Book Review: Cooperative Strategy

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Cooperative strategy is the attempt by organizations to realize their objectives through cooperation rather than in competition with them, focusing on the benefits of cooperation. I used Cooperative Strategy in preparing for my book chapter on risks in virtual enterprise networks, where two chapters in this book were particularly useful: Networks (Chapter 8) and Virtual Corporations (Chapter 9). My review focuses on these two chapters. I did browse the other chapters in the book, although I did not read them as intensively as chapter 8 and 9, which obviously were the chapters I read most.

Cooperative strategy

Traditional enterprises can enter into various forms of cooperation depending on what their goal is and this book describes six reasons why firms seek to establish cooperative networks: 1) certainty – by developing relationships , 2) flexibility – by being able to quickly allocate a range of resources, 3) capacity – by “outsourcing” work to other network members, 4) speed – by being able to quickly respond to a wide range of business opportunities, 5) skills and competence - by gaining access to resources other than one’s own, and 6) intelligence – by sharing market information.

Networks

Placing cooperative networks on a scale, going from independent to integrated, five degrees of networks can be discerned: 1) Equal-partner network, 2) Unilateral agreements, 3) Dominated network, 4) Virtual corporation, and 5) Strategic alliance. The virtual corporation is described as “a loosely coupled enterprise in which the parts are held together through the medium of sophisticated information technology packages”. Interestingly, and somewhat contradictory to Ken Thompson’s The Networked Enterprise, they consider virtual corporations as “a transitional stage of company development on the path to complete hierarchy”.

Virtual corporations

The chapter on virtual corporations focuses not so much on the virtual corporation itself, as The Networked Enterprise does. Instead it focuses on management. The authors state that a virtual corporation needs a brain and a central nervous system, because a virtual organization too requires strategic direction. In their appraisal of the virtual corporation they do not see it as a solution to all solutions, and in most circumstances, the integrated corporation outperforms the virtual corporation. So they say. Especially when it comes to the communication of tacit knowledge, where there is a need for industry standards and where the growth potential lies in extending existing markets rather than exploring new markets. However, in markets with considerable turbulence, where there is a need for response and flexibility across a global perspective, a single firm may not have the required resources, and that is the place for the virtual corporation. Virtual and integrated corporations are likely to exist side-by-side, with one becoming the selected winner in certain markets, but not in others.

Conclusion

For my part, and for what I needed, the book was very useful. It gave me an insight into different kinds of cooperative networks, what distinguishes them, benefits, disadvantages and pitfalls. Five stars.