Question 1
A strategic alliance can be defined when two or more companies wish to engage in a mutual business agreement whereby they still retain their own identity as a company but work towards a common purpose. These two companies engage in similar business practices but do not necessarily have to be based in the same location.
The companies involved in the strategic alliance can offer each other their market knowledge, skills, assets such as intellectual property, funding and capital, technologies, suppliers, distribution networks as well as a share in profits, risks and expenses.
It is important for the alliance to work towards a synergistic business environment whereby the benefits gained from the individual companies involved in …show more content…
The individual firms have access to each other’s technologies and intellectual property rights. This can assist with flexibility and to gain access into new markets and thus also allows the individual firms to focus on their competitive advantage.
Disadvantages of forming a strategic alliance is the lack of control of intellectual property rights such as trademarks, patents and copyright protection. Unrealistic expectations, different management styles and organisational culture also leads to disagreements disparity. A lack of commitment and trust from partners in the alliance and goal discrepancies are also weaknesses of a strategic alliance. Information outflows as well as inefficient management and partner’s quality performance can be detrimental to the alliance.
A strategic alliance where a partner is in a different location can make the entry into a foreign market effortless because the local firm already has access to the current markets, is more knowledgeable on customer preferences and the markets distribution networks and its …show more content…
Translation exposure – refers to the exposure of the consolidated financial statements of an MNE to the exchange rate fluctuations. This arises when a firm denominates a portion of its equities, assets, liabilities or income in a foreign currency. A parent company must combine all its subsidiaries financial statements into the parent company’s financial statement. The financial statements of the subsidiaries have the following condition: it must take into account the foreign currency of the host nation and subsequently be translated into home currency rates. The account balances of the parent company in addition with the translated currency permits its components to be consolidated into one account at the end of its financial
A strategic alliance can be defined when two or more companies wish to engage in a mutual business agreement whereby they still retain their own identity as a company but work towards a common purpose. These two companies engage in similar business practices but do not necessarily have to be based in the same location.
The companies involved in the strategic alliance can offer each other their market knowledge, skills, assets such as intellectual property, funding and capital, technologies, suppliers, distribution networks as well as a share in profits, risks and expenses.
It is important for the alliance to work towards a synergistic business environment whereby the benefits gained from the individual companies involved in …show more content…
The individual firms have access to each other’s technologies and intellectual property rights. This can assist with flexibility and to gain access into new markets and thus also allows the individual firms to focus on their competitive advantage.
Disadvantages of forming a strategic alliance is the lack of control of intellectual property rights such as trademarks, patents and copyright protection. Unrealistic expectations, different management styles and organisational culture also leads to disagreements disparity. A lack of commitment and trust from partners in the alliance and goal discrepancies are also weaknesses of a strategic alliance. Information outflows as well as inefficient management and partner’s quality performance can be detrimental to the alliance.
A strategic alliance where a partner is in a different location can make the entry into a foreign market effortless because the local firm already has access to the current markets, is more knowledgeable on customer preferences and the markets distribution networks and its …show more content…
Translation exposure – refers to the exposure of the consolidated financial statements of an MNE to the exchange rate fluctuations. This arises when a firm denominates a portion of its equities, assets, liabilities or income in a foreign currency. A parent company must combine all its subsidiaries financial statements into the parent company’s financial statement. The financial statements of the subsidiaries have the following condition: it must take into account the foreign currency of the host nation and subsequently be translated into home currency rates. The account balances of the parent company in addition with the translated currency permits its components to be consolidated into one account at the end of its financial