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?