Business 498-Chapter09: Strategic Alliances, Mergers and Acquisitions.

In order to build alliance management capabilities in small companies, it is recommended that firms take the ______ approach.

"learning-by-doing"

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.

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

A real option perspective.

Which of the following did Kraft see as an advantage of integration with Cadbury?

Access to new markets

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

Acquisitions.

What are the most expensive, complicated, and difficult to undo options used to grow a firm?

Acquisitions. | mergers

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

Alliance management capability

Eli Lilly, a company known for its alliance management, manages its alliances using a three-person team consisting of which of the following?

An alliance manager. | An Alliance champion. |An alliance leader.

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.

In general, if a resource is highly tradable, then it should be ______ using a license or contractual agreement.

Borrowed

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 can horizontal integration increase product differentiation?

By filling the empty spaces in a firm's offerings.

Which of the following terms is used to describe cooperation by competitors?

Co-opetition.

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

When Pfizer and Wyeth merged, they reduced the size of their combined sales force while also increasing the number of drugs they could promote. This is an example of which source of value creation for M&As?

Decreased cost.

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

Equity alliance

Which bodies regulate mergers and acquisitions?

European Commission . | Federal Trade Commission

Knowledge that can be codified is also called ______ knowledge.

Explicit

Non-equity alliances tend to share ______, which allows the firms to understand a certain process or product.

Explicit knowledge

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

False

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.

In 2010 Kraft Foods bought UK-based Cadbury PLC in a hostile takeover. Kraft felt that a ______ with Cadbury would help Kraft break into emerging countries because of the strong position Cadbury had in India, Egypt, Thailand. and other countries.

Horizontal integration

When two competitors merge, leading to industry consolidation, they are engaging in ______.

Horizontal integration.

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

How it will achieve growth.

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 creation of M&As?

Increased differentiation.

Sources of costs in a horizontal integration strategy include which of the following?

Integration failure. |Reduced flexibility. | increased potential for legal repercussions.

What is an important aspect of alliance success?

Inter-organizational trust

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.

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 private car ownership model is likely to shift in favor of fleet ownership and management.

Which of the following are true of alliance management capability?

It involves alliance design and governance. | It involves partner selection and alliance formation.

Strategy scholars believe that firms should create a dedicated alliance function with which of the following features?

It should be led by a VP or director. | It should have its own resources and support staff

What are some managerial advantages of building a firm into a large organization?

Job security, greater prestige, and increased power.

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 ventures

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.

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

Joint ventures.

Which of the following is a disadvantage of a joint venture?

Knowledge shared with the new partner could be misappropriated by opportunistic behavior.

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

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

In order to build alliance management capabilities in small companies, it is recommended that firms take the ______ approach.

Learning by doing

What are sources of value creation in a horizontal integration strategy?

Lower costs and reduction in competitive intensity.

Zoe is a manager at a large company engaged in the acquisition of a smaller company. The smaller company has operated at a loss for the last three years under three different managers, but Zoe is convinced that she can turn the company around despite the evidence to the contrary. Zoe is engaging in ______.

Managerial hubris.

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

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

Non equity alliance.

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

Non-equity alliance

Non equity alliance

Partnership based on contracts between firms.

Equity alliance

Partnership in which at least one partner takes partial ownership in other

What are common reasons a firm might pursue a merger?

Principal-agent problems. |The desire to overcome competitive disadvantage. |Superior acquisition and integration capability.

What are the components of post-formation alliance management?

Relation-specific investments. |interfirm trust. | knowledge sharing routine.

Which of the following is true of firms' acquisition and integration capabilities?

Some firms can consistently use mergers and acquisitions to increase their competitive advantage

Joint venture

Standalone organization created and owned by two or more parent companies.

In order for an alliance to qualify as ______, it must have the potential to alter a company's competitive advantage.

Strategic.

How does horizontal integration affect Porter's Five Forces for the surviving firms?

Strengthening bargaining power vis a vis suppliers and buyers. It reduces rivalry among existing firms. | It reduces the threat of entry.

Which of the following are advantages of joint ventures?

Strong ties, trust, and commitment

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 downsides of equity alliances?

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

Which of the following best exemplifies the relational view of competitive advantage?

The strategic alliance between company A and company B creates more value than either company individually.

What is a true statement about strategic alliances?

They have high failure rate

What are some advantages of strategic alliances?

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

Which of the following statements about equity alliances is true?

They require larger investments than non-equity alliances.

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

To change industry structure.

Why do incumbent companies enter into strategic alliances with startups?

To hedge against uncertainty.

Which are the three main reasons firms make acquisitions?

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

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

True

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

True

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

Trust each other

Which framework can companies use to assess whether their internal resources are superior to those of competitors in the targeted area?

VRIO Framework. |Value, rarity, imitability, and organization.

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

A firm with alliance management capability is able to effectively manage which of the following tasks?

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

What are the phases of alliance management?

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

Internal development should occur when the firm's resources are _____ to those of competitors in the targeted area.

both similar and superior

A real option gives a firm the right to continue making investments ______.

but does not obligate the firm to do so

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

change the industry structure

When competitors enter strategic alliances and become collaborators, ______ ensues and can result in learning races.

co-opetition

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

corporate venture capital

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 ______.

critical complementary assets

Marketing, manufacturing, and after-sale service are examples of ______.

critical complementary assets

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

flexibility and ease of initiation

What must strategic alliances do in order to create the foundation for a competitive advantage?

form unique resource combinations that obey the VRIO criteria

One reason why a firm might enter into a strategic alliance is to _____.

hedge against uncertainty

An unfriendly acquisition of one company of another is known as a(n) ______.

hostile takeover

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) ______.

hostile takeover

What three of the following are the primary benefits of horizontal integration?

increased differentiation. |A reduction in competitive intensity. | Lower costs

A firm should consider using mergers and acquisitions only when ______.

it is important to be extremely close to the resource partner in order to understand underlying information

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

make acquisitions

What are the two necessary conditions for successful alliance formation.

partner compatibility and partner commitment

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

What are three advantages of equity alliances?

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

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

Which of the following are the three choices in the build-borrow-or-buy framework? (Check all that apply.)

strategic alliances. | internal development. | acquisition of new resources

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

tacit knowledge

A firm should use an equity alliance, a joint venture, or an outright acquisition in order to gain use of a resource when _____

the resource is not easily traded

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

How can firms build alliance management capability?

through repeated experiences over time

Why might a firm create a joint venture when entering a new geographic market?

to adhere to local law. |to access local contacts . | to access local expertise

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 to pursue horizontal integration as a corporate strategy

to provide such benefits as complementary products in their offering. | to lower costs. | to enhance their economic value creation.