In paper is to examine the many factors

In today’s increasing globally competitive marketplace many firms are utilizing cooperative
strategies such as forming strategic alliances in the form of joint ventures.  Strategic alliances are formed when firms
combine some of their resources to create a competitive advantage, one such
alliance that could be utilized is a joint
venture.  A joint venture is created when
two or more firms create a legally independent company to create a competitive advantage
(Hitt, Ireland, & Hoskisson, 2017, p. 279).  While there are many challenges and opportunities
from forming strategic alliances, many times the benefits outweigh the risks.  The purpose of
this paper is to examine the many factors that are involved in the formation of strategic
alliances and the potential benefits and risks.

Resource Based View

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            As resources are the means by
which firms produce their products, utilizing these resources to gain a competitive
advantage against other firms is the ultimate goal of firms.  While there are two types of resources,
tangible and intangible, it is the combination of both that create the capabilities
of a firm.  Capabilities that are formed
from the combination of both the tangible and intangible resources are typically what create a source of competitive
advantage for a firm.  While some firms
may have the resources to create specific competitive advantages that allow
them to be highly competitive in the market,
others may not.  Recognizing and
understanding the resource deficiencies within a firm, while recognizing and
understanding the resources of another firm that might have complementary
resources is the basis for the formation of many strategic alliances.  When two or more firms combine their resources,
they are allowing themselves to rise stronger within the market, to become more
competitive, to create above average returns, and to offer more value for the
customer.

  Core Competencies

            According to Investopedia.com,
core competencies are the main strengths or strategic advantages of a business
that allows them to be competitive in the
marketplace (“Core
Competencies”, 2015).  When some firms’
assess their core competencies, they are merely identifying what capabilities they have that provide them with a competitive advantage over
other firms.  According to Hitt,
Ireland, and Hoskisson, core competencies are the “crown jewels of a company”
which are the activities they perform exceptionally
well compared to other firms (2017, p.87). 
By identifying and recognizing deficiencies or needed core competencies,
firms can either invest to fix the deficiencies
within these competencies, or they can form strategic alliances with
another firm that might have core competencies they need to continue to compete
at an elevated level within the market.  According
to Ed Rigsbee in an article by Melanie Hakien, he states that it is impossible
to be good at everything, but the key is to look for partners with core competencies
that fill the gaps that will allow a firm to accomplish something bigger,
faster, and better (2007).

Complementary Assets

            By definition,
the term complementary means “combining in such a way as to enhance or
emphasize the qualities of each other” (Complementary,
n.d.).  Based on this definition when two firms have complementary assets,
they have assets that separately do not have the potential impact that their
assets would have together.  When Renault
and Nissan decided to form their alliance, both lacked the necessary size to
develop economies of scale and scope to succeed.  By forming an alliance, it allowed them to
complement each other’s assets such as location, technologies, engineering, research
and development, and management.  In
their book entitled Cooperative Strategy, Child, Faulkner, and Tallman state that Nissan was known for efficient manufacturing
and engineering, while Renault had superior design and marketing skills (2005,
p.102).  This alliance also allowed each
of them to enter different markets than they were currently in.  Another such complementary asset, according
to Douglas Bolduc, is autonomous driving as Renault has been the beneficiary of
Nissan’s technology (2015).

Risk

While strategic alliances have many
benefits, they also come with risks.  Risks associated with the Renault Nissan
alliance could be said to be the same for any firms that form alliances.  The risk
associated with this alliance could be the difference in how each business
operates and different company cultures. These differences could make it difficult
for each firm to integrate and share with each other which could ultimately
lead to one firm not sharing the resources they agreed to. Trust could be a significant issue with strategic alliances as
either firm could steal the others information. 
One way to minimize this risk would be having an ownership stake in each
other’s firms.  With Renault holding a
43.3 percent stake in Nissan and Nissan holding a 15 percent stake in Renault
each firm is financially vested leading to both companies wanting mutual
success (Hitt, Ireland, & Hoskisson, 2017, p. 301).  Renault and Nissan have negated the risk
mentioned above because each company is now invested in each other and the
success of each organization has an impact on the other. Having the same CEO
for both has also created the same
leadership style for both thus effectively reducing the risk of cultural differences.  Furthermore, by developing values based on trust, respect, and transparency, the alliance is poised to
continue to succeed into the future.

Network Cooperative
Strategy

            Many
of the firms mentioned in the case study are smaller car manufacturers and by forming
a network cooperative strategy, they could increase their economies of scale
and scope, but should only do so if they share the same objectives. By forming
a network of car manufacturers, their resource pool will be much more significant as well as their buying power
would increase, thus radically reducing
the cost to produce or purchase certain parts. 
The formation of this network could help these
smaller car manufacturers to
compete with Ford and GM.  One of the
factors that should be explored before the companies mentioned in the case
study form a network cooperative strategy should be if the formation would increase
their competitive advantage and help to create value for customers.  

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