What types of financial conflicts are likely to occur in a strategic alliance? How can many of these disagreements be avoided?

What will be an ideal response?

An obvious limitation of strategic alliances relates to the distribution of earnings. Because the
partners share risks and costs, they also share profits. Of course, this aspect of collaborative
arrangements is known ahead of time and is virtually always negotiated as part of the
original agreement. However, there are other financial considerations beyond the basic distribution of earnings that can cause disagreement. The partners must also agree on the proportion of the joint earnings that will be distributed to themselves as opposed to being reinvested in the business, the accounting procedures that will be used to calculate earnings or profits, and the way transfer pricing will be handled.