1. Explain why the car industry seems to have so many strategic alliances.

A strategic alliance is a business arrangement in which two or more firms cooperate for
their mutual benefit. It can also be said to be an agreement between two or more
partners to share knowledge or resources, which could be beneficial to all parties
involved. Automobile industries today engage in so many strategic alliances which affect
all level of business processes within their supply chain as a response to economic
pressures, fast technological changes, powerful customer demand and other issues
which influence drastically on corporate strategy of the industry.
Also, the car industry has realized that alliances allow not only for exchange of
technology but also for the exchange of skills and know-how often referred to as
competencies, reduced R&D costs shared risks and liabilities, marketing strength etc.

2. What is meant by ‘levelling out of knowledge’? How can firms prevent this happening
when engaging in strategic alliances?

In the globalized business, companies require strategic thinking and only by evolving
good corporate strategies can they become strategically competitive. A sustained or
sustainable competitive advantage occurs when firm implements a value – creating
strategy of which other companies are unable to duplicate the benefits or find it too costly
to initiate. This is known as levelling out of knowledge and experience. Firms can prevent
others from taking this undue advantage of their innovation under a strategic alliance by
clearly stating out the area of collaboration and cooperation.

3. Considering the case study, discuss some of the wider strategic reasons why firms may
wish to enter a strategic alliance.

Firms enter into strategic alliances in order to: Expand their market share by strategic
partnerships with the film industry

4. Apple seems to have many strategic alliances and supplier relations. Discuss the extent
to which these contribute to its success.

Strategic alliances by Apple contribute to its success as they have helped Apple to
develop new technologies and stay ahead of their competitors such as Samsung and
others. Strategic alliances have also led to Apple’s product differentiation helping it stay
ahead of the competition and retain a higher market share. Supplier relations led to
cheaper production and high quality and to strategically share development costs.
Apple’s strategic alliances has helped it to maintain technological competence up to
date. Apple was able to identify top-tier alliance partners with the strength, stability, and
experience to help their product grow and success globally. Apple’s strategic alliances is
based on mutual trust to avoid their product recipe including research and development
from being leaked to competitors

5. Explain some of the risks involved with all strategic alliances.

From Cooperation to Competition. No agreement that can limit that alliance will not lead
to competition. Since both sides will have access to the same resources and knowledge,
it is very possible that the relationship shifts to competition. Please keep in mind that
each side will always seek for ways to survive in the market stay the same or even
bigger. Partners Lack of Performance. Before deciding with whom a company will create
strategic alliances, it is important to thoroughly analyze and learn the quality of future
 partners. Risk such as low-quality performance, financial difficulties, failure in delivering
product or services can be major threat in the business later on. Another risk similar is
the incompatibility of working cultures and objectives. Therefore, it is important to
carefully go through each characteristic of future partners.

6.     Explain why the repeated game of the prisoner’s dilemma is considered to be more
useful in predicting behavior.

According to research implementing game theory, the prisoner’s dilemma can

catch the issue of trust in strategic alliance. In the prisoner’s dilemma, no
matter what other party does, both are better off if they confess. If trying to
relate this with strategic alliance, a knowledge that each party has when
repeating the game will resulted in different outcomes. Options will be more
likely to be different therefore the outcomes will be different significantly.