4490 Chapter 9

What are downsides of equity alliances? (Check all that apply.) The time and effort for assembling the partnership The amount of investment involved Their resulting relatively weak ties Low levels of trust

The time and effort for assembling the partnership The amount of investment involved

Horizontal integration can ______.

help a firm improve its strategic position in an industry

What are the components of post-formation alliance management? (Check all that apply.) Establish knowledge-sharing routines. Create communities of practice. Make relation-specific investments. Develop perceptual and virtual teams. Build inter-firm trust.

Establish knowledge-sharing routines. Make relation-specific investments. Build inter-firm trust.

In what way does the strategic alliance between GM and Lyft allow GM to hedge against uncertainty?

It gives GM access to the market of the future, in which traditional private car ownership no longer exists.

What is a true statement about strategic alliances?

They have a high failure rate.

When an established firm makes an equity investment in an entrepreneurial venture it is known as a(n) ______ investment.

corporate venture capital

A partnership in which at least one partner takes partial ownership in the other is a(n) ______.

equity alliance

What is a component of post-formation alliance management?

establishing knowledge-sharing routines

Sources of COSTS in a horizontal integration strategy are ______. integration failure displaced competitive intensity reduced potential for legal repercussions reduced flexibility

integration failure reduced flexibility

Which of the following are the three choices in the build-borrow-or-buy framework? (Check all that apply.) internal development elimination of product costs strategic alliances acquisition of new resources

internal development strategic alliances acquisition of new resources

Gaining new capabilities or competencies is one of the three main reasons companies ______.

make acquisitions

A partnership that is based on contracts between companies is referred to as a(n) ______.

non-equity alliance

What is the main goal of corporate venture capital investments?

to create real options in terms of gaining access to new technologies

Which of the following are reasons why firms enter into strategic alliances? (Check all that apply.) to enter new markets to increase outsourcing to decrease economies of scale to learn new capabilities to strengthen their competitive position

to enter new markets to learn new capabilities to strengthen their competitive position

Which term refers to a company's ability to handle the three specific tasks related to an alliance concurrently and effectively?

alliance management capability

What is a major problem for between 30% and 70% of all strategic alliances?

At least one partner in the alliance considers the venture to be a failure.

Which of the following is true regarding the government and horizontal integration?

Large horizontal integration activity typically needs to be approved by government authorities.

Strategists can grow their firms by growing organically through internal development or externally through alliances and ______.

acquisitions

What are the phases of alliance management? (Check all that apply.) alliance design and governance post-formation alliance management partner selection and alliance formation strategic network manipulation tacit and explicit knowledge collaboration

alliance design and governance post-formation alliance management partner selection and alliance formation

An advantage of using a non-equity alliance to govern a strategic alliance is its ______.

flexibility and ease of initiation

Some foreign countries require companies to be structured as __ in order to enter that foreign market. The companies gain access to the market, while the country gains advanced technology and know-how.

joint ventures

Why does Facebook acquire startups?

to preempt rivals

Horizontal integration is a good option if ______.

the target firm will have more value when combined with the acquiring firm

Horizontal integration can reduce ______.

the threat of entry

If an alliance between two firms succeeds, it is likely that the firms in the alliance _____.

trust each other

What is an important aspect of alliance success?

inter-organizational trust

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.

What allows firms to manage both strategic alliances and mergers and acquisitions?

a relational capability

At which level of the corporation should strategic alliances and mergers and acquisitions be managed?

at the corporate level

A firm might want to use a strategic alliance to ______.

change the industry structure

On average, mergers and acquisitions ______ shareholder value.

destroy

Which of the following forms of agreement do non-equity alliances typically take? (Check all that apply.) marketing distribution licensing innovation supply

distribution licensing supply

What are some managerial advantages of building a firm into a large organization? (Check all that apply.) easier integration greater prestige increased power more job security

greater prestige increased power more job security

A standalone organization that two or more parent companies create and own together is a ___.

joint venture

The three mechanisms to govern alliances are non-equity alliances, equity alliances, and ______.

joint venture

What are the three mechanisms that alliances can be governed by? (Check all that apply.) joint ventures equity alliances non-equity alliances upstream alliance downstream alliance

joint ventures equity alliances non-equity alliances

A(n) ______ is when two firms agree to join and create a combined entity, and a(n) ______ is when one firm buys or takes over another firm.

merger; acquisition

A voluntary arrangement between firms to share knowledge, resources, and capabilities to develop products, processes, or services is known as a ______.

strategic alliance

When companies get involved in a bidding war and the winner overpays for the acquisition, the acquiring company has fallen victim to the ______.

winner's curse

True or false: In most cases, mergers and acquisitions create competitive advantage.

False

Which of the following are true of alliance management capability? (Select all that apply.) It has little effect on a firm's competitive advantage. It involves partner selection and alliance formation. Every firm has alliance management capability. A firm may need to employ it with several different alliances.

It involves partner selection and alliance formation. A firm may need to employ it with several different alliances.

Which are the three main reasons firms make acquisitions? (Check all that apply.) to reduce flexibility to gain access to a new capability or competency to gain access to new distribution channels and markets to increase potential for legal repercussions to preempt rivals

to gain access to a new capability or competency to gain access to new distribution channels and markets to preempt rivals

True or false: Firms tend to enter strategic alliances when they have no other choice.

False

Which bodies regulate mergers and acquisitions? state legislatures The Supreme Court Federal Trade Commission European Commission

Federal Trade Commission European Commission

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.

How does Lyft benefit from its strategic alliances with GM and Waymo?

It allows Lyft to more effectively compete against Uber.

Which of the following is true of tacit knowledge?

It can only be acquired through actively participating in the process.

How does horizontal integration affect Porter's Five Forces for the surviving firms? (Check all that apply.) It weakens bargaining power vis-à-vis buyers. It increases rivalry among existing firms. It reduces rivalry among existing firms. It increases the threat of entry. It reduces the threat of entry.

It reduces rivalry among existing firms. It reduces the threat of entry.

Peter's Pans makes cast-iron cookware. It decides to acquire another similar-sized cast-iron cookware company in the hope that its larger size will enable it to snag some market share away from Iron Maiden, the industry leader. What is Peter's Pans strategy?

Peter's Pans is trying to overcome competitive disadvantage.

What are some advantages of strategic alliances? (Select all that apply.) They have few risks associated with them. They give one firm complete control of the resource value chain. They help firms achieve goals faster than they would alone. They might give companies a competitive advantage.

They help firms achieve goals faster than they would alone. They might give companies a competitive advantage.

Which of the following statements about equity alliances is true?

They require larger investments than non-equity alliances.

True or false: A horizontal integration strategy leads to industry consolidation.

True

True or false: 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

True or false: Firms can use strategic alliances to strengthen their competitive advantage when competing in battles to control industry standards.

True

Vasily is a manager at a large snack foods company. Vasily believes his company would benefit from being larger and thinks the shareholders would support such growth. The company is doing relatively well but needs to focus on stabilizing profits and expenditures. Vasily pushes for an acquisition anyway. The reason for this acquisition is ______.

a principal-agent problem

Which approach to strategic decision making takes a larger investment decision and divides it into multiple smaller decisions that happen over time?

a real-options perspective

A conceptual model that helps strategists choose between seeking internal development, entering into an alliance, or acquiring new resources, capabilities, and competencies is called the "______ framework."

build-borrow-or-buy

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 ______.

commitment

A firm must decide whether to build, borrow, or buy to answer the question of ______.

how it will achieve growth

What three of the following are the primary benefits of horizontal integration? (Check all that apply.) lower costs a reduction in competitive intensity increased differentiation increased activity in all levels of the value chain

lower costs a reduction in competitive intensity increased differentiation

The most common type of alliance is a(n) ______.

non-equity alliance

What are the two necessary conditions for successful alliance formation? (Check all that apply.) partner commitment partner globalization partner compatibility partner selection

partner commitment partner compatibility

Although the three tasks of alliance management capability often occur at the same time, in general what is the first phase of alliance management?

partner selection and alliance formation

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 ______.

real-options perspective

Horizontal integration through mergers and acquisitions can create costs. Which of the following are sources of such costs? (Check all that apply.) reduced flexibility increased differentiation increased potential for legal repercussions reduction in competitive intensity

reduced flexibility increased potential for legal repercussions

What are three advantages of equity alliances? (Check all that apply.) stronger ties a window into new technology (option value) possible emergence of trust and commitment an institutional setting requirement easy initiation and termination

stronger ties a window into new technology (option value) possible emergence of trust and commitment

Which type of knowledge cannot be codified and can only be gained through active participation in the task?

tacit knowledge

The partners in non-equity alliances can have weak ties because such alliances are often ______ in nature, which can cause lack of trust and commitment.

temporary

What are common reasons a firm might pursue a merger? (Check all that apply.) to address principal-agent problems to increase strategic alliances in secondary markets to gain superior acquisition and integration capability to overcome competitive disadvantage

to address principal-agent problems to gain superior acquisition and integration capability to overcome competitive disadvantage

Why might a firm create a joint venture when entering a new geographic market? to adhere to local law to adhere to domestic law to access local expertise to access local contacts

to adhere to local law to access local expertise to access local contacts