Mgt. 4335 Ch. 8

Borpon Inc. and Biocolog Corp. are well-established biotechnology companies. They enter into a strategic alliance in which they create and own a legally independent company. The new company is created from resources and assets contributed by the parent firms. Revenues, expenses, and profits are equally shared by both firms. Which of the following strategic alliances is adopted by Borpon and Biocolog? A joint venture An equity alliance A distribution agreement A contractual alliance

A joint venture

Sepia Inc., a fertilizer company, needs permission to test its new products on plantations owned by an agro-based industry. In return, the company is willing to pay a percentage of revenue to the agro-based industry. In this case, which of the following contractual alliances should be adopted by Sepia? A distribution agreement A licensing agreement A supply agreement An input agreement

A licensing agreement

John requires 500 shirts of a particular fabric and quality. He partners with Loumang Inc., a fabric manufacturing company, to develop certain customized inputs. Which of the following is being exemplified in this scenario? A profit agreement A supply agreement A licensing agreement A distribution agreement

A supply agreement

Green Dye Inc., a manufacturing firm that produces organic products, is approached by Zoe, a leading clothes designer owning her own label. Together, they create a line of clothes using organic dye and fabric made from pure cotton. Which of the following is likely to be the primary value created by this alliance? Lowering the transaction costs at all stages of the value chain Offering customized retail benefits to increase the sale of the products Combining unique resources along different stages of the value chain Lowering distribution costs at all stages of the value chain

Combining unique resources along different stages of the value chain

An air conditioner manufacturer, Hues Corp., decides to form a strategic alliance with a firm to source components that make up the highest percentage of total costs. Which of the following suppliers is it most likely to choose as a partner? Fin Inc. which produces the compressors used in Hues air conditioners Black Corp., which prints Hues logo on the air conditioners Den Corp., which produces the designer vents for Hues that come in different colors Jades Inc., which manufactures the packages required for finished products of Hues

Fin Inc. which produces the compressors used in Hues air conditioners

Which of the following statements is true about how an arm's-length relationship is used in strategic alliance? Firms that use the arm's-length relationship acquire the production facilities of other firms. Firms typically use the arm's-length relationship between internal departments. Firms use the arm's-length relationship to purchase inputs at the lowest price. Firms cannot buy inputs from multiple sources using the arm's-length relationship.

Firms use the arm's-length relationship to purchase inputs at the lowest price.

_________ occurs when one partner tries to exploit the alliance-specific investments made by another partner. Misrepresentation Battery Hold-up Bondage

Hold-up

Teal Inc. forms a strategic alliance with White Corp. In their contract, they specify how governance issues, operating issues, and termination issues would be resolved. Which of the following is likely to be covered under the clause that deals with governance issues? How intellectual property will be shared by Teal and White How profits will be split between Teal and White What performance is expected by Teal and White from each other Under which circumstances Teal or White can exit the alliance

How profits will be split between Teal and White

Which of the following statements is true about strategic alliances? In strategic alliances, companies may choose to cooperate at any stage along the value chain. Strategic alliances usually lead to one of the firms losing their relational advantage. Strategic alliances exclude functions that are bought through bidding. In strategic alliances, the power to make decisions is always evenly distributed amidst the firms.

In strategic alliances, companies may choose to cooperate at any stage along the value chain.

Which of the following statements best describes a strategic alliance? It is a cooperative arrangement in which two or more firms combine their resources and capabilities to create new value. It is an unofficial arrangement in which two large firms cooperate unofficially to control production and prices within a certain market segment. It is an arrangement where a firm purchases an input from another firm with no obligation to have a long-term relationship with the other firm. It is a cooperative arrangement where a firm which is on the verge of shutting down sells all of its assets to another firm.

It is a cooperative arrangement in which two or more firms combine their resources and capabilities to create new value.

The research and development department of a pharmaceutical company is in the process of developing a new drug to cure Parkinson's disease. It requires additional resources to complete the process. To convince another pharmaceutical company to provide the necessary resources, it gives false information about how long the drug has been in the developmental pipeline and the guidelines followed in the production process. Which of the following is being exemplified in this case? Profit stealing Misrepresentation Hold-up Bondage

Misrepresentation

Timber Inc. enters an exclusive partnership to ally with Teal Corp. in order to enter a foreign market. Which of the following statements is likely to be true in this case? Timber and Teal are unlikely to receive inputs or activity from each other. Timber is likely to acquire an activity or input from Teal to create a new value. Timber is likely to buy an activity from Teal using an arm's-length relationship. Timber is likely to send a bid to Teal along with other suppliers for the lowest price.

Timber is likely to acquire an activity or input from Teal to create a new value.

The only true way to protect against misrepresentation is to partner with trustworthy individuals.

True

Zeal Inc., a software firm, decides to enter the publishing industry. While it has the financial resources required to enter the new market, it lacks the expertise and technical knowledge required to establish itself in the new industry. So, Zeal Inc. enters into strategic alliance with Chrome Corp., a leading e-publisher. Which of the following is likely to be true in this case? Chrome is likely to lose its relational advantage through this alliance. Zeal and Chrome are likely to cooperate even at the stage of research and development. Zeal's vision is likely to contradict that of Chrome. Chrome is likely to provide its expertise only at the marketing stage.

Zeal and Chrome are likely to cooperate even at the stage of research and development.

The most common way to distinguish one type of alliance from another is by the _________. measure of profit each firm derives out of the alliance mechanism used to govern the alliance motive behind the alliance products of the firms involved in the alliance

mechanism used to govern the alliance

An alliance is likely to rely most on relationships between individuals when it is based on _________. legal contracts collateral bonds goodwill trust shared ownership

goodwill trust

Which of the following are ways a firm can take advantage of another firm in an alliance? Vertically integrating Misrepresentation Hold-up Both vertically integrating and hold-up Both misrepresentation and hold-up

Both misrepresentation and hold-up

Why should a company create a strategic alliance with one or more other companies? To differentiate more from competitors To combine resources and capabilities to create new value To make employees happy that may have connections with other companies Both to differentiate more from competitors and to combine resources and capabilities to create new value Both to combine resources and capabilities to create new value and to make employees happy that may have connections with other companies All of the choices are correct.

Both to differentiate more from competitors and to combine resources and capabilities to create new value

Identify a way firms create value through alliance. By combining unique resources By creating new industry-specific resources By pooling trade secrets By increasing the transaction costs

By combining unique resources

Which one of the following is NOT one of the basic alliance arrangements? Contractual alliance Equal alliance Equity alliance Joint venture

Equal alliance

A contractual alliance involves writing a contract that describes how much equity each partner receives.

False

To achieve economies of scale in a strategic alliance, two or more companies combine unique resources.

False

_________ occurs when one partner in an alliance creates false expectations about the resources it brings to the relationship or fails to deliver what it originally promised. Misrepresentation Hold-up Profit stealing Bondage

Misrepresentation

An organization forms an alliance contract. It specifies in detail the duties and obligations of each of the partners, how the profits are to be split by the partners, and the process by which disputes will be resolved. Which of the following clauses is likely to cover the duties and obligations of the partners, including warranties and minimum output levels required to satisfy the contract? Performance clause Dispute clause Residual rights clause Voting rights clause

Performance clause

Two organizations that are positioned at different stages along the value chain form an alliance. The contract includes the conditions under which the contract will be closed and the consequences of closure for each partner. Which of the following clauses specifies the above conditions? Voting rights clauses Termination clauses Noncompete clauses Preemption rights clauses

Termination clauses

Which of the following statements is true about firms in a joint venture? The contributions made by individual firms are easy to measure. The parent firms share revenues and expenses in a particular ratio. The dependency level between partners is low. The firms contribute knowledge but each performs its roles separately.

The parent firms share revenues and expenses in a particular ratio.

Toyota's seat supplier built its factory next door to Toyota's main factory and built a conveyor belt that transferred seats from the supplier into the Toyota factory. This is an example of _____________. combining unique resources creating alliance specific resources pooling similar resources making the best out of their situation

creating alliance specific resources

Drew's Cafe Inc. and Cuppa Corp., two local coffee chains, combine resources to enter the global market. They retain their individual ownership; however, they agree to share production facilities and manpower, and they also decide to market their products through combined promotional tools. The arrangement made by the two retail chains to combine resources and collaborate for a common objective refers to a _________. product-differentiation strategy mass-customization strategy standardization venture strategic alliance

strategic alliance