Sample Questions Chapter 9 FINAL
Which of the following best describes a cross-border strategic alliance?
A cooperative strategy where firms from different countries combine resources
Which of the following best defines a cooperative strategy?
A strategy where a firm collaborates with other firms to achieve a shared objective.
Which of the following statements is true?
As many as 50 percent of cooperative strategies fail.
BPM Corp. is a manufacturer of radar systems for regional-sized jet aircraft. The company has announced plans to enter into a joint venture with J3 Composites, a producer of advanced composite materials. The announced venture will produce a new, combined product consisting of the radar unit and protective composite cover. Which of the following ownership arrangements would be MOST typical for a joint venture?
BPM and J3 will both own 50 percent of the venture, and a new company will be formed.
GM China and SAIC Motor Corp. are managing their joint venture through formal contractual relationships. Which approach to managing cooperative strategies does this exemplify?
Cost minimization approach
Offshore Oil Exploration Partners (OOEP) has entered into a cooperative strategy with Malay Petroleum. The resulting documents are long, formal, and detailed. They specify detailed responsibilities of each partner and include methods of monitoring accounting and technical procedures. OOEP and Malay Petroleum are using which management approach?
Cost-minimization
Microsoft and Nokia formed an alliance that had hundreds of pages to specify each partner's responsibilities. In contrast, the Renault and Nissan formed an alliance that was based on trust, respect, and transparency. These are examples of which two respective approaches to managing cooperative ventures?
Cost-minimization; opportunity-maximization
What is one factor that makes cross-border strategic alliances more complex and riskier than domestic alliances?
Differences in legal and institutional characteristics across countries
Why is trust more difficult to establish in international cooperative strategies compared to domestic ones?
Differences in trade policies and cultures
Meredith Inc. is a manufacturer of art supplies. The company has announced plans to enter into an equity strategic alliance with JaZz Paper to develop a line of specialty papers for use with a line of specialty paints Meredith manufactures. Which of the following would be the MOST accurate interpretation of this announcement?
Either Meredith or JaZz will own a majority equity stake, but we do not know which one based on the announcement.
What is one benefit of using the opportunity-maximization approach to managing cooperative strategies?
Enhanced exploration of new opportunities
Which type of risk is more common when a firm misrepresents its resources in a cooperative partnership?
Failure due to misrepresentation of available resources
What is one risk associated with a cooperative strategy when the contract governing the alliance is insufficient?
Failure to address important issues as they arise
A cooperative agreement between a hotel chain and a casino operator would be viewed as a horizontal complementary strategic alliance because as separate entities, the two firms would compete for the same customers.
False
A major pharmaceutical company formed a nonequity strategic alliance with an outsourcing firm to monitor its drug safety claims. The outsourcing firm did not have the requisite knowledge to identify all possible side effects and categorize their severity. This best illustrates the risk associated with inadequate contracts.
False
Renault and Nissan Motor Company have formed a vertical complementary strategic alliance to create synergy.
False
McDonald's, Hilton International, and Subway all license their trademarks and methods to other businesses. In doing so, they rely on which type of strategy?
Franchising
Which of the following statements is false?
Franchising agreements require more trust between firms than do other cooperative strategies.
Which of the following is NOT a risk for firms engaged in cooperative strategies?
Insufficient variation in firms' core competencies
Why is trust considered important in managing cooperative strategies, even when formal contracts cannot specify all operational details?
It enhances alliance stability
Why is cooperating with other firms beneficial for a company?
It helps a company achieve strategic competitiveness and earn above-average returns.
Which of the following statements best describes a competitive advantage developed through a cooperative strategy?
It relies on the relationship that develops among collaborating partners.
Which of the following is NOT an example of cooperative behavior known to contribute to alliance success?
Maximizing cost reduction
In the opportunity-maximization approach to managing cooperative strategies, what is the focus?
Maximizing value-creating opportunities
The risks of being accused of collusion are MOST likely under which of the following types of alliance?
Nonequity-based horizontal complementary alliance
Amylin Pharmaceuticals has an alliance with Eli Lilly & Co. to produce diabetes drugs. Lilly, however, recently signed an alliance agreement with another company to also produce diabetes drugs. As a result, Amylin sued Lilly for breach of the alliance agreement. Which of the following risks of cooperative strategies is MOST likely occurring here?
Opportunistic behavior
Which approach to managing cooperative strategies requires a high level of trust between partners?
Opportunity maximization approach
In practice, the cost-minimization strategy can be more expensive than the opportunity-maximization strategy. Which of the following is a way in which the cost-minimization strategy is LESS expensive than the opportunity-maximization strategy?
Prevention of opportunistic behavior by the partner(s)
What contributes to the stability of a cooperative relationship when partners trust each other?
Reduced need for contractual control
In what areas do partners in a cross-border strategic alliance often cooperate?
Research and development
The Fiat Chrysler merger brought together two prominent automotive companies and aimed to leverage their strengths, enhance global competitiveness, and achieve synergies through shared resources and capabilities. Fiat and Chrysler cooperated to produce a Fiat-designed car in Chrysler's Illinois factory. Because it allows the firms to share resources and capabilities across multiple functions, it is considered which type of alliance?
Synergistic
The Renault Nissan alliance was one that the firms sought to create economies of scope by sharing their resources and capabilities to develop manufacturing platforms that can be used to produce cars that will be either a Renault or a Nissan. This would be considered which type of collaboration?
Synergistic alliance
For which of the following reasons are alliances in the airline industry unstable?
The alliances require cooperation among firms that must also compete with one another.
Consider the case of two smartphone manufacturers, Apple and Samsung, who are fierce competitors in the market. Despite their rivalry, they recognize that there are areas where collaboration can lead to shared advantages. These areas are that of standardization of certain technologies related to the smartphones, R&D by performing joint research, supply chain efficiency, etc. In free-market economies, who must decide how rivals can collaborate with their competitors without violating established regulations?
The government
Evaluate the risks associated with using cooperative strategies and their management.
The risks associated with cooperative strategies can be mitigated through effective management.
Analyzing the information provided, what role do complementary resources play in cooperative strategies?
They are essential for achieving the shared objective in a cooperative strategy
What might be a reason that the number of cross-border alliances are continuing to increase?
They can occur in virtually all industries.
In the Opening Case, what was the outcome of Google's cooperative strategy with Intel and TAG Heuer?
They developed technological innovations to compete in the luxury fashion industry.
Why do formal contracts and extensive monitoring systems tend to stifle partners' efforts to gain maximum value from their participation in a cooperative strategy?
They limit the exploration of new opportunities
What is the primary reason why firms use cooperative strategies?
To achieve a shared objective that benefits all partners
Why is it important to have full awareness of a partner's expectations in a cooperative strategy?
To prevent opportunistic behaviors
Why do firms use cross-border alliances in countries with strong local ownership policies?
To take advantage of governmental preferences for local companies
Which approach to managing cooperative strategies is more efficient in influencing alliance partners' behaviors?
Trust-based approach
A manufacturer of specialty jams and jellies has decided to ally itself with an orchard and vineyard growing rare strains of fruit. This is which type of strategy?
Vertical complementary
Greentech, Inc., is a bioengineering firm specializing in food crops. It is considering a cooperative alliance with an Asian agribusiness firm, AsiaFoods, to jointly produce improved crops for the Asian market. The questions that Greentech should consider before entering this alliance include all of the following EXCEPT:
Will Greentech be able to use a cost-minimization management strategy in the AsiaFoods alliance?
In the franchising strategy, the most important competitive advantage for the franchisee is usually the franchisor's
brand name
The collaboration between Volvo Aero (a subsidiary of Sweden's AB Volvo) and U.S.-based Pratt & Whitney to produce a new jet engine would be characterized as a(n)
cross-border strategic alliance.
The three main luxury hotels in a major tourist destination keep very close track of their competitors' room pricing, restaurant offerings, tour packages, and special services, such as airport transportation and spa privileges. When one hotel makes adjustments in prices or offerings, the other hotels follow suit. It is possible that these hotels are
engaging in tacit collusion.
Legitimately, a firm may pursue an international strategic alliance for all of the following reasons EXCEPT to:
enhance the compensation packages of top managers.
A strategic alliance in which the partners own different percentages of the new company they have formed is called a(n)
equity strategic alliance
A businessperson in Atlanta who wishes to develop a luxury pet kennel approaches the owner of the highly successful Pet Resort and Day Spa in Houston to see if the owner is interested in franchising the Pet Resort brand. The Atlanta businessperson's goal is to
gain access to Pet Resort's tacit knowledge.
FrameCo, a maker of commercial greenhouses, has just extricated itself from a failing cooperative alliance with another firm. The expected synergies were never achieved, and FrameCo lost most of its investment. The top management of FrameCo should
internalize the knowledge about the successes and failures of this alliance so FrameCo can learn from the experience.
Moon Flower Cosmetics Company's executives are aware that their Asian customer base is interested in advanced skin care treatments beyond Moon Flower's traditional herbal and organic compounds. Moon Flower and a large American chemical company are in discussions to create a 50-50 partnership in a new firm, which would create skin care treatments based on innovative chemical formulations that would be marketed both in Asia and the United States. Beyond being a cross-border alliance, this partnership can be called a(n)
joint venture
In which situation is a firm at a relative disadvantage in terms of returns earned from a cooperative strategy?
When one firm makes alliance-specific investments while its partner does not
Stable alliance networks will most often
appear in mature industries where demand is relatively constant and predictable.
In the technology industry, new products and innovations are introduced at a rapid pace, and product life cycles can be relatively short due to the continuous advancements and changing consumer demands. In such an environment, no single company can possess all the necessary expertise, resources, and capabilities to develop and bring innovative products to market quickly. Dynamic alliance networks work best in industries
characterized by frequent product innovations and short product life cycles.
A strategy in which firms work together to achieve a shared objective is a
cooperative strategy.
The two basic approaches to successfully manage cooperative strategic alliances involve
cost minimization and opportunity maximization.
When using cooperative strategies, firms most frequently develop strategic alliances that
create a competitive advantage
Fujitsu Siemens Computers is a legally independent company of which Fujitsu and Siemens each own 50 percent. This is which type of collaboration and knowledge transfer?
joint venture; tacit knowledge
A collaboration between an automotive company from the US and a technology company from India occurs. Both companies decide to form an alliance to develop and produce electric vehicles (EVs) for the global market. In this alliance, the automotive company brings its expertise in vehicle design, manufacturing processes, and supply chain management, while the technology company contributes its knowledge and experience in electric powertrain technology, battery systems, and software development. The collaboration aims to leverage the strengths of each partner to create innovative and competitive EVs. Which of the following types of strategic alliance is being described and is best at passing tacit knowledge between partners?
joint ventures
DDD Partners, a U.S. business consulting firm, is considering a cooperative alliance with an Indian business consulting firm that has a wide practice in the Middle East and Asia. DDD has some European clients, but it sees the Middle East and Asia as growth opportunities. It hopes to learn how to navigate the different cultures and business practices in this part of the world from its alliance with the Indian firm. DDD's greatest risk here is that the Indian firm will
not fully share its intangible resources.
For the purpose of diversification, a corporate-level cooperative strategy may be preferable to a merger or acquisition for all of the following reasons EXCEPT:
opportunistic behaviors are less likely.
A competitive advantage developed through a cooperative strategy often is an advantage that is referred to as collaborative or
relational
Firms participate in strategic alliances for all of the following reasons EXCEPT to:
retain tight control over intangible core competencies.
In a cross-border alliance, the local partner is often a useful source of information about
sources of capital
One disadvantage of developing effective monitoring systems to manage a strategic alliance is that
spontaneous opportunities are minimized.
In some countries, the only legal way for foreign firms to invest in the country is through
strategic alliance with a local firm.
The Renault Nissan alliance was created to gain economies of scope by sharing resources and capabilities and, therefore, is an example of a
synergistic strategic alliance.
All of the following are business-level cooperative strategic alliances EXCEPT:
synergistic strategic alliances.
The fact that the prices consumers pay for branded breakfast cereals are above the prices that would exist if there were true competition suggests that the cereal manufacturers are engaging in
tacit collusion.
The primary responsibility of a franchisor, such as McDonald's or Hilton International, is to
transfer to the franchisee knowledge and skills needed to compete at the local level.
One area in which joint ventures are effective is the transfer of tacit knowledge as illustrated in the joint venture that created Shanghai GM Co.
true
The two dominant types of complementary strategic alliances are
vertical and horizontal.
