ch8 Strategic alliances

4 primary ways to create value with an alliance partner

1. combine unique resources 2. pool similar resources 3. create new alliance-specific resources 4. lower transaction costs

4 ways that partners build trust in alliance relationships

1. personal trust 2. legal contracts 3. shared equity/financial collateral bonds 4. reputation

Teal Inc. forms a strategic alliance with White Corp. In their contract, they specify how governance issues, operating issues, and termination issues would be resolved. Which of the following is likely to be covered under the clause that deals with governance issues?

How profits will be split between Teal and White

examples of government issues

how decisions will be made, how profits will be split and how disputes will be resolved

3 choices companies have to conduct any particular activity that needs to be done to offer a product or service to a customer

make, buy, ally

strategic alliance

a cooperative arrangement in which two or more firms combine their resources and capabilities to create new value; sometimes referred to as a partnership

vertical alliance

an alliance between firms that are positioned at different stages along the value chain, such as a supplier and a buyer

horizontal alliance

an alliance between two firms that do not have a supplier-buyer relationship and are typically positioned at a common stage of the value chain

joint venture

an alliance in which collaborating firms create and jointly own a legally independent company

An alliance is likely to rely most on relationships between individuals when it is based on _________.

goodwill trust

contractual or nonequity alliance

two or more firms write a contract to govern their relationship. ownership is shared between the companies

examples of operating issues

what performance is expected, and how intellectual property will be shared and protected

misrepresentation

when one partner in an alliance creates false expectations about the res

hold-up

when one partner tries to exploit the alliance-specific investments made by another partner

An organization wants to form a strategic alliance with another firm. The second firm is at the same level along the value chain. It cannot contribute the same level of financial resources, although it can contribute an extensive level of knowledge. In order to accommodate these factors, they decide to start a legally independent firm. Which of the following alliances will be best suited for the organization?

A joint venture

types of strategic alliances

Contractual alliance, equity alliance, joint venture

Which of the following statements is true about strategic alliances?

In strategic alliances, companies may choose to cooperate at any stage along the value chain.

Which of the following is a key function of an effective dedicated alliance function?

Increasing external visibility

Identify a true statement about a horizontal alliance.

It can occur between companies who do not do the same activities but do complementary ones.

Two firms that produce industrial machinery decide to form a strategic alliance. The objective of this collaboration is to combine their manufacturing facilities to achieve economies of scale during production. Which of the following is the primary value they aim to create through this alliance?

Pooling similar resources

examples of exit/termination issues

conditions under which partners can exit the alliance or the contract can be terminated

equity alliance

the collaborating firms in an alliance supplement contract with equity holdings in their alliance partners