Chapter 9 Flashcards
strategic alliance
whenever two or more independent organizations cooperate in the dev., manuf, or sale of products
non-equity alliance
cooperating firms agree to work together to d, m, or sell products but they do not take equity positions in each others companies
licensing agreements
where one firm allows another firm to use its brand name
supply agreements
where one firm agrees to supply another
distribution agreements
where one firm agrees to distribute the products of others
equity alliance
cooperating firms supplement contracts with equity holdings in alliance partners
joint venture
cooperating firms create a legally independent firm in which they invest and from which they share any profits that are created
economies of scale
when the per unit cost of production falls as the volume of production increases
network industries
industries that require other people to use a product, fax machine example
explicit collusion
when firms directly communicate with each other to coordinate their levels of production, and pricing decisions
tacit collusion
when firms coordinate their production and pricing decisions, not by directly communicating with each other, but by exchanging signals with other firms about their intent to cooperate
collusion
when two or more firms in an industry coordinate their strategic choices to reduce competitive advantage
adverse selection
exists when an alliance partner promises to bring to an alliance certain resources that it either does not have or control
moral hazard
when partners in an alliance have resources, but don’t make them available to alliance partners
transaction specific
when an investment is worth more in its current alliance than outside of the alliance
