CA Intermediate · Financial Management and Strategic Management · Strategic Choices
A Mumbai pharma company wants to enter the US generics market. It lacks local regulatory expertise, so it signs a contract with a US firm: both pool resources for a defined product launch, share costs and profits, but remain separate legal entities with no new company formed and no equity exchange. Which strategy best describes this arrangement?
This is a strategic alliance. The two firms cooperate under a contract for a specific launch, share costs and profits, and stay independent without forming a new company or exchanging equity. An equity joint venture would need a jointly owned new entity, and mergers or acquisitions involve ownership changes.
- AMerger
- BAcquisition
- CEquity joint venture
- DStrategic alliance (contractual cooperation)Correct
Explanation
Two independent firms cooperate for a defined purpose through a contract, with no new entity and no equity exchange. This is a strategic alliance. An equity joint venture creates a separate jointly owned company, which is not the case here, and mergers or acquisitions involve combining or taking control of firms.
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