What are some possible ways to minimize the risk that one partner may take advantage
of another?
What will be an ideal response?
A potential problem in any alliance is that one partner may take advantage of another. To minimize this risk, many
alliances call for formal protection mechanisms, such as equity investments (which should align incentives) or
formal contracts (which should outline expected behavior and remedies for violations). Although such mechanisms
are costly, they may still be cheaper than formal integration of activities within one firm. However, some experts
argue that the true cost savings of alliances comes to those firms that can rely on less formal managerial control
over their partners' behavior and instead depend on self-enforcement and informal agreements. Informal
arrangements, of course, require a great deal of trust, which is likely to develop only after multiple dealings
between partners.
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If a firm ends its fiscal year with profit, which plan can the firm use to distribute part of the excess to employees?
A) Gainsharing plan B) Profit-sharing plan C) Cafeteria plan D) Insurance plan E) Salary-sharing plan