A firm should use an equity alliance, a joint venture, or an outright acquisition in order to gain use of a resource when __. Show -the resource is not easily traded -the resource is not easily traded An advantage of using a non-equity alliance to govern a strategic alliance is its __. -use of tacit knowledge -flexibility and east of initiation When two competitors merge, leading to industry consolidation, they are engaging in __. -horizontal integration
-horizontal integration How do mergers and acquisitions differ? -a merger describes the joining of two independent companies, while an acquisition describes the purchase or takeover of a firm -a merger describes the joining of two independent companies, while an acquisition describes the purchase or takeover of a firm Chao's Coffee is a large chain of coffee shops. It wants to join with Rigoberto Roasters, a large coffee roasting company. Rigoberto Roasters wants to stay independent, but Chao's is able to purchase Rigoberto. This describes a(n) __. -merger -hostile takeover What three of the following are the primary benefits of horizontal integration? (Check all that apply.) -increased differentiation -increased differentiation One possible source of COSTS in a horizontal integration strategy is __. -reduction is competitive intensity -integration failure Horizontal integration can reduce __. -bargaining
power with suppliers -the threat of entry Which of the following is NOT a reason to pursue horizontal integration as a corporate strategy? -to provide additional benefits, such as complementary products, in their product offering -to reduce flexibility Why does Facebook acquire startups? -to secure a monopoly -to preempt rivals Which of the following did Kraft see as an advantage of integration with Cadbury? -increased product-line
gaps -access to new markets T/F: In most cases, mergers and acquisitions create competitive advantage. False T/F: Because the size of organizations is typically positively correlated with prestige, power, and pay, principal-agent problems might be a reason to pursue M&As. True When managers of acquiring companies incorrectly convince themselves that they are able to manage the business of the target company more effectively than its current managers, they are engaging in __. -managerial hubris -managerial hubris Horizontal integration through mergers and acquisitions create value but can also create costs. Which of the following are sources of such costs? (Check all that apply.) -reduced flexibility -reduced flexibility Which are the three main reasons firms make acquisitions? (Check all that apply.) -to gain access to new capability or competency -to gain access to new capability or competency What are some managerial advantages of building a firm into a large organization? (Check all that apply.) -increased power -increased power Which of the following are benefits of a horizontal integration? (Check all that apply.) -increased
differentiation -increased differentiation A partnership that is based on contracts between companies is referred to as a(n) __. -non-equity alliance -non-equity alliance Which of the following statements about equity alliances is true? -they require larger investments than non-equity alliances -they require larger investments than non-equity alliances What is the main goal of corporate venture capital investments? -to reduce product costs -to create real options in terms of gaining access to new technologies Which three of the following are advantages of equity alliances? (Check all that apply.) -an institutional setting
requirement -possible emergence of trust and commitment Which of the following statements about joint ventures are true? (Check all that apply.) -they are primarily used in short-term
commitments -they involve the sharing of both explicit and tacit knowledge Which of the following are true of alliance management capability? (Select all that apply.) -it ensures that the alliance will be successful -it involves partner selection and alliance formation Which of the following terms refers to a company's ability to handle three tasks related to an alliance concurrently and effectively? -partner alliance design -alliance management capability Which of the following are some advantages of strategic alliance? (Select all that apply.) -they might give companies a competitive advantage -they might give companies a competitive advantage Which of the following states that important resources and capabilities are commonly embedded in strategic alliances that cross firm boundaries? -Porter's
five forces model -the relational view of competitive advantage One reason why a firm might enter into a strategic alliance is to __. -hedge against uncertainty -hedge against uncertainty T/F: Firms can use strategic alliances to strengthen their competitive advantage when competing in battles to control industry standards True Why do incumbent companies enter into strategic alliances with startups? -to spend as much free cash flow as possible -to hedge against uncertainty When a company makes incremental investments as part of a larger investment and takes the time to analyze the information gained following each incremental investment, the company is taking a __. -co-opetition perspective -real-options perspective A firm has a core competency in R&D but little else, so it enters into a strategic alliance with a larger firm to gain distribution channels and marketing expertise. In this case, distribution channels and marketing expertise would be examples of __. -potential legal repercussions -critical complementary assets Which of the following terms is used to describe cooperation by competitors? -comperation -co-opetition Non-equity alliances tend to share __, which allows the firms to understand a certain process or product. -explicit knowledge -explicit knowledge Which of the following is true of tacit knowledge? -it can only be acquired through actively participating in the process -it can only be acquired through actively participating in the process Which of the following is a disadvantage of a joint venture? -knowledge shared with the new partner could be misappropriated by opportunistic behavior -knowledge shared with the new partner could be misappropriated by opportunistic behavior How willing the firms in an alliance are to share necessary resources and make sacrifices in the name of long-term rewards is referred to as partner __. -compatibility -commitment What does the incomplete nature of contracts mean for post-formation alliance management? -it means that the alliance design was faulty -it means that trust is critical to success How can firms build alliance management capability? -through regular use of established knowledge-sharing routines -through repeated experiences over time Strategy scholars believe that firms should create a dedicated alliance function with which of the following features? (Check all that apply.) -it should focus on facilitating mergers -it should be led by a vice president or director How do foreign governments typically influence a firm's use of strategic alliances to enter new markets? -governments may require that foreign firms have a local joint venture partner in
order to conduct business within the country's borders -governments may require that foreign firms have a local joint venture partner in order to conduct business within the country's borders What is a major problem for between 30% and 70% of all strategic alliances? -one partner effectively steals the product of the venture, cutting the other out of the profits -at least one partner in the alliance considers the venture to be a failure Which of the following should partners do in order to make a strategic alliance work? (Check all that apply.) -create communities of practice -build inter-firm trust Which of the following are advantages of joint ventures? (Check all that apply.) -strong ties -strong ties Which of the following are the three options used be executives to drive firm growth? (Check all that apply.) -downsizing -organic growth What are the phases of alliance management? (Check all that apply.) -partner selection and alliance formation -partner selection and alliance formation The acquisition of PeopleSoft enabled Oracle to offer its customers expertise in human resource management systems (PeopleSoft's core competency) in addition to database management systems (Oracle's core competency). This is an example of which source of value created of M&As? -integration failure -increase differentiation Which of the following are the primary reasons a firm might pursue a merger? (Check all that apply.) -to overcome competitive disadvantage -to overcome competitive disadvantage Which of the following is true of firms' acquisition and integration capabilities? -most firms are able to create shareholder value through mergers and
acquisitions -some firms can consistently use mergers and acquisitions to increase their competitive advantage A firm should consider using mergers and acquisitions only when __. -the resource in question is
highly tradable -it is important to be extremely close to the resource partner in order to understand underlying information A conceptual model that helps strategists choose between seeking internal development, entering into an alliance, or acquiring new resources, capabilities, and competencies is the "__ framework." -organic growth -build-borrow-or-buy Which framework can companies use to assess whether their internal resources are superior to those of competitors in the target area? -PESTEL framework -VRIO framework Which of the following is true regarding the government and horizontal integration? -horizontal integration must always be approved by governmental authorities -large horizontal integration activity typically needs to be approved by government authorities The starting point of the build-borrow-or-buy framework is management's - evaluation of the
firm's existing internal resources to check if they are relevant. identification of a strategic resource gap that will impede future growth. A strategic alliance has the potential to help a firm gain and sustain a competitive advantage when it joins resources and knowledge that are - common in the industry. difficult to imitate. Which of the following best illustrates a strategic alliance? - ACME Inc., a large conglomerate, taking over a startup company against its will All Pharma Inc. teaming up with a research company to invent and market breakthrough vaccines Firms enter strategic alliances to - increase fixed and variable costs for itself and competitors. have a positive effect on economic value creation. The local real estate companies in a city have joined together and arranged a "Property Fair." The sponsors will equally share the expenses of the event. Although many companies compete against each other, they have joined together because the medium will help the companies market themselves through a dedicated forum at an extremely low cost. This arrangement is best referred to as - co-opetition co-opetition Which of the following statements is true of the real-options perspective? - The approach obligates the incumbent firm to make continued investments when demanded by its partner. The approach allows the incumbent firm to obtain additional information at predetermined stages. A non-equity alliance is the most common type of strategic alliance because - it is easy to initiate and terminate. it is easy to initiate and terminate. Which of the following is an example of explicit knowledge? - the creative ability of a manager to recognize potential business opportunities the findings of a research published in a scientific journal What happens in the third phase of alliance management? - Alliance partners choose an appropriate governance mechanism. Alliance partners make relation-specific investments. In order to rejuvenate its floundering product lineup, Disney - acquired Pixar. acquired Pixar. "The process of joining two independent companies with their consent to form a combined entity on a permanent basis" is the definition of a - joint venture. merger. The purchase or takeover of one company by another is a(n) - acquisition acquisition The management at Fast Autos Inc. and All Start Automobiles Inc. realized that by combining the two entities, the stakeholders of both the companies would benefit. Their core competencies would act as complementary assets to each other. Consequently, All Start Automobiles joined with FastAutos to form a combined entity called Just All Start Inc. Which of the following does this scenario best illustrate? - a hostile takeover a merger Trek Inc., a large conglomerate, took over a small startup company that had made some breakthrough innovations in the field of telecommunications. This purchase would help Trek to gain access to the startup company's superior technology and human capital. This transaction is an example of a(n) - acquisition acqusition The process of merging with a competitor at the same stage of the value chain is best described as - backward integration horizontal integration. Which of the following best illustrates horizontal integration? - CHOAM Autos Inc. sets up its own component-part manufacturing units to have strong control over production. Rich Industries Inc. acquires its competitor, Keenbean Electronics Inc., to gain access to its core competencies. Which of the following is one of the reasons that firms make acquisitions? - to shift the industry structure from oligopoly to perfect competition to gain access to a new capability or competency To secure a strong strategic position in fast-growing emerging markets, which of the following corporate strategies did Kraft Foods primarily pursue by acquiring Cadbury? - strategic outsourcing horizontal integration "A form of self-delusion in which managers convince themselves of their superior skills in the face of clear evidence to the contrary" is the definition of -
self-actualization managerial hubris. Which of the following was one of the primary reasons why Adidas acquired Reebok? - to reduce the levels of differentiation to overcome a competitive disadvantage A(n) ________ is used to describe the combining of two companies that are equal in size. - merger merger Builder's Square, a do-it-yourself home improvement store recently purchased Tiny Tool Inc, a smaller incumbent. This would be best described as a(n) -
acquisition acquisition When a firm wishes to consolidate the industry in which they compete by merging with their competitors, they are engaging in - vertical integration horizontal integration.
There are several benefits of horizontal integration. Which of the following below is not a benefit? - reducing competitive intensity access to new marketing and sales divisions A non-equity alliance is the most common type of strategic alliance because it is easy to initiate and terminate. Which of the following was one of the primary reasons why Adidas acquired Reebok? to overcome a competitive disadvantage Which of the following is one of the reasons that firms make acquisitions? to gain access to a new capability or competency What happens in the third phase of alliance management? Alliance partners make relation-specific investments. The process of merging with a competitor at the same stage of the value chain is best described as horizontal integration. Which of the following statements is true of the real-options perspective?
The approach allows the incumbent firm to obtain additional information at predetermined stages. A strategic alliance has the potential to help a firm gain and sustain a competitive advantage when it joins resources and knowledge that are difficult to imitate. Firms enter strategic alliances to have a positive effect on economic value creation. The purchase or takeover of one company by another is a(n) acquisition. The starting point of the build-borrow-or-buy framework is management's identification of a strategic resource gap that will impede future growth. "A form of self-delusion in which managers convince themselves of their superior skills in the face of clear evidence to the contrary" is the definition of managerial hubris. The local real estate companies in a city have joined together and arranged a "Property Fair." The sponsors will equally share the expenses of the event. Though many companies compete against each other, they have joined together because the medium will help the companies market themselves through a dedicated forum at an extremely low cost. This arrangement is best referred to as co-opetition. Which of the following best illustrates horizontal integration? Denali Electronics Inc. acquires its competitor, Mariana Electronics Inc., to gain access to its core competencies. The management at Just Right Autos Inc. and Blue Skies Automobiles Inc. realized that by combining the two entities, the stakeholders of both the companies would benefit. Their core competencies would act as complementary assets to each other. Consequently, Blue Skies Automobiles joined with Just Right Autos to form a combined entity called Just Blue Autos Inc. Which of the following does this scenario best illustrate? a merger In order to rejuvenate its floundering product lineup, Disney acquired Pixar. "The process of joining two independent companies with their consent to form a combined entity on a permanent basis" is the definition of a merger. Anderson Products Inc., a large conglomerate, took over a small startup company that had made some breakthrough innovations in the field of telecommunications. This purchase would help Anderson Products to gain access to the startup company's superior technology and human capital. This transaction is an example of a(n) acquisition. Which of the following is an example of explicit knowledge? the findings of a research published in a scientific journal Which of the following best illustrates a strategic alliance? Velociraptor Pharma Inc. teaming up with a research company to invent and market breakthrough vaccines To secure a strong strategic position in fast-growing emerging markets, which of the following corporate strategies did Kraft Foods primarily pursue by acquiring Cadbury? horizontal integration The success of the Pixar-Disney strategic alliance demonstrated that A. Disney was in desperate need of Pixar's graphic display systems. B. the two entities' complementary assets matched. C. it was easier for the alliance partners to reduce the value gap created. D. the companies were effectively managing an unrelated diversification strategy. B Disney became the world's leading media company to a large extent by pursuing a corporate strategy of A. related-linked diversification. B. cost-leadership. C. unrelated diversification. D. hostile takeovers. A Which of the following best illustrates a merger between the two companies GD Inc. and VS Inc.? A. GD Inc. purchases VS Inc. for $80 billion despite VS Inc. being against the purchase. B. GD Inc. and VS Inc. join together to form a third new entity, while they also operate separately. C. GD Inc. outsources a few of its business activities to VS Inc. for competitive advantage. D. GD Inc. and VS Inc. join together to form a single new company called GDVS Inc. D When does a merger between companies typically occur? A. when two firms of comparable size join to form a combined entity B. when large, incumbent firms buy start-up companies C. when a target firm does not want to be acquired D. when two or more firms enter a temporary vertical strategic alliance A The Mansion Hotel Group purchased Red Brick Hotels for an estimated value of $120 billion. All the hotels previously owned by Red Brick Hotels are now managed by the Mansion Hotel Group and are known as Mansion hotels. What does this scenario best illustrate? A. a merger B. a joint venture C. an acquisition D. an equity alliance C Which of the following is true of acquisitions? A. Acquisitions can be friendly or hostile. B. Acquisitions can occur only when the involved entities are of comparable size. C. In acquisitions, two independent companies join to form a separate third entity. D. Acquisitions increase the competitive intensity in an industry. A When large, incumbent firms buy start-up companies, the transaction is generally described as a(n) A. joint venture. B. partnership. C. acquisition. D. alliance. C Olympia Autos Inc. merged with its competitor Vaca Autos Inc. This allowed Olympia Autos to use its technological competencies along with Vaca Autos' marketing capabilities to capture a larger market share than what the two entities individually held. What does this scenario best illustrate? A. backward integration B. forward integration C. horizontal integration D. vertical integration C Which of the following scenarios best illustrates horizontal integration? A. Regal Autos Inc. enters into a licensing contract with a distributor in a new international market. B. Regal Autos Inc. acquires a component parts manufacturer who previously supplied to Regal Autos' competitor. C. Regal Autos Inc. sets up its own distribution channel and retail stores. D. Regal Autos Inc. joins with Marcus Motors Inc., one of its direct competitors. D How does horizontal integration within an industry affect the surviving firms? A. by increasing the threat the surviving firms will face from new entrants B. by strengthening the rivalry among existing firms C. by requiring the surviving firms to shift their focus from non-price to price competition D. by strengthening the bargaining power of the surviving firms vis-à-vis suppliers and buyers D Which of the following is a result of horizontal integration in terms of Porter's five forces model? A. The industry structure becomes less consolidated. B. There is a reduction of excess capacity in the market. C. The industry structure becomes potentially less profitable. D. There is an increase in rivalry among existing firms. B How did the recent horizontal integration in the U.S. airline industry provide benefits to the surviving carriers? A. by facilitating excess capacity in the industry B. by preventing mergers from taking place C. by lowering competitive intensity in the industry overall D. by increasing the threat of entry in the industry C It is necessary for government authorities such as the Federal Trade Commission (FTC) and/or the European Commission to approve any large horizontal integration activity because A. the horizontal integration activity changes the industry structure from oligopolistic to monopolistically competitive. B. the surviving firms will need to be protected against the increasing bargaining power of the suppliers. C. the horizontal integration activity has the potential to reduce competitive intensity in an industry. D. the surviving firms will need protection against the relaxed entry barriers. C PureSource Pharma Inc. recently acquired BioChem Pharmaceuticals Inc. It now sells its own products along with the products originally sold by BioChem Pharmaceuticals. As a result, PureSource Pharma's sales force will also be marketing the acquired company's products. How will this horizontal integration most likely affect PureSource Pharma? A. PureSource Pharma will lower its costs through economies of scale. B. PureSource Pharma will diminish its economic value creation. C. PureSource Pharma will increase its cost of distribution. D. PureSource Pharma will reduce the size of its sales force. A Which of the following is a disadvantage of a horizontal integration corporate strategy? A. It increases competitive intensity within an industry. B. It increases the potential for legal repercussions. C. It increases the costs associated with increasing value. D. It increases the threat of new entrants in an industry. B How does Kraft Foods benefit from its hostile takeover of Cadbury PLC in 2010? A. Its main strategic focus is now on the domestic market. B. It opens a market for it that is growing slowly but has high profit margins. C. It has access to convenience stores and a new distribution channel. D. It automatically gains monopoly in the chocolate-manufacturing industry. C The Hershey Company, the largest U.S. chocolate manufacturer, decided to enter the Chinese market in 2013 because A. the U.S. population was growing slowly and becoming more health conscious. B. its strategic position in the U.S. market was well protected through high entry barriers. C. this would help the company gain access to large cocoa plantations in China. D. Hershey's main strategic focus was on product and market diversification and not on the domestic market. A Google, the leader in online search and advertisement, engaged in a number of smaller acquisitions of tech ventures. It did this in order to A. imitate the actions of its competitors like Apple and Facebook. B. solve its principal-agent problems. C. fill gaps in its competency lineup. D. expand through unrelated diversification. C 19. Which of the following reasons motivated Facebook to acquire Instagram, a photo and video-sharing social media site, for $1 billion in 2012? A. the desire to gain a new capability B. the need to enter a new geographical market C. the need to reduce its level of horizontal integration D. the desire to pursue an unrelated diversification strategy A The main reason behind Google's decision to acquire the Israeli start-up company Waze for $1 billion was to A. preempt its competitors from buying Waze. B. share its capabilities with Waze. C. support start-up companies with venture capital. D. gain access to technology that is alien to it. A The managers at Movo Automobile Inc. want to diversify their business by acquiring a consumer electronics company. This acquisition would mean increased job security, higher compensation, and greater decision-making authority for the managers. The managers correlate this acquisition to greater power for them rather than to the appreciation in shareholder value. In this scenario, this acquisition by Movo Automobile is most likely a result of A. time compression diseconomies. B. experience-curve effects. C. principal-agent problems. D. resource ambiguity. C JetStream Airway's decision to acquire Rex Fuels Inc. proved to be ill-fated because its managers had overestimated their abilities and skills. They believed that they had the skills to manage such diversified businesses and create additional shareholder value. However, the acquisition failed to create the anticipated synergies because the managers' capabilities were restricted to the airlines industry. What does this scenario best illustrate? A. managerial empathy B. managerial feasibility C. managerial hubris D. managerial capitalism C Adidas acquired Reebok primarily to A. overcome its competitive disadvantage against Nike. B. get access to the superior technology of Reebok. C. overcome its principal-agent problems. D. pursue an unrelated diversification strategy. A What causes the winner's curse? A. buying a firm with principal-agent problems B. overpaying for an acquisition C. buying a firm with a competitive disadvantage D. underpaying for an acquisition B Dream Slope Inc. is a leader in producing winter sports equipment, including skis and skates. Recently, the firm decided to expand into the bobsled market and acquired Sleek Phantom Inc. This company produced bobsleds, but its sales had slowed. The managers of Dream Slope convinced themselves that they were able to manage the business of Sleek Phantom more effectively even though they had no experience in the bobsled market. However, this move backfired and the sale of Sleek Phantom's bobsleds plummeted. Which of the following terms is often used to describe this scenario? A. managerial disadvantage B. managerial hubris C. managerial sympathy D. managerial empathy B A _____ is best described as a voluntary arrangement between firms that involves the sharing of knowledge, resources, and capabilities with the intent of developing processes, products, or services. A. proprietorship B. cooperative C. strategic alliance D. leveraged buyout C Which of the following statements is true of strategic alliances? A. They are always focused on joining the same value chain activities. B. They enable firms to achieve goals faster, but at higher costs. C. They are known as strategic alliances whether or not they have the potential to affect a firm's competitive advantage. D. They are most beneficial when they join together resources and knowledge in a combination that obeys the VRIO principles. D Vibgyor Inc., a manufacturer of smartphones, has entered into a 15-year partnership with a software company to develop sophisticated operating systems and innovative mobile applications for its cell phones. This would mean that both the companies will have to mutually share their resources, knowledge, and capabilities to develop a superior product. What is the relationship between Vibgyor and the software company best referred to as in this scenario? A. an acquisition B. a strategic alliance C. a leveraged buyout D. a proprietorship B The _____ is a strategic management framework that proposes that critical resources and capabilities frequently are embedded in strategic alliances that span firm boundaries. A. real-options perspective B. stakeholder strategy C. relational view of competitive advantage D. non-differentiation strategy C What does the relational view of competitive advantage propose? A. A strategic alliance has the potential to help a firm gain a competitive advantage when it joins together resources that are common, inexpensive, and easy to imitate. B. The locus of competitive advantage is often not found within the individual firm but within a strategic partnership. C. Strategic alliances fail to provide competitive advantage when they involve joining different parts of a firm's value chain, such as R&D and marketing. D. A firm has a competitive advantage over its rivals when it can provide goods or services similar to the competitors' at a higher price. B How did the strategic alliance between HP and DreamWorks Animation SKG affect HP? A. It helped HP pursue a taper integration strategy. B. It enabled HP to compete head on with Cisco's videoconferencing solution. C. It resulted in depreciation of HP's shareholder value. D. It failed because HP lacked the expertise in selecting and integrating technology acquisitions. B Which of the following is not a reason why firms enter alliances? A. to replace competitive advantage with competitive parity B. to strengthen competitive position C. to enter new markets, either in terms of geography or products and services D. to learn new capabilities A Although long-standing enemies, Apple and IBM formed an alliance partnership. How did this partnership benefit both Apple and IBM? A. Apple's core competency with consumer services and IBM's core competency with business services complemented each other. B. Apple's core competency with business services and IBM's core competency with consumer services complemented each other. C. Apple's core competency with marketing and IBM's core competency with manufacturing complemented each other. D. Apple's core competency with manufacturing and IBM's core competency with marketing complemented each other. A One of the first new business apps resulting from the alliance of Apple and IBM will help airline pilots determine the right amount of fuel to carry on a particular flight. This task not only requires significant data analytics but also the need to display the information in an easily understandable way so that pilots can digest it quickly when glancing on their iPad in a cockpit prior to departure. Which of the following parts of this example will Apple be responsible for? A. the organization and analysis of data analytics B. the display of information in an easy-to-understand way C. the determination of the amount of fuel to carry on a flight D. the arrangement of the cockpit to facilitate the use of the iPad B A drawback involved in using cross-border strategic alliances to enter new foreign markets is that A. the foreign firm will need to make larger investments when compared to entering the new market on its own. B. some of the firm's proprietary know-how may be appropriated by the foreign partner. C. all potential business risks in the new market will have to be faced alone by the foreign firm. D. the shareholder value of the foreign partner will decline drastically. B Which of the following summarizes the benefit of the strategic alliance between HP and DreamWorks? A. HP and DreamWorks each strengthened their separate markets without impinging on each other's markets. B. Both HP and DreamWorks were able to enter a new market that they would not have been able to pursue alone. C. HP was able to enter a new market, and DreamWorks was able to strengthen its old market. D. DreamWorks was able to enter a new market, and HP was able to strengthen its old market. B Why did incumbent pharmaceutical firms enter into hundreds of strategic alliances with biotech start-ups? A. to pursue an unrelated-options perspective without disrupting existing market economics B. to make small-scale investments in ventures poised to disrupt existing market economics C. to invest their excess cash flow in the superior technology of the biotech start-ups D. to share their continuously updated research technology with the biotech start-ups B A _____ is best described as an approach to strategic decision making that breaks down a larger investment decision into a set of smaller decisions that are staged sequentially over time. A. cost-leadership approach B. break-even analysis C. market risk framework D. real-options perspective D
Terranova Autos Inc., a large automobile company, made an initial small investment in a start-up company that was developing a solar-powered car. This gave Terranova Autos controlling interests in the start-up company. However, Terranova Autos had no obligations to make continued investments in the experiments of the start-up company. It could invest in small amounts depending on the new product's success at each stage of its development. If the product proved to be successful, Terranova Autos would have the right to buy out the start-up company. This approach to strategic alliance is referred to as A. a break-even analysis. B. a real-options perspective. C. credible commitment. D. transaction cost economics. B In 1990, Roche, a Swiss pharmaceutical company, initially invested $2.1 billion to purchase a controlling interest in the biotech startup Genentech. In 2009, after witnessing the success of Genentech's drug discovery and development projects, Roche spent $47 billion to purchase the remaining minority interest in Genentech, making it a wholly owned subsidiary. In terms of strategic alliances, this scenario best indicates A. the real-options perspective. B. co-opetition. C. explicit knowledge. D. the stakeholder strategy. A How does taking a real-options perspective by entering strategic alliances help incumbent firms? A. It helps the incumbent firms gain the confidence of the partnering company by making credible commitments. B. It helps the incumbent firms reduce the value gap they create through their product and service offerings. C. It allows the incumbent firms to buy time and wait for the uncertainty surrounding the market and technology to fade. D. It reduces the incumbent firms' cost of acquisition by enabling them to make the entire investment decision in the beginning itself. C When North Autos Inc. wanted to sell its cars in the country of Balvia, it lacked access to distribution channels and marketing expertise in the country. Thus, North Autos had to enter into a strategic alliance with a local automobile company to get access to the foreign partner's well-established distribution channels. Which of the following reasons for entering into a strategic alliance is best illustrated in this scenario? A. increasing competitive intensity B. accessing critical complementary assets C. procuring additional capital investments D. reducing differentiation of product and service offerings B When entering a foreign market, it is advisable for a new venture that has a core competency only in R&D to form a strategic alliance with a local partner because A. the local partner can better protect its proprietary know-how. B. building downstream complementary assets can be expensive and time-consuming. C. the strategic alliance will reduce the differentiation of its product and service offerings. D. the value gap created by the firm can be easily lowered in an alliance. B
_____ is best described as cooperation by competitors to achieve a strategic objective. A. Limited liability B. Proprietorship C. Co-opetition D. Commerce C _____ are best described as situations in which both partners in a strategic alliance are motivated to form an alliance for learning, but the rate at which the firms learn may vary. A. Learning races B. Learning networks C. Learning effects D. Learning matrices A In a strategic alliance, the firm that learns faster A. has the tendency to lose its competitive advantage. B. has the incentive to reduce its knowledge sharing. C. has the tendency to move up a learning curve. D. has the incentive to invest further in the alliance. B FR Pharmaceuticals Inc., BioCure Pharma Inc., and Regime Pharma Inc. are three rival firms who have set up an alliance to conduct research and find a cure for cancer. They have made almost equal contributions to the research, and they also share their expertise with each other. However, the three firms will continue to behave as competitors in markets for other drugs and vaccines. What is this arrangement best referred to as? A. takeover B. buyout C. co-opetition D. acquisition C New United Motor Manufacturing, Inc. (NUMMI), formed between General Motors (GM) and Toyota in 1984 was the first _____ in the U.S. automobile industry. A. joint venture B. non-equity alliance C. hostile takeover D. equity alliance A Comfort Shoes Inc. and InStep Shoes Inc., two competing shoe brands, entered into a strategic alliance to study and acquire each other competencies. Comfort Shoes entered the strategic alliance to acquire the production system pioneered by InStep Shoes. Similarly, InStep Shoes agreed to the strategic alliance to study the designing process of Comfort Shoes. However, Comfort Shoes was more successful and faster than InStep Shoes in accomplishing its alliance goal. What does this scenario best illustrate? A. network effects B. economies of scope C. learning races D. time compression diseconomies C With regard to New United Motor Manufacturing, Inc. (NUMMI), why did General Motors (GM) enter into a strategic alliance with Toyota? A. to transfer its knowledge of a completely new production system B. to learn the lean manufacturing system pioneered by Toyota C. to better understand the American workforce D. to get access to Toyota's distribution system and marketing expertise B In the New United Motor Manufacturing, Inc. (NUMMI) joint venture, why did Toyota enter into a strategic alliance with General Motors (GM)? A. to access GM's completely new production system B. to learn and implement the just-in-time inventory system pioneered by GM C. to learn how to implement its lean manufacturing program with an American workforce D. to access GM's distribution system and marketing expertise C A(n) _____ occurs when firms enter into a partnership based on contractual agreements, which results in vertical strategic alliances that connect different parts of the industry value chain. A. equity alliance B. joint venture C. non-equity alliance D. greenfield venture C Supply, distribution, and licensing contractual agreements between firms, which result in vertical strategic alliances, are all examples of A. cartel arrangements. B. non-equity alliances. C. joint ventures. D. equity alliances. B In a non-equity alliance, which of the following types of information would firms most likely share? A. a manager's knowledge related to solving non-routine problems B. a top-level manager's experience related to making strategic decisions C. the documented information about the material composition of a product D. the employees' entrepreneurial skills C Which of the following statements is true of explicit knowledge? A. Explicit knowledge is about knowing how to do a certain task. B. Explicit knowledge is knowledge that cannot be codified. C. Explicit knowledge is shared in non-equity alliance firms. D. Equity knowledge is acquired only through actively participating in a process. C _____ are best described as contractual alliances in which the participants regularly exchange codified knowledge. A. Cartels B. Licensing agreements C. Equity alliances D. Acquisitions B Amiware Inc., a manufacturer of ceramic cookware, has entered into a contractual agreement with Micoware Inc. The agreement involves vertical strategic alliances connecting different parts of the industry value chain. This arrangement between the two companies best illustrates a(n) A. joint venture. B. acquisition. C. non-equity alliance. D. greenfield venture. C Which of the following best illustrates a non-equity alliance? A. a contractual agreement that provides Motor Source Inc. non-exclusive rights to supply component parts to Pristine Autos Inc. B. an alliance between RedGate Systems Inc. and DB Computers Inc. that results in DB Gate Inc., an independent third company C. a collusion between two competitors, RP Pharma Inc. and Vital Pharma Inc., to fix prices D. an alliance that allows Virtue Insurance Inc. to claim 49 percent ownership in Mercury Finance Inc. A Which of the following is an advantage of non-equity alliances? A. They produce strong ties between alliance partners as they are permanent in nature. B. They are flexible and easy to initiate and terminate. C. They facilitate the sharing of tacit knowledge between the alliance partners. D. They are based on ownership rather than contracts. B Which of the following is a disadvantage of equity alliances? A. They are reflective of weaker ties between firms. B. They do not permit the exchange of explicit knowledge. C. They can bring about a lack of commitment. D. They can entail significant investments. D Which of the following statements is true of joint ventures? A. They enable the exchange of both tacit and explicit knowledge. B. They reduce the possibilities of trust and commitment. C. They are characterized by single reporting lines. D. They cannot entail long negotiations. A Which alliance type is the Renault-Nissan alliance, where Nissan owns 15 percent of Renault, and Renault owns 44.4 percent in Nissan? A. equity alliance B. non-equity alliance C. greenfield venture D. joint venture A Which of the following is an advantage of equity alliances when compared to non-equity alliances? A. They are more flexible and easy to initiate and terminate. B. They require smaller capital investments. C. They produce stronger ties between partners. D. They are based on contracts rather than ownership. C Dow Corning is a company owned by Dow Chemical and Corning. This is most likely an example of a(n) A. equity alliance. B. sole proprietorship. C. non-equity alliance. D. joint venture. D A drawback of joint ventures is that they are characterized by A. involuntary mergers. B. double reporting lines. C. contractual agreements rather than ownership. D. weak ties between alliance partners. B A(n) _____ is best described as a partnership in which at least one partner takes partial ownership in the other partner. A. acquisition B. non-equity alliance C. joint venture D. equity alliance D Equity alliances are less common than non-equity alliances because they A. depend on contractual agreements. B. produce weaker ties between partners. C. fail to facilitate the transfer of tacit knowledge. D. often require larger investments. D
Which of the following statements is true of an equity alliance? A. An equity alliance is based on contractual agreements rather than partial ownership. B. In an equity alliance, the partners frequently exchange personnel to make the acquisition of tacit knowledge possible. C. In an equity alliance, a standalone organization is created that is jointly owned by two or more parent companies. D. An equity alliance creates weaker ties between the alliance partners when compared to a non-equity alliance. B Which of the following statements is not true of tacit knowledge? A. It is concerned with knowing how to do a certain task. B. It is knowledge that cannot be easily codified. C. It is regularly shared between partners in a non-equity alliance. D. It is acquired only through actively participating in the process. C Which of the following best illustrates an equity alliance? A. a contractual agreement that provides Ocia Pharma Inc. the exclusive rights to distribute the drugs of Marvel Pharma Inc. in the Asian market B. an alliance between GoldWing Systems Inc. and GM Computers Inc. that results in GM Wing Inc., an independent third company C. a collusion between two competitors, Torque Steels Inc. and Vizor Metals Inc., to fix prices D. a partnership in which RedGate Insurance Inc. has a 40 percent ownership claim in TwinTrust Finance Inc. D The partnership between Toyota and Tesla Motors, in which Toyota has made a $50 million investment in the California startup company to learn new knowledge and gain a window into new technology, is an example of a(n) A. acquisition. B. joint venture. C. non-equity alliance. D. equity alliance. D Toyota's President, Akio Toyoda, hopes that a transfer of tacit knowledge will take place through its equity alliance with Tesla Motors. He is referring to A. the lean manufacturing process pioneered by Tesla. B. the entrepreneurial spirit in Tesla. C. the safety measures followed in Tesla, recorded in its user manuals. D. the product information documented in Tesla's database. B _____ are best described as equity investments by large established firms making in entrepreneurial ventures to gain access to new, and potentially disruptive, technologies. A. Corporate venture capital investments B. Greenfield ventures C. Joint ventures D. Loan sharks A The downside of equity alliances is A. the weaker ties and reduced trust between partners. B. the amount of investment that can be involved. C. that the alliances cannot be abandoned if not promising. D. that they are not useful stepping-stones toward full integration of the partner firms. B When a stand-alone organization is created and owned by two or more parent companies together, the strategic alliance is referred to as a(n) A. non-equity alliance. B. equity alliance. C. proprietorship. D. joint venture. D EveningStar Inc. and The Luxur Group have together established The Luxur Star Group of hotels. EveningStar owns 49 percent and The Luxur Group has a 51 percent share in The Luxur Star Group of hotels. However, the management of The Luxur Star Group of hotels is separate from its parent companies. What alliance type does this scenario best illustrate? A. sole proprietorship B. non-equity alliance C. equity alliance D. joint venture D Which of the following is an advantage of joint ventures? A. They create strong ties, trust, and commitment between the partners. B. They are based on contractual agreements rather than partial ownership. C. They require the lowest amount of investment relative to the other alliance types. D. They can be easily initiated and terminated. A Which of the following is a drawback of joint ventures? A. They produce weak ties, trust, and commitment between the partners. B. They are based on contractual agreements rather than partial ownership. C. They do not enable the transfer and sharing of tacit knowledge. D. They necessitate the sharing of rewards between the partners. D Wave Motors Inc., a Kempa-based automobile company, has entered into a partnership with Sphere Autos Inc., headquartered in United Cadvia. The parent companies, together, have established a stand-alone firm called Genuine Autos Inc. This arrangement best exemplifies a A. joint venture. B. partnership. C. non-equity alliance. D. proprietorship. A Which of the following types of strategic alliances is the least common in terms of frequency? A. mergers B. acquisitions C. equity alliances D. joint ventures D The process of alliance management begins with A. selecting the best possible partner. B. choosing an appropriate governance mechanism. C. designing the alliance. D. creating resource combinations that obey the VRIO criteria. A Partner compatibility and partner commitment are necessary conditions for successful alliance formation. Partner compatibility captures A. aspects of cultural fit between different firms in an alliance. B. features of the financial health of the different alliance partners. C. the readiness to accept short-term sacrifices to ensure long-term awards. D. the willingness to make available necessary resources. A In Eli Lilly's Office of Alliance Management, the _____ is a senior, corporate-level executive responsible for high-level support and oversight. A. alliance manager B. alliance leader C. alliance regulator D. alliance champion D In Eli Lilly's Office of Alliance Management, who is responsible for providing alliance training and development? A. the alliance champion B. the alliance leader C. the alliance manager D. the alliance boss C In Eli Lilly's Office of Alliance Management, the alliance champion is primarily responsible for A. making sure that an alliance fits within the firm's existing alliance portfolio and corporate-level strategy. B. providing technical expertise and knowledge needed for the specific technical area in an alliance. C. providing alliance training and development, as well as diagnostic tools. D. serving as an alliance process resource and business integrator between the two alliance partners. A In Eli Lilly's Office of Alliance Management, who is responsible for providing the technical expertise and knowledge needed for the specific technical area and the day-to-day management of the alliance? A. the alliance champion B. the alliance leader C. the alliance manager D. the alliance boss B Which of the following is an ineffective practice in alliance management? A. coordinating a firm's portfolio of alliances B. establishing knowledge-sharing routines between alliance partners C. developing relational capabilities to manage mergers and acquisitions D. focusing on developing an alliance-management capability in isolation D A consumer electronics company is in the process of evaluating whether it should pursue an internal development strategy or an external growth strategy. To make this decision, the management needs to assess whether the company's internal resources are superior to those of competitors in the targeted area. Which of the following strategic management models would be most useful in this assessment? A. the core competence matrix B. the Boston Consulting Group (BCG) matrix C. the transaction-cost economics model D. the VRIO framework D When a firm does not have the resource required for pursuing a growth strategy, and if the resource in question is not easily tradable, the implication for the strategist is most likely to A. borrow via a contractual agreement. B. pursue internal development. C. enter into a licensing agreement. D. consider an outright acquisition. D When should mergers and acquisitions (M&A) be considered the "buy" option for a strategist trying to determine which corporate strategy to implement? A. when the resource in question is highly tradable B. before the strategist has considered borrowing the necessary resources through integrated strategic alliances C. after it has been established that the firm's internal resources are sufficient to build D. when extreme closeness to the resource partner is necessary to understand and obtain its underlying knowledge D Why did Pixar enter into a strategic alliance with Disney? A. to develop into a live-action feature film company B. to finance and distribute high-end graphic display systems for theaters C. to develop into a computer hardware company D. to finance and distribute its newly created computer-animated movies D Which of the following accurately describes a common difference between a merger and an acquisition? A. A merger tends to include mostly small firms; an acquisition can often involve large firms. B. A merger involves the combination of three or more firms; an acquisition involved the combination of two firms. C. A merger involves firms of different size; an acquisition involved firms of the same size. D. A merger tends to be friendly; an acquisition can be friendly or unfriendly. D What is horizontal integration? A. the process of merging with a competitor at a different stage of the value chain B. the process of merging with a competitor at the same stage of the value chain C. the process of acquiring a competitor at a higher stage of the value chain D. the process of acquiring a competitor at a lower stage of the value chain B Horizontal integration through mergers and acquisitions can help firms strengthen their competitive positions by increasing A. competitive intensity. B. differentiation. C. costs. D. managerial efficiency. B Medetect Inc. is a large firm involved in the highly competitive market of high-tech medical equipment. In this market, smaller firms that focus on research are constantly making new technological developments. Which of the following approaches would best serve the needs of Medetect? A. mergers B. serial mergers C. acquisitions D. serial acquisitions D Which of the following best explains why Disney showed superior post-merger integration capabilities? A. Disney pursued a combination of horizontal and vertical integration through its acquisitions. B. Disney did a thorough job in eliminating principal-agent problems in the firms it acquired. C. Disney managed its new subsidiaries more like alliances rather than attempting full integration. D. Disney used a corporate strategy based on a build-borrow-or-buy framework for its acquisitions. C Why did Quaker Oats Company's acquisition of Snapple fail? A. strong competitive disadvantage B. managerial hubris C. inferior acquisitions ability D. shareholder unrest B When entering new geographic markets, some governments, such as those of Saudi Arabia and China, require that foreign firms have a local A. market partner. B. joint venture partner. C. strategic alliance partner. D. merger partner. B Luxura Inc. is a large cosmetics company that made an initial small investment in a start-up company, GreenDream, that was developing an organic face lotion. This gave Luxura controlling interests in the start-up company. However, GreenDream soon began to have financial difficulties because of principal-agent problems. As a result, Luxura did not invest in the next stage of development and pulled out of the company. This approach to strategic alliance is referred to as a A. break-even analysis. B. partial joint venture. C. credible commitment. D. real-options perspective. D Which of the following is the best definition of a complementary asset? A. an asset a firm needs to complete the value chain from upstream innovation to downstream commercialization B. an asset a firm would like to add to its portfolio even though it is not vital to the running of the company C. an asset a firm can use to attract a potential joint venture partner D. an asset a firm keeps because it helps them maintain a strong image for marketing A In 1984, GM and Toyota formed a joint venture called New United Motor Manufacturing Inc. Each partner was motivated to learn new capabilities. This joint venture is an example of A. creating a real-options perspective. B. accessing complimentary assets. C. using co-opetition. D. forming a conglomerate. C Which of the following is a common drawback of a non-equity alliance? A. lack of trust between partners B. difficulty initiating the contract C. difficulty terminating the contract D. lack of flexibility for the partners A Which of the following is an example of explicit knowledge? A. knowing how to create surveys B. a research skill C. knowing how to assemble semiconductors D. a research summary D Which of the following corresponds to the use of tacit knowledge? A. Pedro studies a fact sheet about France. B. Heather reads a demographic report about minorities in Texas. C. John assembles the motorcycle from memory. D. Henrietta uses a scientific article to defend her thesis about global warming. C A candy company called SweetThings Inc. forms an agreement with another candy company called Reverie Inc. Through this agreement, SweetThings owns 30 percent of Reverie. However, Reverie does not own any part of SweetThings. This type of agreement is called a(n) A. non-equity alliance. B. equity alliance. C. joint venture. D. capital venture. B Which of the following statements is true about managing alliances-related tasks? A. Forming an alliance with another firm prohibits that firm from forming other alliances. B. Alliance management capability is based on three alliance-related tasks. C. A merger is one of the three options for alliance design and governance. D. In post-formation alliance management, none of the firms in an alliance is permitted to gain a competitive advantage. B Which of the following aspects of alliance management capability is paired with partner selection? A. alliance governance B. alliance design C. alliance formation D. post-formation alliance management C Which of the following examples describes the task of an alliance manager? A. Sophia oversaw the agreement between her company and the potential alliance partner and offered support when needed. B. Ira used his knowledge of digital watches to help him to manage the day-to-day operations of the alliance. C. Natasha reviewed the alliance portfolio to make sure it fit with the corporate strategy of her firm. D. Fyodor trained the employees of his alliance partner in the skills needed to create a display for an e-notebook. D In terms of the build-borrow-or-buy framework, a firm's internal resources are considered to be relevant when they are A. similar to those that need to be developed and superior to those of competitors in the targeted area. B. similar to those that need to be developed and inferior to those of competitors in the targeted area. C. different from those that need to be developed and superior to those of competitors in the targeted area. D. different from those that need to be developed and inferior to those of competitors in the targeted area. A Susan is a strategist for the firm, DigiVision Inc., which produces high-quality HD movie cameras. This company needs a specific material for a new camera they are developing, which is manufactured in large quantities by a competitor called Tech Resources Inc. However, this material is difficult to trade for. Because of this, which of the following is most likely the best strategy for Susan to suggest? A. DigiVision should acquire Tech Resources. B. DigiVision should form a short-term agreement with Tech Resources. C. DigiVision should form a long-term agreement with Tech Resources. D. DigiVision should enter into co-opetition with Tech Resources. A What is the problem of strategic alliance?Figure: Pitfalls of Strategic Alliances between Companies
Lack of Trust: In several alliances one partner will point the failure finger at the other partnering company. Transferring the blame will not solve the issue, but increases the stress between the alliance partners and usually ruins the alliance.
What is the main reason that strategic alliances fail quizlet?Reasons for failure with strategic alliances. - Not enough attention paid to detail. - Different strategic goals. - Lack of top executive commitment.
What key factors can cause a strategic alliance to fail?You do need to be careful to avoid some common pitfalls, and here are five common missteps.. #1 Lack of a Shared Vision. Inherent to a partnership is a shared goal or commitment that will benefit both parties. ... . #2 Over- or Under-Investing. ... . #3 Poor Governance. ... . #4 Lack of Trust. ... . #5 Lack of Adaptability.. What are the challenges to having alliances?A clash of corporate cultures or the lack of independence perhaps is the major challenge in the number of alliances. Furthermore, the companies may withdraw themselves from future business opportunities with the rivals of their strategic partner.
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What is a major problem for between 30% and 70% of all strategic alliances quizlet?
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