When Gilded Products planned to start its operations in Upper Medici, an emerging nation, it realized that it would have to set up its own distribution channels. This would be a risky and expensive strategic move. The company had an option of hiring a small supply chain management company, Canopy Logistics, to reach its ultimate customers. However, this would require Canopy Logistics to make huge investments, which would be of no use to it if Gilded Products decided to exit the market. Thus, to gain Canopy Logistics' confidence, Gilded Products purchased 40 percent of the stock of Canopy Logistics. What does this scenario best illustrate?

Question

Alina Odonnell

Business

16 July, 06:49

When Gilded Products planned to start its operations in Upper Medici, an emerging nation, it realized that it would have to set up its own distribution channels. This would be a risky and expensive strategic move. The company had an option of hiring a small supply chain management company, Canopy Logistics, to reach its ultimate customers. However, this would require Canopy Logistics to make huge investments, which would be of no use to it if Gilded Products decided to exit the market. Thus, to gain Canopy Logistics' confidence, Gilded Products purchased 40 percent of the stock of Canopy Logistics. What does this scenario best illustrate?

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Answers (1)

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Parker Costa · Answer 1

equity alliance

Explanation:

An equity alliance is a type of strategic alliance where two companies combine resources and capabilities to gain a competitive advantage. This alliance is formed by one company purchasing a certain percentage of the other company's stock (or total equity), but the ownership percentages are not equal, the original owners will generally retain control.

In this case, Gilded Products purchased 40% of Canopy Logistics in order to combine resources and convince them of working together.