Question

1. What are some of the major complexities encountered in developing cooperative strategies such as strategic alliances and joint ventures?

Answer 1

There are four major complexities that arise in cooperative strategies. This firstmajor complexity is when an organization acts in an opportunistically way – thishappens when contracts are not well thought-through. The second majorcomplexity is when an organization misrepresents the competencies andresources it will bring to the alliance – this mostly occurs when the assets areimmaterial. The third major complexity is when an organization’s resources andcompetencies are not made available to its partner. The last major complexity iswhen an organization invests in the alliance whereas the partner doesn’t – theorganization that invested is thus put in a situation where it may rethink thebenefits of the alliance since it is not earning as much as it could (Das, 2020). It’salways crucial to make sure that the alliance is creating mutual added value andthat the companies trust each other and have a solid contract to follow.

Strategic alliance is defined as covering a variety of flexible cooperative arrangements betweenorganizations, from fluid, short term cooperation to long term, formal agreement. Joint venturesrepresent a divided ownership. There can be some complexity in the process such as determiningthe necessity of an alliance for example transaction cost theory states that firm enter the allianceto reduce the transaction costs associated with entering into new market (Sparling et al, 2000).So, a firm must decide if it is ready to expend the resources and capital as they might move awayfrom cost leadership strategy to a diversifying strategy to maximize their performance. Anothercomplexity comes while selecting a partner. The partner should be compatible and with well-defined boundaries w.r.t the business transactions. Each partner should have clear goals,expectations and contributions. Sometimes a partner may seem opportunistic, misinterpret thecontribution or defy the availability of committed resources. Creating an alliance is difficult taskso is managing it. The cultural differences between the two firms can be a very challengingproblem. For example, most seen issues are export rights, taxes, difference in size