Question

Exxon Mobil has entered into a pact with Gazprom, the world's largest natural gas extractor, to set up a processing unit in Baku, Azerbaijan. Which of the following is most likely the reason for Exxon Mobil to opt for this strategic alliance?

Answer 1

Answer:

To gain access to low-cost inputs of production.

Explanation:

Exxon Mobil in this scenario have formed a pact with Gazprom the largest natural gas extractor in the world.

Exxon Mobil is setting up a processing plant in Azerbaijan to process gas supplied by Gazprom.

The main reason for this alliance will be to get cheap input (gas) form Gazprom because they enjoy economies of scale and can supply the gas to Exxon Mobil at lower price.

This arrangement will reduce input cost of Exxon Mobil.