Certified Production & Operations Manager (POM) Practice Exam

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Which of the following is an external product development strategy?

Vertical integration
Alliances
Cost leadership
Market penetration

The correct answer is: Alliances

Alliances are an external product development strategy because they involve collaborating with other organizations to enhance capabilities, resources, or knowledge to facilitate new product development. Through alliances, companies can share risks, access new markets, and leverage complementary strengths, making it easier to innovate and bring new products to market. In contrast, vertical integration refers to a company's internal strategy where it takes ownership of its supply chain processes, including production and distribution. This is focused on consolidating operations internally rather than collaborating with external partners. Cost leadership and market penetration primarily relate to competitive positioning and market strategy, respectively, rather than the development of products through external collaborations. Therefore, alliances stand out as the strategy that emphasizes partnership and external collaboration for product development success.