Question

Two firms will develop a strategic alliance to combine each of their unique resources because they believe it will:

a competitive advantage.
b barriers to foreign trade.
c the price of their stock.
d federal regulation.

Answer 1

Two firms enter into a strategic alliance primarily to gain a competitive advantage, which helps them access new markets and increase efficiency. It's important to note that such alliances must not violate laws against anti-competitive practices like price setting and market division. The correct answer to the question is (a) a competitive advantage.

Step-by-step explanation:

When two firms develop a strategic alliance to combine each of their unique resources, they often do so because they believe it will provide them with a competitive advantage. This advantage comes from pooling resources and expertise, which can help both firms achieve goals they may not be able to realize independently. The strategic alliance can lead to innovation, access to new markets, and the enhancement of operational efficiencies. Several competing corporations may join together in an association for a variety of reasons. These include the idea that there is strength in numbers (option a), they often have common issues that may affect an entire industry (option b), and they can all benefit from governmental policies (option c); essentially, the correct answer would be (option d)all of the above. By forming such associations, these firms can lobby for favorable legislation, share best practices, and potentially influence market conditions to benefit all members.

However, it is crucial to highlight that in many parts of the world, including the European Union and the United States, certain types of strategic alliances might step over legal boundaries. It is illegal for firms to divide markets and set prices collaboratively, as this could create a monopolistic situation, harming competition and consumers. Additionally, international trade agreements can play a role in counterbalancing domestic pressures and opening economies to foreign competition, leading to benefits such as economies of scale for even small economies and a wider variety for consumers. Regarding the particular question posed, the correct option is (a) a competitive advantage. The strategic alliance is formed with the goal of gaining a competitive edge over other firms that are not part of the alliance, thereby increasing the success potential for the allied firms.

Answer 2

Firms form strategic alliances to gain competitive advantages by pooling resources, addressing industry-wide concerns, and influencing government policies. Such alliances must comply with anti-competitive laws. International trade enhances competitiveness and economies of scale, offering benefits to consumer and business alike.

Step-by-step explanation:

Firms often develop strategic alliances to combine their unique resources, creating a competitive advantage. This often occurs because companies recognize that uniting their strengths can make them more competitive and successful in the marketplace. There are several reasons why firms might join together in an association or alliance:

• There is often strength in numbers, allowing firms to pool their resources for mutual benefit.
• They frequently have common issues that affect an entire industry, so collaborating can be an effective way to address those concerns.
• Working together, they can influence government policies that benefit their industry.

However, there are legal limitations to such alliances. In many regions, including the EU and the US, it is illegal for firms to collude to divide markets and set prices as these practices can lead to monopolistic behavior, which harms competition and consumer interests. In essence, although alliances can provide the illusion of acting as a single monopoly to enjoy larger profits, they must navigate the complex landscape of legal regulations.

Additionally, international trade and agreements can greatly impact firms. They serve as counterweights to domestic special interests, help prevent protectionism, and can expand markets, which allows businesses to achieve economies of scale and benefit from increased competition. Consumers ultimately gain access to better and more affordable products while firms that can compete effectively see increased profits. Although competition can sometimes force businesses out, the overall effect of such trade typically results in net gains for the economy.

When discussing intra-industry trade, it is evident that countries can prosper from extreme specialization, benefiting from economies of scale, while delivering the advantages of competition and variety. This has positive implications not only for international markets but also for trade between states within a country.