Formulating cooperative strategies—joint ventures, strategic alliances, and other partnering arrangements—is the complement of outsourcing. For many corporations, cooperative strategies capture the benefits of internal development and acquisition while avoiding the drawbacks of both.
Globalization is an important factor in the rise of cooperative ventures. In a global competitive environment, going it alone often means taking extraordinary risks. Escalating fixed costs associated with achieving global market coverage, keeping up with the latest technology, and increased exposure to currency and political risk all make risk-sharing a necessity in many industries. For many companies, a global strategic posture without alliances would be untenable.
Cooperative strategies take many forms and are considered for many different reasons. However, the fundamental motivation in every case is the corporation’s ability to spread its investments over a range of options, each with a different risk profile. Essentially, the corporation is trading off the likelihood of a major payoff against the ability to optimize its investments by betting on multiple options. The key drivers that attract executives to cooperative strategies include the need for risk sharing, the corporation’s funding limitations, and the desire to gain market and technology access. 
Most companies cannot afford “bet-the-company” moves to participate in all product markets of strategic interest. Whether a corporation is considering entry into a global market or investments in new technologies, the dominant logic dictates that companies prioritize their strategic interests and balance them according to risk.
Historically, many companies focused on building sustainable advantage by establishing dominance in all the business’s value-creating activities. Through cumulative investment and vertical integration, they attempted to build barriers to entry that were hard to penetrate. However, as the globalization of the business environment accelerated and the technology race intensified, such a strategic posture became increasingly difficult to sustain. Going it alone is no longer practical in many industries. To compete in the global arena, companies must incur immense fixed costs with a shorter payback period and at a higher level of risk.
Companies usually recognize their lack of prerequisite knowledge, infrastructure, or critical relationships necessary for the distribution of their products to new customers. Cooperative strategies can help them fill the gaps. For example, Hitachi has an alliance with Deere & Company in North America and with Fiat Allis in Europe to distribute its hydraulic excavators. This arrangement makes sense because Hitachi’s product line is too narrow to justify a separate distribution network. What is more, customers benefit because the gaps in its product line are filled with quality products such as bulldozers and wheel loaders from its alliance partners.
A large number of products rely on so many different technologies that few companies can afford to remain at the forefront of all of them. Carmakers increasingly rely on advances in electronics, application software developers depend on new features delivered by Microsoft in its next-generation operating platform, and advertising agencies need more and more sophisticated tracking data to formulate schedules for clients. At the same time, the pace at which technology is spreading globally is increasing, making time an even more critical variable in developing and sustaining competitive advantage. It is usually beyond the capabilities, resources, and good luck in R&D of any corporation to garner the technological advantage needed to independently create disruption in the marketplace. Therefore, partnering with technologically compatible companies to achieve the prerequisite level of excellence is often essential. The implementation of such strategies, in turn, increases the speed at which technology diffuses around the world.
Other reasons to pursue a cooperative strategy are a lack of particular management skills; an inability to add value in-house; and a lack of acquisition opportunities because of size, geographical, or ownership restrictions.
The airline industry provides a good example of some of the drivers and issues involved in forging strategic alliances. Although the U.S. industry has been deregulated for some time, international aviation remains controlled by a host of bilateral agreements that smack of protectionism. Outdated limits on foreign ownership further distort natural market forces toward a more global industry posture. As a consequence, airline companies have been forced to confront the challenges of global competition in other ways. With takeovers and mergers blocked, they have formed all kinds of alliances—from code sharing to aircraft maintenance to frequent flyer plans.
Cooperative strategies cover a wide spectrum of nonequity, cross-equity, and shared-equity arrangements. Selecting the most appropriate arrangement involves analyzing the nature of the opportunity, the mutual strategic interests in the cooperative venture, and prior experience with joint ventures of both partners. The essential question is, how can this opportunity be structured in order to maximize benefit s) to both parties?
The Boston Consulting Group (BSC) divides alliances into four groups on the basis of whether the participants are competitors or not and on the relative depth and breadth of the alliance itself: expertise alliances, new business alliances, cooperative alliances, and merger and acquisition M&A-like alliances.
Expertise alliances typically bring together noncompeting firms to share expertise and specific capabilities. Outsourcing of IT services provides a good example. New business alliances are partnerships focused on entering a new business or market. Many companies, for example, have partnered when venturing into new parts of the world, such as China. Cooperative alliances are joint efforts by competing firms, formed to attain critical mass or economies of scale. Competitors combining to seek cheaper health insurance for employees, for example, or combined purchasing arrangements, illustrate this kind of alliance. M&A-like alliances—as the name implies—focus on near-complete integration but may be prevented from doing so, either because of legal regulatory constraints (e.g., airline industry) or because of unfavorable stock market conditions.
BCG found that while new-business alliances compose a clear majority (over 50%), expertise-based alliances are most favored by the stock market, and M&A-like alliances are least favored. The latter is not surprising since such alliances are created in response to unfavorable regulatory or market conditions. 
Minicase: May 2009: The Air France/KLM Group and Delta Air Lines Launch New Transatlantic Global Joint Venture 
The Air France KLM Group and Delta Air Lines announced a new, long-term joint venture whereby the partners will jointly operate their transatlantic business by coordinating operations and sharing revenues and costs of their transatlantic-route network. The airlines will cooperate on routes between North America and Africa, the Middle East and India, as well as on flights between Europe and several countries in Latin America.
For customers, this joint venture will result in more choices, frequencies, convenient flight schedules, competitive fares, and harmonized services on all transatlantic flights operated by the partners. The joint venture represents approximately 25% of total transatlantic capacity, with annual revenues estimated at more than $12 billion (approximately 9.3 billion euros, reference year 2008–2009).
Global passengers will be able to access a vast network offering over 200 flights and approximately 50,000 seats daily. That network is structured around six main hubs: Amsterdam, Atlanta, Detroit, Minneapolis, New York-JFK, and Paris-CDG, together with Cincinnati, Lyon, Memphis, and Salt Lake City. The airline partners will provide their corporate clients with a broad global offering that best meets their expectations for the most convenient airline system, while providing efficient account management as well as ease of travel for their clients. Going forward, this structure will represent a major strength for the SkyTeam alliance, of which all three airlines are members.
The joint venture’s geographic scope includes all flights between North America and Europe, between Amsterdam and India, and between North America and Tahiti. On these routes, the business will be jointly operated, with the strategy and economics equally shared among the Air France-KLM Group and Delta.
Air France and KLM have been working with their respective American partners for many years. KLM signed a joint venture agreement with Northwest in 1997, while Air France and Delta signed a joint-venture agreement in 2007. Following the merger of Delta and Northwest, the next logical business strategy was to establish a single transatlantic joint venture. The agreement is the result of that collaboration.
Governance of the joint venture will be equally shared between the Air France KLM Group and Delta. An executive committee comprising the three CEOs and a management committee comprising representatives from marketing, network, sales, alliances, finance, and operations will define strategy. Ten working groups will be responsible for implementing and managing the agreement in the sectors of network, revenue management, sales, product, frequent flyer, advertising and brand, cargo, operations, IT, and finance. The joint venture will not lead to the creation of a subsidiary.
The venture is a long-term, evergreen arrangement that can only be canceled with a three-year notice and after an initial term of 10 years.
Minicase: GE Money Announces Joint Venture With One of Colombia’s Largest Banking Groups 
Stamford, Connecticut, February 28, 2007: Furthering its growth strategy in Latin America, GE Money, the consumer lending unit of General Electric Company, today announced that it would acquire a minority position in Banco Colpatria—Red Multibanca Colpatria S.A.—a consumer and commercial bank based in Bogota, Colombia. GE Money will acquire a 39.3% stake in Red Multibanca Colpatria in two installments, with options to acquire up to an additional 25% stake from Mercantil Colpatria S.A. by 2012. The initial purchase, subject to regulatory approvals, is expected to close within the next few months. “We are excited to be entering Colombia to partner with Banco Colpatria and its customers,” said the president and CEO of GE Money, Americas. “Colombia is an important growth market for GE as we continue to expand our business in Latin America. The Banco Colpatria team has built an exciting bank in Colombia. We look forward to partnering with them to help accelerate their growth.”
Banco Colpatria, a member of the Mercantil Colpatria S.A. group, had over $2.4 billion in assets and was the second-largest credit card issuer in Colombia. With 139 branches, the bank served more than 1 million customers. The new partnership positioned the two companies to deliver enhanced consumer credit products to the growing Colombian financial services market.
“This partnership will enable Banco Colpatria to expand its product offerings and to further accelerate the bank’s strong growth in the Colombian market,” said the chairman of the board of Banco Colpatria. “This is part of the vision that we share with our new partner. GE Money is the perfect partner to help us broaden our business in Colombia.”
GE Money, Latin America, began operations in 2000, offering consumer loans and private-label credit cards. The business now operates in Mexico, Argentina, and Brazil, as well as in Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and Panama, through a joint venture with BAC-Credomatic Holding Co., Ltd. (BAC). With approximately $7 billion in assets, GE Money, Latin America, offers a wide range of financial products, including mortgages, auto loans, credit cards, insurance products, and personal loans in more than 430 branches and locations.
 Harbison (1993).
 Cools and Roos (2005).
 http://corporate.airfrance.com/; http://corporate.klm.com/; http://news.delta.com/
 GE money to form a joint venture (2007, February 28).