Question

When Moon Star Products Inc. planned to start its operations in United Cadvia, an emerging nation, it realized that it will have to set up its own distribution channels. This would be a risky and an expensive strategic move. The company had an option of hiring a small supply chain management company, Gold Logistics Inc., to reach its ultimate customers. However, this would require Gold Logistics to make huge investments, which would be of no use to it if Moon Star decided to exit the market. Thus, to gain Gold Logistics's confidence, Moon Star purchased 40 percent of the stock of Gold Logistics. What does this scenario best illustrate?
a. Equity alliance
b. Backward vertical integration
c. Farward vertical integration
d. None of the above

Answer 1

Answer:

a. Equity alliance

Explanation:

Equity alliance -

It is the process , in which one of the company take the equity stake of the other company and vice versa , is referred to as equity alliance .

Due to this ,  the company becomes shareholder and stakeholder of each other .

The share acquired is the minor one , so that the company still have the power of decision making .

Hence , same case is shown in the question ,where the Moon Star Products Inc.buys the 40 % of the stock of Gold Logistics .