STRATEGIC MANAGEMENT
Tutorial Sheet
Unit 8 – Strategic Alliance
ACTIVITY #1
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Discussion Questions
1. What is the definition of cooperative strategy, and why is this strategy important to
firms competing in the twenty-first century competitive landscape?
2. What is a strategic alliance? What are the three main types of strategic alliances firms
use to develop a competitive advantage?
3. What are the four business-level cooperative strategies, and what are the differences
among them?
4. What are the three corporate-level cooperative strategies? How do firms use each one
to create a competitive advantage?
5. Why do firms use cross-border strategic alliances?
6. What risks are firms likely to experience as they use cooperative strategies?
7. What are the differences between the cost-minimization approach and the
opportunity-maximization approach to managing cooperative strategies?
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Scenarios
Read the scenarios and state what kind of Strategic Alliances they are.
Spotify and Uber
Leaping forward to a very recent piece of news, Spotify and Uber have partnered to provide
stereo control to Uber customers. Not every Spotify consumer uses Uber, nor does every
Uber rider have a Spotify account. The strategic alliance allows each company to pursue
prospects from the other’s existing customer base, all while continuing to promote both
products.
In both cases, it gives the company a leg up over its competition. Spotify is offering
something with the Premium package that other streaming services do not yet have. And
likewise, Uber can provide the riders with an opportunity to listen to their own playlists as
opposed to other ride-share services that cannot match them yet.
Etihad Airways & Jet Airways
Etihad Airways, based in Abu Dhabi, has completed an investment in India’s Jet Airways for
a 24% equity stake. That stake, resulting in an investment of US $379 million. This alliance
will provide considerable benefits for both carriers, as it opens Etihad to 23 cities in India,
and offers Jet Airways passengers connection possibilities to the US, Europe, Middle East
and Africa that were previously unavailable. Etihad flies to 88 destinations, Jet to 77, and
eliminating duplicates, they combine into a 140 unique destination network.
Google and Luxottica
Luxury eyewear and cutting edge technology. While you might not think of them working
together, oddly enough the partnership is exactly what was needed for each company to get
ahead in the market.
Luxottica can provide premium quality eyewear to the luxury market, with a justification that
the technology is what is driving the price and maintain and increase their market share by
diversifying the customer base. Google on the other hand, can provide technology that has a
touch of luxury, and reach consumers that may be seeking eyewear that has the premium
look, regardless of the technology.
The Saudi Butanol Company (SABUCO)
Saudi Butanol Company (SABUCO) was established in May 2013 as a mixed limited
liability company between SAAC (Saudi Arabian Amiantit Company), Saudi Kayan Co. and
Sadara Chemicals Co. Each of them had an equal part of 33.3% of ownership, and the capital
of SABUCO is around 130 million dollars. Basically, the company was founded to manage
and operate the n-Butanol plant and to distribute it evenly among the partners. So what is the
big deal here? Well, just that it is the world’s largest butanol plant, as said by Mubasher. The
profit is probably as such, but it is kept secret. Knowing the starting capital and that building
the plant cost around $533 million, we can only imagine the revenues.
Answer: Joint venture
Source: [Link]
examples-of-companies-doing-it-right/
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ACTIVITY #3
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Case Study
The Covid-19 pandemic cause many firms to join forces to combat the crisis and save lives.
These initiatives included developing much needed test kits and state of the art machinery to
aid respiration for patients that are hospitalized. Two such strategic alliances are detailed
below.
Mount Sinai Health System & RanalytixAl
Mount Sinai Health System is a New York-based network of more than a dozen hospitals and
medical research and education centers. They partnered with RenalytixAI, a company that
specializes in diagnostic testing, to form Kantaro Biosciences after seeing a need for a new
class of diagnostic tests in the wake of COVID-19. In August 2020, the venture created
COVID-SeroIndex, the first COVID-19 antibody testing kit made for research purposes.
Soon after, Kantaro received regulatory approvals in the U.S. and Europe for a clinical
version of the kit named COVID-SeroKlir. Developed in New York City during a period
when the region was considered to be at the epicentre of the pandemic, the technology of the
test has been used more than 120,000 times and it uses two viral antigens to reduce the
incidences of false positives. It also doesn’t require specialized equipment. Even with the
subsequent approval of several vaccines, the need for a deeper understanding of COVID-19
—how long its antibodies last, how understanding them can affect treatment and therapeutics
—and having a company in place to develop and scale up a test for the next health crisis is
more necessary than ever.
Ventec Life Systems & General Motors
Ventec Life Systems was a small company based in Bothell, Washington, producing state-of-
the-art ventilators when the first U.S. case of COVID-19 was detected just north of Seattle.
The accelerating national health crisis was compounded by a severe shortage of ventilators,
and to meet the urgent need Ventec executives knew they’d need a powerful partner to scale
up from its production rate of 150 multi-function ventilators, the FDA-approved VOCSN,
which combines five devices into a single portable unit: ventilator, oxygen concentrator,
cough assist, suction pump, nebulizer. The company partnered with General Motors,
modifying a production facility in Indiana and training hundreds of employees. Within a
month, the joint entity was delivering the first of 30,000 ventilators ordered by the federal
government, and by June monthly production of VOCSN increased from 150 to more than
10,000.
Questions:
1. What kind of strategic alliance has occurred between:
a) Mount Sinai Health System & RanalytixAl
b) Ventec Life Systems & General Motors
2. What business level cooperative strategy/strategies do you expect from both
partnerships? Discuss.
3. What corporate level cooperative strategy/ strategies do you expect from both
partnerships?
4. Explain four (4) risks associated with both strategic alliance partnerships.
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Jigsaw Story
This is a story of how two firms will use Strategic Alliance to achieve competitive advantage.
Each group will tell a part of the story. Students will have to think fast .
Scenario: Company A makes women’s fashionable footwear and Company B makes belts
and handbags. Both companies are thinking of forming an alliance so that they can combine
some of their resources and capabilities for the purpose of creating a competitive advantage.
Group 1 – what kind of alliance should they form?
Group 2 – why should they form the alliance stated by group 1?
Group 3 - what cycle market would this alliance fall in? Why?
Group 4 – What kind of business-level cooperative strategy would this alliance fall in?
Group 5 – What kind of corporate-level cooperative strategy would this alliance fall in?
Yay!