ACCA Strategic Business Leader (SBL) Practice Exam

What is a key difference between a joint venture and a strategic alliance?

1. Joint ventures involve merging resources

2. Strategic alliances form legal entities

3. Joint ventures create a separate legal entity

4. Strategic alliances require formal contracts

The correct answer is: Joint ventures create a separate legal entity

A key difference between a joint venture and a strategic alliance lies in the nature of their legal and operational structure. In a joint venture, two or more parties combine their resources to create a new, separate legal entity. This entity operates as an independent business that is distinct from the parent companies involved, often sharing profits, risks, and management responsibilities. The creation of this legal entity allows for a clearer governance structure and shared investment, which can facilitate more significant projects or businesses that might be difficult to achieve independently. On the other hand, a strategic alliance typically does not involve creating a separate legal entity. Instead, it is more of a cooperative agreement between parties where they collaborate towards mutual goals while remaining independent organizations. Strategic alliances are often characterized by less formal arrangements, though they can include contractual agreements to outline the relationships and expectations between the parties involved. This distinction highlights that joint ventures are formalized through the creation of a new business entity, while strategic alliances focus on collaboration without the same legal framework or new entity creation.