This essay draws on the findings of the vast amounts of research and studies done on cooperative strategy; it attempts to illustrate that a cooperative approach between foreign and local firms is feasible and can provide a host of advantages (including decreased level of competition and costs of doing business) but it may not be the best approach. The first part of this essay deals with the cooperative approach – what kinds there are, its advantages, and what makes it successful. The second and final part of the essay explores other options a domestic firm has against a foreign firm and discusses how to choose make the best strategic choice with regards to its situation. The emphasis is to illustrate that forming an alliance with a foreign firm entering the local market is not a universal “model” answer when international firms like multinational corporations (MNCs) exploit deregulation and venture into emerging economies. There are other options a firm can consider; and even if it decides to cooperate with the incoming foreign firm, it should also keep in mind that there are many factors that determine the success of the alliance. In the following sections, we take a look at the different types of alliances; the advantages of alliances; factors that determine the success of alliances; other actions a firm can take in response to foreign firms; and lastly, how to choose an optimum strategy.
Some 20 years ago in the 1980s, strategic alliances have already started to appear – some sectors in the US economy have seen more domestic ventures announced in a single year than the previous fifteen to twenty years combined (Kanter 1990). Baranson (1990) attributes this trend to two reasons: time and resource costs. He argues that due to the increased competition all around ...