Strategic Positioning of Alliances

Authors: Rosenkranz, Stephanie; Weitzel, Utz

Source: International Journal of the Economics of Business, Volume 14, Number 1, February 2007 , pp. 135-149(15)

Publisher: Routledge, part of the Taylor & Francis Group

Buy & download fulltext article:

Price: $50.43 plus tax (Refund Policy)

Abstract:

In this paper we use a simple linear demand structure to analyze firms' and alliances' strategic positioning with regard to cost reduction and product differentiation. In particular, we compare investment decisions under competition and in alliances and analyze comparative static properties concerning changes in market size. In contrast to Porter (1980), this model explicitly allows firms to allocate their budget between the two strategies. The analysis reveals that the optimal allocation of resources for strategic positioning changes markedly when a firm enters an alliance: the general investment level decreases with a shift towards more cost reduction and less product differentiation. Another finding is that alliances (as well as independent firms) in larger markets invest more in both strategies and investment is driven towards product differentiation. These results are in line with Klepper's (1996) findings as they show that the attractiveness of following cost leadership or differentiation strategies changes through industry evolution.

Keywords: Alliance; Strategic Positioning; Competitive Strategy; Cost Reduction; Product Differentiation; Innovation; Game Theory

Document Type: Research article

DOI: http://dx.doi.org/10.1080/13571510601097199

Publication date: 2007-02-01

More about this publication?