Alex Ltd and Lucy Ltd have recently agreed ot co-operate to exploit the possibilities that both companies have in a particular overseas market, France.
No separate company has been established for this purpose as the companies’ chief executives, who have known each other for many years, have agreed matters informally over a handshake and nice meal.
This arrangement is an example of a ….?
Select ONE answer:
- Licencing agreement
- Joint venture between two separate limited liability companies
- Strategic alliance
- Group structure
Show your workings to arrive at your answer, and explain and justify your reasons:
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This multiple-choice question is suitable for Accounting KS5 classes.
The answer is 3
- Not correct
- Not correct
- Correct –> A strategic alliance (3) is an informal or weak contractual agreement between companies. A licensing agreement (1) would be more formal in nature (based on a legally binding contract to ensure adherence to agreements), whilst a joint venture (2) would nearly always involve the formation of a separate company, with the investing companies taking a financial stake as shareholders and with management being provided as agreed. A group structure (4) would imply the establishment of a new company that would be controlled by one of the two companies.
- Not correct
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