Question

understanding about real options with the knowledge on strategic alliances.

Answer 1

DEFINITION OF STRATEGIC ALLIANCES :

Strategic Alliance can be seen as an agreement between two or more organizations, firms or even parties which works together under an agreement, for achievement of a common goal by being independent organization. Strategic alliance is the main objective of strategic planning. What is strategic planning? The meaning of strategic planning is when all departments of a company work together in order to achieve a long term goal then it's called strategic planning.

DEFNITION OF REAL OPTIONS :-

Real options is basically a choice that is given to the managers of a firm/company in order to make a choice between different available investment choices or opportunities. Why is it called Real Options? It's called real options because it involves a tangible assest and not intangible assets like various financial instruments.

Now, coming to the above question :-

Real Options helps in making the right decision about investment projects. It helps to strengthen strategic alliance as what real option do is that it serves the purpose of providing an useful insight into investment decision. With the help of real options, the path of choosing which investment at what time becomes clear to the organization.  When real options are merged with strategic alliance, it anticipates the rate of future risks. Thus, in this way, it helps strategic alliance to plan accordingly and choose the right investment. Also, it provides an insight as to when should exit decisions should be taken. Another important and usefulness of real options with the knowledge of strategic alliance is that it helps to survive the competitive market. With the help of pooling of resources, investments etc, real options helps to enhance your performance and reduces risks which gives a competition to other marktes and organization.