Organizing to Implement Strategic Alliance
Explicit contracts and legal sanction
One way to prevent cheating in strategic alliances is the presence of an explicit contract that determines the legal liability if a fraud occurs.
Equity investments
Effectiveness of the contract can be improved by having a partner in the alliance and mutual investment with each other.
Firm reputations
A third limitation of stimulant fraud in a strategic alliance that is the effect that the reputation of fraud will result in a company’s future opportunities. Even so, it is relatively difficult to anticipate all the differences between the alliance partners who might commit fraud. Fraud in an alliance can close the opportunity or the opportunity to develop the partnership. For this reason, the company may decide not to commit fraud in their community today.
Reputation for fraud control in strategic alliances has several limitations.
- Fraud difficult to be separated in strategic alliances and relatively less impact on the reputation of the company or the company’s ability to establish alliances in the future.
- Even if one partner in a partnership may betray the relationship openly, one or two companies may not be simply connected to a network with other companies to make information public.
- Finally, the effect of a reputation of being eliminated, as long as fraud in an alliance is blatant and known to the public, may be able to close the opportunity or chance company in the future, but it’s only a small fraction showing the losses at this time by the company who cheated.
Strategic Alliances in an International Context
Development of local distribution network is a difficult and expensive process, as usually takes a lot of knowledge about local conditions. Local alliance partners may have mastered this knowledge. They may have a local distribution relationship in one place by working with local partners, companies can essentially reduce the cost of entry into this market.
Of course, some governments require new members to become a local alliance partners. Governments see such relationships not only as a way to facilitate entry of foreign firms into their markets, but also as a means for domestic firms to learn from foreign companies.
All potential threats within the alliance, such as from a moral hazard, of robbery in the international context. Although these cases often become an important information asymmetry between companies in a partnership. This would appear asymmetrical when the alliance partners come from different countries, operating in different cultures and speak different languages.
Checklist for Capital Structure Decision
Companies generally take into account the following factors when making decisions of capital markets:
- Stability of Sales. Relatively stable sales companies that can safely take on more debt and the burden remains higher than in companies with sales that are not stable.
- Structure of Assets. Suitable company as collateral for the loans tends to use more debt.
- Operating Leverage. Companies with fewer operating leverage has a better ability in applying financial leverage because they will have a smaller business risk.
- Growth Rate. Companies that grow rapidly should rely more on external capital.
- Profitability. Companies that have a rate of return on investment are very high using relatively little debt.
- Tax. Flowers are a burden that can become a tax deduction, and tax deduction is very valuable for companies with high tax rates.
- Control. Impact on the stock versus debt management control positions can affect the capital structure.
- The attitude of management. Because no one can prove that the capital structure will lead to higher stock prices than in other capital structure, management DAPT implement their own consideration of the appropriate capital structure.
- The attitude of lenders and donor agencies binder. Without looking at the analysis of the managers on the factors appropriate for companies leverage their own behavior and agent lenders often giving binding decisions affecting the financial structure.
- Market conditions. Bond market conditions and changes in both long and short term can provide an important sense in a company’s capital structure is optimal.
- Internal conditions of the company. Internal conditions are very influential companies have their capital structure as an example suppose a company has just conducted a research and development to really successfully and the company predicts high profits in the not long anymore.
Seeing all the above ideas give importance to the purpose of maintaining financial flexibility, as seen from the point of a long operation, it means maintaining an adequate reserve borrowing capacity.