Smartbook Chapter 9

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 are true of alliance management capability? (Select all that apply.)

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

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.

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

False

What is a true statement about strategic alliances?

They have a high failure rate.

A standalone organization that two or more parent companies create and own together is a ___.

joint venture

Horizontal integration can reduce ______.

the threat of entry

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 three of the following are the primary benefits of horizontal integration? (Check all that apply.)

a reduction in competitive intensity lower costs increased differentiation

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

acquisition

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

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

borrowed

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

but does not obligate the firm to do so

How can horizontal integration increase product differentiation?

by filling the empty spaces in a firm's offerings

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

change the industry structure

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

equity alliance

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

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

horizontal integration

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

internal development acquisition of new resources strategic alliances

What are sources of value creation in a horizontal integration strategy? (Check all that apply.)

lower costs reduction in competitive intensity

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

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

Sources of COSTS in a horizontal integration strategy are ______.

reduced flexibility integration failure

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

strategic

Horizontal integration is a good option if ______.

the target firm will have more value when combined with the acquiring firm

Why do incumbent companies enter into strategic alliances with startups?

to hedge against uncertainty

Why does Facebook acquire startups?

to preempt rivals

Which are the three main reasons firms make acquisitions? (Check all that apply.)

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

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

Which of the following are reasons why firms enter into strategic alliances? (Check all that apply.)

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

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

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

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

alliance management capability

Which bodies regulate mergers and acquisitions?

European Commission Federal Trade Commission

What are downsides of equity alliances? (Check all that apply.)

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

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.

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

VRIO framework

Which of the following occurs when a targeted firm is unwillingly acquired?

a hostile takeover

What are the phases of alliance management? (Check all that apply.)

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

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

strategic alliance

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.

Which of the following is true of tacit knowledge?

It can only be acquired through actively participating in the process.

How does horizontal integration affect Porter's Five Forces for the surviving firms? (Check all that apply.)

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

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

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

What are three advantages of equity alliances? (Check all that apply.)

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

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

both similar and superior

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

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

flexibility and ease of initiation

Which of the following are advantages of joint ventures? (Check all that apply.)

commitment trust strong ties

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

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

What are the three mechanisms that alliances can be governed by? (Check all that apply.)

equity alliances non-equity alliances joint ventures

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

false

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

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

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

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

joint venture

Which of the following states that important resources and capabilities are commonly embedded in strategic alliances that cross firm boundaries?

the relational view of competitive advantage

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

Equity alliances allow for the sharing of ______, which involves information that cannot be codified for completing tasks.

tacit knowledge

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

What is the main goal of corporate venture capital investments?

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

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

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