Corporate Strategy : Strategic Alliances, Mergers, & Acquisitions

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 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.

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

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

Which statements about joint ventures are true?

They are the least common of the three types of strategic alliances. They involve the sharing of both explicit and tacit knowledge.

Which of the following statements about equity alliances is true?

They require larger investments than non-equity alliances.

Sources of COSTS in a horizontal integration strategy are ______.

reduced flexibility integration failure

Horizontal integration can reduce ______.

the threat of entry

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

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

acquisitions

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

hedge against uncertainty

What is an important aspect of alliance success?

inter-organizational trust

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

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

False

Which of the following are true of alliance management capability?

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

What is a true statement about strategic alliances?

They have a high failure rate.

On average, mergers and acquisitions ______ shareholder value.

destroy

Which of the following is likely not a reason Disney was eager to enter its initial strategic alliance with Pixar?

enter new markets

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

equity alliance

What are the three mechanisms that alliances can be governed by?

equity alliances joint ventures non-equity alliances

Why does Facebook acquire startups?

to preempt rivals

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

It allows Lyft to more effectively compete against Uber.

What is the main goal of corporate venture capital investments?

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

Which are the three main reasons firms make acquisitions?

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

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 of tacit knowledge?

It can only be acquired through actively participating in the process

What are some advantages of strategic alliances?

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

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

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

a reduction in competitive intensity lower costs increased differentiation

Disney appears to have made acquisitions mainly in pursuit of

access to new markets and distribution channels and access to a new capability or competency are both correct.

Which of the following terms refers to when one firm purchases or takes over another firm?

acquisition

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

at the corporate level

Disney's current relationships with Pixar, Marvel Entertainment, and Maker Studios represent the implementation of which corporate strategy?

backward vertical integration

Disney's decision to launch two new streaming services is an example of which type of corporate diversification strategy?

build new core competencies to create and compete in markets of the future

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

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

change the industry structure

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

corporate venture capital

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

flexibility and ease of initiation

Horizontal integration can ______.

help a firm improve its strategic position in an industry

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

horizontal integration

Which of the following are benefits of a horizontal integration?

increased differentiation reduced competition

Which of the following are the three choices in the build-borrow-or-buy framework?

internal development acquisition of new resources strategic alliances

Which of the following forms of agreement do non-equity alliances typically take?

licensing supply distribution

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

make acquisitions

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

non-equity alliance

What are three options used by executives to drive firm growth?

organic growth acquisitions alliances

What are the two necessary conditions for successful alliance formation?

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

What are the phases of alliance management?

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

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

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

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

real-options perspective

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

strategic

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

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

Which of the following are reasons why firms enter into strategic alliances?

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

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

trust each other