Definition: The Expansion through Cooperation is a strategy followed when an organization enters into a mutual agreement with the competitor to carry out the business operations and compete with one another at the same time, with the objective to expand the market potential.
The expansion through cooperation can be done by following any of the strategies as explained below:
- Merger: The merger is the combination of two or more firms wherein one acquires the assets and liabilities of the other in the exchange of cash or shares, or both the organizations get dissolved, and a new organization came into the existence.
The firm that acquires another is said to have made an acquisition, whereas, for the other firm that gets acquired, it is a merger.
- Takeover: Takeover strategy is the other method of expansion through cooperation. In this, one firm acquires the other in such a way, that it becomes responsible for all the acquired firm’s operations.
The takeovers can either be friendly or hostile. In the former, both the companies agree for a takeover and feels it is beneficial for both. However, in the case of a hostile takeover, a firm try to take on the operations of the other firm forcefully either known or unknown to the target firm.
- Joint Venture: Under the joint venture, both the firms agree to combine and carry out the business operations jointly. The joint venture is generally done, to capitalize the strengths of both the firms. The joint ventures are usually temporary; that lasts till the particular task is accomplished.
- Strategic Alliance: Under this strategy of expansion through cooperation, the firms unite or combine to perform a set of business operations, but function independently and pursue the individualized goals. Generally, the strategic alliance is formed to capitalize on the expertise in technology or manpower of either of the firm.
Thus, a firm can adopt either of the cooperation strategies depending on the nature of business line it deals in and the pursued objectives.