What is an equity alliance quizlet?
an alliance with cooperative contracts that are supplemented by equity investments by one partner in the other partner.
What are equity alliances?
Equity alliances, which are alliances in which some form of shareholding exists, are used with some regularity. Three forms of equity alliances exist: joint ventures; minority stakes; and cross-shareholdings. Joint ventures come into existence when two or more companies jointly set up a separate legal entity.
What are the pros and cons of alliances?
| Pros | Cons | |
|---|---|---|
| Alliance | Lower risk than an acquisition Gives competences that you may lack Low investment | Less permanent, shorter life-cycle May dilute competence and cover up weaknesses Can be hard to manage, especially with change |
•Oct 1, 2014
Which of the following is an advantage of equity alliances when compared to non-equity?
They are flexible and easy to initiate and terminate. Which of the following is an advantage of non-equity alliances? They enable the exchange of both tacit and explicit knowledge.
Which of the following is an advantage of non-equity alliances?
Which of the following is an advantage of non-equity alliances? –They produce strong ties between alliance partners as they are permanent in nature.
Which of the following is a disadvantage of a joint venture?
Which of the following is a disadvantage of joint ventures? It can lead to conflicts and battles for control between the investing firms.
What are the benefits of an equity alliance?
This type of alliance focuses on combining some of the firms' resources, thus creating a competitive advantage. Typically, the larger firm in equity alliances has more cash flow, a lower debt ratio, a stronger interest coverage ratio, a higher profit margin, and ROA than the smaller firm.
Why do strategic alliances fail?
Reasons for alliance failure Earlier research indicates that alliances fail for a variety of reasons: Differences in culture. Incompatible objectives. Lack of executive commitment.
What are the possible risks of the alliance?
The two major types of risk in alliances—relational risk and performance risk—represent two major sources of unsatisfactory performance, one internal to the relationship and the other external to the relationship. Alliance resource management must explicitly take the unique alliance risks into account.
Why do alliances fail?
Reasons for alliance failure Earlier research indicates that alliances fail for a variety of reasons: Differences in culture. Incompatible objectives. Lack of executive commitment.
Which of the following is an advantage of non equity alliances?
Which of the following is an advantage of non-equity alliances? –They produce strong ties between alliance partners as they are permanent in nature.
What is the main reason that most mergers and acquisitions negatively effect shareholder value?
Many mergers destroy shareholder value because the anticipated synergies never materialize.
Which of the following is a disadvantage of a joint venture quizlet?
Which of the following is a disadvantage of joint ventures? It can lead to conflicts and battles for control between the investing firms. In a _____, the firm owns 100 percent of the stock.
What are the risks of joint ventures?
Risks
- Lack of clarity regarding the obligations and responsibilities of each of the partners.
- Clash in the management styles and techniques of different partners, leading to frequent conflict.
- An imbalance of the capital and the resources invested by the partners leading to frequent arguments and conflicts of interest.
What are the risks of strategic alliances?
Some of the risks are listed below:
- Partner experiences financial difficulties.
- Hidden costs.
- Inefficient management.
- Activities outside scope of original agreement.
- Information leakage.
- Loss of competencies.
- Loss of operational control.
- Partner lock-in.
What are common causes of alliance failure?
Reasons for alliance failure Earlier research indicates that alliances fail for a variety of reasons: Differences in culture. Incompatible objectives. Lack of executive commitment.
Why are strategic alliances risky?
In strategic alliances, relational risk is defined as the probability and con- sequences of not having satisfactory cooperation (Das and Teng 1996). This risk arises because of the potential for opportunistic behaviour on the part of both firms.
What is the problem of strategic alliance?
Poor operating/planning integration. Strategic weakness. Rigidity/poor adaptability. Too-strong focus on internal alliance issues instead on customer value.
What are the challenges of strategic alliances?
Strategic Alliance Challenges A clash of corporate cultures or the lack of independence perhaps is the major challenge in the number of alliances. Furthermore, the companies may withdraw themselves from future business opportunities with the rivals of their strategic partner.
Why are mergers bad for shareholders?
If a merger is construed by the market to produce synergies that will benefit the acquirer and the target, both company's shares may rise. If the market feels the deal is a blunder, both share prices may even fall.
Which of the following is a disadvantage of strategic alliances quizlet?
They do not allow for sharing of risks and fixed costs.
Which of the following is a disadvantage of joint ventures as a mode of entry into foreign markets?
Which of the following is a disadvantage of joint ventures as a mode of entry into foreign markets? Joint ventures can lead to conflicts and battles for control between the investing firms.
What are four common problems that cause joint ventures to fail?
There are four typical problems that most joint ventures will encounter and have to address in one way or another. These are: compatibility issues, funding, problems with the Joint Venture Agreement, and differing profit/outcome expectations.
What are the risks in alliances?
In strategic alliances, there are two types of risks: relational risk and performance risk. Performance risk is the type of risk that concerns firms failing to achieve their goals even when the alliance itself is fully operational. Synergy is at the center of reducing performance risk.
What are the negative effects of strategic alliances?
All the partners in an alliance have control over the performance of the assigned tasks. No partner, hence, can unilaterally control the result of an alliance activity. The business may not be able to use its own time-tested technology, if the alliance partner refuses to subscribe to it.
Which of the following is disadvantage of strategic alliances?
Strategic alliances do come with some disadvantages and risks. One disadvantage is sharing. Strategic alliances require you to share resources and profits, and often require you to share knowledge and skills as well. Sharing knowledge and skills can be problematic if they involve trade secrets.
Which one of the following is a disadvantage of a merger?
In a merger the: Acquiring firm retains its pre-merger legal status. Which one of the following is a disadvantage of a merger? Seeking approval of the shareholders of both firms.
What are the pros and cons of mergers and acquisitions?
Here are some of the advantages that can come with mergers and acquisitions:
- Improved economic scale. …
- Lower labor costs. …
- Increased market share. …
- More financial resources. …
- Enhanced distribution capacities. …
- Increased legal costs. …
- Expenses associated with the deal. …
- Potentially lost opportunities.
Which of the following is a disadvantage that a firm faces when forming a strategic alliance?
Which of the following is a disadvantage that a firm faces when forming a strategic alliance? A firm can give away more than it receives when forming an alliance.
What are the disadvantages of joint venture?
Disadvantages of joint venture
- the objectives of the venture are unclear.
- the communication between partners is not great.
- the partners expect different things from the joint venture.
- the level of expertise and investment isn't equally matched.
- the work and resources aren't distributed equally.