.11 Which of the following firms faces the greater threat of “cheating” in the alliances described, and why?
(a)Firms I and II form a strategic alliance. As part of the alliance, Firm I agrees to build a new plant right next to Firm II’s primary facility. In return, Firm II promises to buy most of the output of this new plant. Who is at risk, Firm I or Firm II?
(b)Firms A and B form a strategic alliance. As part of the alliance, Firm A promises to begin selling products it already sells around the world in the home country of Firm B. In return, Firm B promises to provide Firm A with crucial contracts in its home country’s government. These contracts are essential if Firm A is going to be able to sell in Firm B’s home country. Who is at risk, Firm A or Firm B?
(c) Firms 1 and Firm 2 form a strategic alliance. As part of the alliance, Firm 1 promises to provide Firm 2 access to some new and untested technology that Firm 2 will use in its products. In return, Firm 2 will share some of the profits from its sales with Firm 1. Who is at risk, Firm 1 or Firm 2? 9.12 For each of the strategic alliances described in the above question, what actions could be taken to reduce the likelihood that partner firms will “cheat” in these alliances?
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