Review the discussion of the ‘alliance fund’ presented in Insight from research 11.4 1. Verify with a spreadsheet analysis that the fund payments from cost savings preserves NMA’s profits at original prices and costs.

2. Evaluate the incentives for NMA to initiate or agree to aggressive cost savings. How sustainable are these incentives? Explain.

3. Contrast the “alliance fund” incentive with the gain-sharing plan between InnoTech and FinPro. Which do you prefer? Why?

Answers to Exercises–available on the text’s CD