CHAPTER 9 QUIZ

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) non-equity alliance

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) often require larger investments.

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) building downstream complementary assets can be expensive and time-consuming.

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) some of the firm's proprietary know-how may be appropriated by the foreign partner.

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) the two entities' complementary assets matched.

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) By lowering competitive intensity in the industry overall

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) It has access to convenience stores and a new distribution channel.

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) They produce stronger ties between partners.

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-�-vis suppliers and buyers

d) By strengthening the bargaining power of the surviving firms vis-�-vis suppliers and buyers

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) GD Inc. and VS Inc. join together to form a single new company called GDVS Inc.

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) When extreme closeness to the resource partner is necessary to understand and obtain its underlying knowledge

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) consider an outright acquisition.

When a standalone 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) joint venture

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) PureSource Pharma will lower its costs through economies of scale.

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) They enable the exchange of both tacit and explicit knowledge.

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) aspects of cultural fit between different firms in an alliance.

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) the real-options perspective

_____ 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) Licensing agreements

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) The locus of competitive advantage is often not found within the individual firm but within a strategic partnership.

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) They are flexible and easy to initiate and terminate.

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) Explicit knowledge is shared in non-equity alliance firms.

Titan Autos Inc. merged with its competitor, Cadvia Autos Inc. This allowed Titan Autos to use its technological competencies along with Cadvia Autos's 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) Horizontal integration

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 alliance