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156 PART 2 • STRATEGY FORMULATION

addition of Continental Airlines, the Star Alliance has 25 airlines such as Air Canada,
Spanair, United, and Singapore Airlines; the OneWorld Alliance has 10 airlines such
as American, British Air, and LanChile; and finally, SkyTeam Alliance has 15 airlines such
as Air France, Delta, and Korean Air. Firms are moving to compete as groups within
alliances more and more as it becomes increasingly difficult to survive alone in some
industries.
The idea of joining forces with a competitor is not easily accepted by Americans, who
often view cooperation and partnerships with skepticism and suspicion. Indeed, joint
ventures and cooperative arrangements among competitors demand a certain amount of
trust if companies are to combat paranoia about whether one firm will injure the other.
However, multinational firms are becoming more globally cooperative, and increasing
numbers of domestic firms are joining forces with competitive foreign firms to reap mutual
benefits. Kathryn Harrigan at Columbia University says, “Within a decade, most compa-
nies will be members of teams that compete against each other.” Once major rivals,
Google’s YouTube and Vivendi SA’s Universal Music Group have formed a partnership
called Vevo to provide a new music-video service. Google provides the technology and
Universal Music provides the content, and both firms share the revenues. The two firms
now operate the stand-alone site Vevo.com.
U.S. companies often enter alliances primarily to avoid investments, being more inter-
ested in reducing the costs and risks of entering new businesses or markets than in acquir-
ing new skills. In contrast, learning from the partner is a major reason why Asian and
European firms enter into cooperative agreements. U.S. firms, too, should place learning
high on the list of reasons to be cooperative with competitors. U.S. companies often form
alliances with Asian firms to gain an understanding of their manufacturing excellence, but
Asian competence in this area is not easily transferable. Manufacturing excellence is a
complex system that includes employee training and involvement, integration with suppli-
ers, statistical process controls, value engineering, and design. In contrast, U.S. know-how
in technology and related areas can be imitated more easily. U.S. firms thus need to be
careful not to give away more intelligence than they receive in cooperative agreements
with rival Asian firms.

Joint Venture/Partnering
Joint venture is a popular strategy that occurs when two or more companies form a tempo-
rary partnership or consortium for the purpose of capitalizing on some opportunity. Often,
the two or more sponsoring firms form a separate organization and have shared equity
ownership in the new entity. Other types of cooperative arrangements include research and
development partnerships, cross-distribution agreements, cross-licensing agreements,
cross-manufacturing agreements, and joint-bidding consortia. Once bitter rivals, Nokia
Corp. and Qualcomm recently formed a cooperative agreement to develop next-generation
cell phones for North America to hit the market in mid-2010. Based in Finland, Nokia has
roughly 40 percent of the global cell phone market but has lagged behind in North
America.
Nokia is also in discussion with Facebook Inc. to form a partnership that would embed
parts of the social network into some Nokia phones. Contact information stored in
Facebook, for example, could be integrated with the phone’s address book. On the phone,
when users look up a contact they can see whether their Facebook friends are logged on,
send them messages, and post comments on their profile pages. Facebook is also in discus-
sion with Palm Inc. and Motorola Inc. to form other partnerships to integrate Facebook
features into cell phones. Facebook has fewer U.S. users than MySpace but has eclipsed
MySpace in U.S. visitors from mobile phones. MySpace is owned by News Corporation,
which also owns Dow Jones, publisher of the Wall Street Journal.
Microsoft, based in Redmond, Washington, and Yahoo, based in Sunnyvale,
California, recently resumed talks about search and advertising partnerships as many firms
are doing the same—shifting their focus from acquisitions to partnerships.
Joint ventures and cooperative arrangements are being used increasingly because they
allow companies to improve communications and networking, to globalize operations, and