MGMT 498 SB Assignment Chapter 9

which bodies regulate mergers and acquisitions?

European commission federal trade commission

a standalone organization that two or more parent companies create and own together is a ____

Joint venture

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

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

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.

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

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

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

VRIO framework

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

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

a relational capability

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

acquisition

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

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

at the corporate level

internal development should occur when the firm's resources are ____ to those of competitors in the targeted area

both similar and superior

what are the components of post-formation alliance management?

build inter-firm trust establish knowledge-sharing routines make relation-specific investments

a real option gives a firm the right to continue making investments _____

but does not obligate the firm to do so

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

how well firms in an alliance fit together culturally is referred to as partner

compatibility

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

corporate venture capital

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 costs

on average, mergers and acquisitions _____ shareholder value

destroy

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

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

flexibility and ease of initiation

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

when two competitors merge, leading to industry consolidation, they are engaging in ____

horizontal integration

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

increased differentiation a reduction in competitive intensity lower costs

which of the following are benefits of a horizontal integration?

increased differentiation reduced competition

horizontal integration through mergers and acquisitions can create costs. which of the following are sources of such costs?

increased potential for legal repercussions reduced flexibility

what is an important aspect of alliance success?

inter-organizational trust

which of the following is true of tacit knowledge?

is can only be acquired through actively participating in the process

how does lyft benefit from its strategic alliance with GM and Waymo?

it allows lyft to more effectively compete against Uber

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

how does horizontal integration affect porter's five forces for the surviving firms?

it reduces the threat of entry it reduces rivalry among existing firms

the three mechanisms to govern alliances are non-equity alliances, equity alliances, and ____

joint venture

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

knowledge shared with the new partner could be misappropriated by opportunistic behavior

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

learning by doing

which of the following forms of agreement do non-equity alliances typically take? (check all that apply)

licensing supply distribution

When managers of acquiring companies incorrectly convince themselves that they are able to manage the business of the target company more effectively than its current managers, they are engaging in ______.

managerial hubris

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

non-equity alliance

the most common type of alliance is a(n)____

non-equity alliance

match the type of alliance with its definition

non-equity alliance: partnership based on contracts between firms equity alliance: partnership in which at least one partner takes partial ownership in the other joint venture: standalone organization created and owned by two or more parent companies

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?

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

what are three advantages of equity alliances?

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

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

real option perspective

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

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

strategic alliance

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 downsides of equity alliances?

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

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

what is a true statement about strategic alliances?

they have a high failure rate

select all that apply what are some advantages of strategic alliances?

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 are true?

they require larger investments than non-equity alliances

How can firms build alliance management capability?

through repeated experiences over time

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

why do incumbent companies enter into strategic alliances with startups?

to hedge against uncertainty

What are common reasons a firm might pursue a merger? (Check all that apply.)

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

why does facebook acquire startups?

to preempt rivals

which are the three main reasons firms make acquisitions?

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

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: a horizontal integration strategy leads to industry consolidation

true

which of the following are advantages of joint venture?

trust strong ties commitment

if an alliance between two firms succeeds, it is likely that the firms in the alliance

trust eachother

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