ITPEC IP April 2023 Question 80

Technological tie-ups, outsourced production and sales, and joint ventures between independent companies — an alliance is cooperation in which the partners stay independent.

In a strategic alliance, companies combine technology, production capacity, sales channels or capital for a shared goal, without merging. Each keeps its own management and identity, which makes an alliance faster to form and easier to end than an M&A, though the partners' control over each other is weaker.

Answer (c)

Why not others:

• •(a) — a merger or acquisition combines the companies into one ownership, which is integration, not an alliance between independent firms
• •(b) — handing non-core work to specialist vendors is outsourcing, a supplier relationship aimed at focusing on core activities
• •(d) — managing group companies through their stock from a company specialised as headquarters describes a holding company (pure holding company)

Key rule: The degree of integration runs from alliance (independent partners cooperating) through capital participation to M&A (one company); the further along, the stronger the control and the harder to undo.

Business Strategy Management · AI-written, may contain errors