What is a Strategic Alliance?

• A. A joint venture creating a new entity
• B. A partnership where two or more companies combine resources and capital to create competitive advantages in a new market
• C. A licensing agreement
• D. An outsourcing contract

Answer: (B)

Strategic alliances are cooperative arrangements where two or more firms work together to gain competitive advantages by sharing resources, capabilities, or access to markets while remaining independently run. The description that two or more companies combine resources and capital to create competitive advantages in a new market fits this idea well, because it highlights collaboration and resource sharing aimed at a stronger market position without creating a separate company.

Licensing involves granting rights to use technology or IP, which is about rights transfer rather than joint resource pooling. Outsourcing is contracting out activities to another firm, not a mutual alliance to build an competitive edge. A joint venture creates a new, separate entity, which is a specific form of collaboration, but strategic alliances cover a broader range of arrangements that don’t require forming a new company.