Quantum Inc. and Cosmic Corp often compete with one another in the marketplace. A new business area is emerging that appeals to both firms. However, organizations that will successfully compete in the new business area will need to have a robust laboratory capability as well as an established construction capability. Quantum has the former, and Cosmic has the latter. Although unusual for two competitors, they negotiate and create a(n) ________. Under the terms of this agreement, Quantum and Cosmic formally and jointly pursue their mutual goals.
A) merger
B) strategic alliance
C) acquisition
D) vertical integration
E) related diversification

Question

Quizplus · Accepted Answer

A strategic alliance is a formal agreement between two companies to collaborate and pursue mutual goals. In this scenario, Quantum and Cosmic are competitors but have complementary strengths in different areas that are required to compete in the new business area. By forming a strategic alliance, they can combine their strengths and compete more effectively. A merger involves two companies becoming one, an acquisition involves one company buying another, vertical integration involves a company acquiring suppliers or distributors, and related diversification involves a company expanding into new but related businesses. None of these options accurately reflect the situation described in the scenario.