To give a manufacturer proper incentives to consider the effect of quality on selling prices, the manufacturer might receive a royalty and a transfer price. Exit strategies Most alliances terminate. Some terminate because they run into trouble. Some terminate when they succeed. Some outlive their purpose.
Exit strategies are a key issue in negotiating the alliance agreements.
Although it may seem pessimistic, or even counterproductive, to discuss how the alliance will end before it even begins, there is tremendous value for all of the parties in knowing that they have a clear path out of the alliance if need be and in knowing what will become of the shared assets if a party exits the alliance. Each party wants the right to exit quickly from an alliance. Each party wants to be able to rely on the alliance as a part of its strategy. Each party wants the other party to depend on and invest in the alliance. As a part of balancing these conflicting objectives, the parties generally agree on the events that will trigger exit rights.