- Firms can successfully use both approaches to manage cooperative strategies. However, the costs to monitor thecooperative strategy are greater with cost minimization, in that writing detailed contracts and using extensive monitoring mechanisms is expensive, even though the approach is intended to reduce alliance costs.

As a strategic asset, trust can enable partner firms to reduce the cost of contracting and monitoring because theprobability of opportunistic behavior is reduced if partners are able to trust each other. Trust also may enablethe venture to take advantage of unforeseen opportunities