NETWORK LEVEL

STRATEGY
 ALLIANCES
 JOINT VENTURES
 COMPETITION VS. COOPERATION
 ORGANIZATIONAL DEPENDENCIES
LEARNING OBJECTIVES:

• To have a greater understanding of network

level strategy.
• To be able to relate network level strategy to
real life cases
• To be aware of aspect of inter-organizational
relationship
• To understand perspective of network strategy
What is Network Strategy?

Network strategy has to do with issue of inter-organizational

relationship.

These strategies systematically aligned with the business to get

maximum advantage.

Strategy to create groups or connections so that they can share

the fruits of one another’s success or competencies.

Primary benefits of network level strategy is the firm’s opportunity

to gain access to a multitude of firms’ resources and capabilities.
The issue of Inter –Organizational
Relationships

In the network level strategies the main focus of the

organization during the strategic management process :
To decide how to stay in the market individually or with
alliances.

To decide how many companies should be in the network

and how much integration or inter dependence is suitable

Most importantly they have to decide what type of

relationships should be develop.
The issue of Inter –Organizational
Relationships
FOUR ASPECTS OF INTER-ORGANIZATIONAL
RELATIONSHIPS

RELATIONAL ACTORS

RELATIONAL OBJECTIVES

RELATIONAL FACTORS

RELATIONAL ARRANGEMENTS
ASPECTS OF INTER-ORGANIZATIONAL
RELATIONSHIPS

1. RELATIONAL ACTORS- (Who)

• Upstream – vertical relations(Supplier)
• Downstream- vertical relations (buyers)
• Direct horizontal relations (industry insider)
• Indirect horizontal relations (industry outsider)
• Socio cultural actors
• Economic actors
• Political/legal actors
• Technological actors
RELATIONAL ACTORS

ASPECTS OF INTER-ORGANIZATIONAL RELATIONSHIPS

ASPECTS OF INTER-ORGANIZATIONAL
RELATIONSHIPS
2. RELATIONAL OBJECTIVES- (Why)
• Relation oriented towards leveraging resources:
• Learning
• Lending
• Relation oriented towards integrating activities:
• Linking
• Lumping
• Relation oriented towards aligning positions:
• Leaning
• Lobbying
• Socio cultural actors
• Economic actors
• Political/legal actors
• Technological actors
ASPECTS OF INTER-ORGANIZATIONAL
RELATIONSHIPS

3. RELATIONAL FACTORS- (How)

• Legitimacy
• Urgency
• Frequency
• Power
ASPECTS OF INTER-ORGANIZATIONAL
RELATIONSHIPS

4. RELATIONAL ARRANGEMENT– (What)

• Organizational forms between markets and
hierarchies: network, partnerships and alliances.
• Organizations involved in network employ different
sorts of collaborative arrangements:
• Bilateral Arrangement (two parties)
• Multilateral Arrangement (three of more parties)
• Non- contractual Arrangement
• Contractual Arrangement
• Equity-based arrangement
ASPECTS OF INTER-ORGANIZATIONAL
RELATIONSHIPS

4. RELATIONAL ARRANGEMENT– (What)

• Demand for inter-organizational competition-
Discreet Organization
• Demand for inter-organizational cooperation-
Embedded Organization
Example of Collaborative
Arrangement
PERSPECTIVE ON NETWORK
STRATEGY

Discreet Organization
Perspective
• The companies that prefer to develop relationships on
the basis of competitive market forces and decide
to work autonomously are considered as the
followers of the discreet organization perspective.
• They believe that the best way to capture market share
is to promote their own competencies instead of using
someone other’s skills.
• In favor of competition instead of cooperation and
focus only at their own self interest.
• Discreet organization believes at the win-
loss relationships and consider the business as a war. 
PERSPECTIVE ON NETWORK
STRATEGY
Embedded Organization
Perspective
• They consider cooperation is the best tool to compete
in the market and form their strategies in order to share
the fruits of success of each other.
• Perspective prefer cooperation over competition and
develop a relation of trust. They should continuously
work in order to compete with the forces of markets.
(competitors, buyers, suppliers, new comers and
substitute)
• Organizations are dependant at each other.
• Embedded organizations prefer win-win solutions
and believes to share the fruits of success with alliances
because the results are considered as the outcome of
joint effort.
PERSPECTIVE ON NETWORK
STRATEGY
 LEARNING OBJECTIVES

 TO DEFINE STRATEGIC ALLIANCE

 TO IDENTIFY REASON FOR
FORMATION OF STRATEGIC ALLIANCE;
 TYPES OF STRATEGIC ALLIANCE
 TO KNOW ADVANTAGES &
DISADVANTAGES OF STRATEGIC
ALLIANCE
STRATEGIC ALLIANCES

Strategic alliances are agreements

between two or more independent
companies to cooperate in the
manufacturing, development, or sale
of products and services or other
business objectives.
STRATEGIC ALLIANCES

It is also a cooperative arrangement between

two or more organizations that does not involve
the creation of a new entity.

Partners may provide the strategic alliance with

resources such as products, distribution
channels, manufacturing capability, project
funding, capital equipment, knowledge,
expertise, or intellectual property.
3 COMMON REASONS FOR
STRATEGIC ALLIANCES

Slow Cycle of Standard Cycle Fast Cycle of

the Business of the Business the Business
 1. STRATEGY
DEVELOPMENT

FORMATION
OF 2. PARTNER
ASSESSMENT
STRATEGIC
ALLIANCE

3. CONTRACT
NEGOTIATION
 FORMATION OF STRATEGIC ALLIANCES

STRATEGY PARTNER CONTRACT

DEVELOPMENT ASSESSMENT NEGOTIATION

 Objectives  potential partners • goals and

analyzed objectives are
 Major issues realistic and
• weaknesses and
feasible
 Resource strengths and the
strategies for motivation for • contribution and
joining reward, penalties
production
• partner selection
and retaining
 Technology companies´
interests
 People
 3 TYPES OF STRATEGIC ALLIANCES

Equity Non-equity
Joint
Strategic Strategic
Venture
Alliance Alliance
TYPES OF STRATEGIC ALLIANCES

JOINT VENTURE

• cooperative arrangement that

involves two or more organizations
each contributing to the creation of
a new entity
TYPES OF STRATEGIC ALLIANCES

EQUITY STRATEGIC
ALLIANCE

• created when one company

purchases a certain equity
percentage of the other company
TYPES OF STRATEGIC ALLIANCES

NON-EQUITY STRATEGIC
ALLLIANCE

• created when two or more

companies sign a contractual
relationship to pool their resources
and capabilities together
 ADVANTAGES OF STRATEGIC
ALLIANCES

Strategic alliances create value by:

Improving current operations
Changing the competitive environment
Ease of entry and exit 
 DISADVANTAGES OF STRATEGIC
ALLIANCES
Challenges in a Strategic Alliances:
 Partners may misrepresent what they bring to the
table (lie about competencies that they do not have).
 Partners may fail to commit resources and capabilities
to the other partners.
 One partner may commit heavily to the alliance while
the other partner does not.
 Partners may fail to use their complementary
resources effectively.
 JOINT
VENTURES
 LEARNING OBJECTIVES

 TO DEFINE JOINT VENTURE

 TO IDENTIFY REASONS FOR
FORMATION OF JOINT VENTURE
 TYPES OF JOINT VENTURE
 COMPARISON OF ADVANTAGES AND
DISADVANTAGES OF JOINT VENTURE
JOINT VENTURE

A joint venture refers to a new organization established

by two or more organizations. It is an agreement where
two or more firms hold equity capital in a venture.

Joint ventures come into existence when two or more

firms mutually decide to create a new firm (with a new
name and legal status) in collaboration/ partnership
specified the purpose. The new entity may be
a corporation, limited liability company, or partnership.
JOINT VENTURE

A strategic joint venture is a business agreement

between two companies who make the active decision
to work together, with a collective aim of achieving a
specific set of goals and increase their respective
bottom lines.

Strategic joint ventures may be seen as strategic

alliances, though the latter may or may not entail a
binding legal agreement, while the former does.
Why Form a Joint Venture?
Five great reasons to form a Joint Venture:

1. Expands your audience. 

2. Increases your credibility to your community. 

3. Spreading costs.

4. Access to new markets. 

5. Strategic move against competition

 TYPES OF JOINT VENTURE

Project- Functional
Vertical Horizontal
Based Based
Joint Joint
Joint Joint
Venture Venture
Venture Venture
TYPES OF JOINT VENTURE

Project-Based Joint
Venture
• Companies enter into a Joint Venture in order to
achieve a specific task which can be an execution of
any specific project or a particular service to be
offered together, Assignment, etc. Such
collaboration is usually undertaken between
companies for an exclusive and specific purpose
only and as such ceases to exist once the particular
project is completed. In other words, these types of
Joint Ventures are bound by time or a particular
project.
TYPES OF JOINT VENTURE

Functional Based Joint

Venture

• Companies come together to achieve a

mutual benefit on account of synergy
(cooperation or teamwork) in terms of
functional expertise in certain areas
which together enables them to
perform more efficiently and effectively.
TYPES OF JOINT VENTURE

Vertical Joint Venture

• Transactions take place between buyers and
suppliers. It is usually preferred when bilateral
trading is not beneficial or economically viable.
• Maximum gain is captured by suppliers while limited
gains are achieved by buyers.
• Vertical Joint Ventures enjoy a higher success rate
and also deepen the relationship between the
Buyers and Suppliers which ultimately help benefit
the businesses in offering quality products and
services to customers at reasonable prices.
TYPES OF JOINT VENTURE

Horizontal Joint Venture

• The transaction happens between companies that are in the
same general line of business and that may use the products
from Joint venture to sell to their own customers or to create
an output that can be sold to the same group of customers.
• Managing a horizontal joint venture is usually difficult to
handle and often results in disputes as the alliance is
between partners which are into the same line of business.
• Also, these types of Joint Ventures suffer from opportunistic
behaviour between the partners due to being in the same
general line of business.
• Under such type of Joint Ventures, the gains are equally
shared by both the parties.
 ADVANTAGES OF JOINT
VENTURE
1. New insights and expertise
2. Better resources
3. It is only temporary
4. Both parties share the risks and costs
5. Joint ventures can be flexible
6. There are ways to exit a joint venture
7. You will know what’s yours and will be able to sell it
8. You are more likely to succeed
9. You will build relationships and networks
10. Your potential will virtually be limitless
11. You get to save money by sharing advertising and marketing costs
12. International joint venture eradicates the risk of discrimination.
 DISADVANTAGES OF JOINT
VENTURE
1. Vague objectives
2. Flexibility can be restricted
3.  There is no such thing as an equal involvement.
4. Great imbalance
5. Clash of cultures
6. Limited outside opportunities
7. A lot of research and planning are necessary
8. It may be hard for you to exit the partnership as there is a contract involved
9. You might be tempted to leave the joint venture
10. Lack of clear communication
11. Unreliable partners
12. Unclear and unrealistic objectives
COMPETITION
VS
COOPERATION
 COMPETITIVE STRATEGY
Competitive Strategy is defined as the long term plan of a particular
company in order to gain competitive advantage over its competitors in
the industry.

TYPES OF COMPETITIVE STRATEGY

Cost Differentiation Differentiation

Cost focus
Leadership leadership focus
TYPES OF COMPETITIVE
STRATEGY

Cost Leadership
• The objective of the firm is to become the
lowest cost producer in the industry and is
achieved by producing in large scale which
enables the firm to attain economies of scale.
High capacity utilization, good bargaining power,
high technology implementation are some of
factors necessary to achieve cost leadership.
TYPES OF COMPETITIVE
STRATEGY

Differentiation leadership
• Firm maintains unique features of its products in
the market thus creating a differentiating factor.
With this differentiation leadership, firms target
to achieve market leadership. Superior brand
and quality, major distribution channels,
consistent promotional support etc. are the
attributes of such products. E.g. BMW, Apple
TYPES OF COMPETITIVE
STRATEGY

Cost focus

• Firm concentrates on specific market

segments and keeps its products low
priced in those segments. Such
strategy helps firm to satisfy sufficient
consumers and gain popularity. E.g.
Sonata watches
TYPES OF COMPETITIVE
STRATEGY

Differentiation focus
• Firm aims to differentiate itself from one or two
competitors, again in specific segments only.
This type of differentiation is made to meet
demands of border customers who refrain
from purchasing competitors’ products only
due to missing of small features. It is a clear
niche marketing strategy.
 COMPETITION
Competition is a process in
which individuals or groups
struggle for some goal or adventure and readiness to
end.
Constructive competitions
are always beneficial but
uncontrolled competition is
always harmful or
dangerous.
For competition self-
confidence, strong
aspirations, the spirit of Competition has limitations
as it bound by norms.
suffer and to struggle are
needed.
Competition may contribute
to socio-economic progress
Competition may cause as well as to general
satisfaction as well as welfare but there is no
dissatisfaction. chance for solution of inter­
national problems and
disputes.
 COOPERATIVE STRATEGY
Cooperative Strategy is a strategy in which firms work together
to achieve shared objectives.

TYPES OF COOPERATIVE STRATEGY

Strategic Joint
Alliances Venture
 COOPERATION

The qualities like natural

awareness,
Cooperation is a process Cooperation is limitless.
understanding,
of working together for Because one can go to
helpfulness and selfless
common rewards. any extent to help other.
attitude are necessary
for co­operation.

The degree of solution

Cooperation is always Cooperation provides for many international
beneficial as it brings satisfaction and problems and disputes
normally positive results. contentment to people. provided by co­operation
is higher.
ORGANIZATIONAL DEPENDECIES
ORGANIZATIONAL DEPENDENCIES CAN BE
DEFINED AS:

The relationship of separate but

interdependent organizational units

Organizational
dependencies
Delineates the direction of ordering
elements based on common
objectives or similiarities of tasks
TYPES OF DEPENDENCIES

Functional dependencies
• resulting from the division of labor

Hierarchical dependencies
• result from the separation of powers
within organization
TYPES OF DEPENDENCIES
TYPES OF DEPENDENCIES
TYPES OF DEPENDENCIES
RULES OF DEPENDENCIES

Principle of coordination

Principle of establishment of advisory dependencies

Principle of ordering information of informational

Principle of the unity of management

Principle of optimal span of control

THANK YOU!

Prepared by:
 
ABEGAIL P. MARANAN
REYLYN JANE B. HERRERA
MBBA-502