Accounting Multiple Choice Question – 25 July 2024

Alex plc wishes to expand abroad.

It has decided to agree with a foreign manufacturer of a complementary product to market both products jointly in both countries.

What method of expansion has the company decided on?

Select ONE answer:

1. A group structure
2. A joint venture
3. A strategic alliance
4. A licensing agreement

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 3

1. Not correct
2. Not correct
3. Correct –> A group structure (A) implies one company owning one or more subsidiaries. A joint venture (B) implies that a third-party business is set up and owned by the joint venturers. A strategic alliance (C) is ”informal” co-operation, while a licensing agreement (D) involves giving permission to another company to manufacture or sell a product, or to use a brand name. In this circumstance, there is no new separate legal company, as would be expected for a joint venture, and no evidence of a licensing agreement. The two companies have instead agreed to enter into a loose and probably short-term strategic alliance.
4. Not correct

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