Question

Lennon Company and Richards Company have entered into a cooperative strategy. The two firms want to have the flexibility to take advantage of any unexpected opportunities that may arise during the term of their alliance and to have the ability to explore additional marketplace opportunities. What cooperative strategy management approach should Lennon and Richards use?

a.Cost minimization
b.Cost maximization
c.Tacit collusion
d.Opportunity maximization

Answer 1

Lennon and Richards should adopt an opportunity maximization approach to remain flexible and capitalize on unexpected market opportunities while maintaining potential for cooperation.

Step-by-step explanation:

The cooperative strategy management approach that Lennon and Richards should use is opportunity maximization. This approach focuses on taking advantage of unexpected opportunities and exploring additional marketplace opportunities. Unlike cost minimization, which seeks to minimize costs and establish strict guidelines, opportunity maximization allows for greater flexibility and adaptation to changing market conditions and potential collaborations.

Considering oligopolistic markets, where firms like Lennon and Richards operate, the prisoner's dilemma and the concept of collusion are relevant. Each firm in an oligopoly may be tempted to act independently to increase profits; however, they would collectively earn more if they could trust each other to cooperate. Opportunity maximization allows firms to seek collaborative advantage without the formal commitments that might trigger legal and political scrutiny like in the case of a cartel.

By using this strategy, Lennon and Richards can adapt quickly to changing market conditions and capitalize on any opportunities that arise. They can also collaborate on research and development, share resources, and combine their strengths to maximize their potential for success.