chp 9 policies

Johnson is an executive vice president at Conecom Hardware. He researches a proposal by a larger company, Openlane Hardware, to combine the two companies. By analyzing past performance, conducting focus groups, and interviewing Openlane employees, Johnson concludes that Openlane has poor profit margins, sells shoddy merchandise, and treats customers poorly. What actions should Johnson and Conecom Hardware take? A) Turn down the acquisition offer and prepare to resist a hostile takeover. B) Attempt a friendly merger and use managerial hubris to improve results at Openlane. C) Welcome the acquisition and use knowledge transfer to impart Conecom Hardware's management practices. D) Do nothing; the two companies cannot combine without Conecom Hardware's explicit consent

A

Rosa is a senior manager at Veridian Dynamics, a motorcycle manufacturer. Veridian Dynamics has entered an equity alliance with Parker Industries, a moped manufacturer. "Don't worry, Rosa," her counterpart at Parker Industries tells her. "I'm going to send you all our guidelines and documentation for manufacturing catalytic converters, and then you'll be all set."What else should Rosa request from Parker Industries? A) personnel exchanges to share tacit knowledge B) a gradual change from an equity alliance to a non equity alliance to show greater commitment C) nothing, because the information transfer described is complete and appropriate D) a licensing agreement so that Veridian Dynamics can exchange codified knowledge with Supremo

A

There are several mechanisms in which strategic alliance can be governed. Which of the following below is not one of those ways? A) acquisitions B) non equity alliances that contain contractual agreements C) equity alliances D) joint ventures

A

Delos Autos Inc., a large automobile company, made an initial small investment in a start-up company that was developing a solar-powered car. This gave Delos Autos controlling interests in the start-up company. However, Delos Autos had no obligations to make continued investments in the experiments of the start-up company. It could invest small amounts depending on the new product's success at each stage of its development. If the product proved to be successful, Delos Autos would have the right to buy out the start-up company. This approach to strategic alliance is referred to as A) a break-even analysis. B) a real-options perspective. C) credible commitment. D) transaction cost economics

B

How did the strategic alliance between HP and DreamWorks Animation SKG affect HP? A) It helped HP pursue a taper integration strategy. B) It enabled HP to compete head on with Cisco's video conferencing solution. C) It resulted in depreciation of HP's shareholder value. D) It failed because HP lacked the expertise in selecting and integrating technology acquisitions

B

Jennifer is the CEO of JustFixIt Inc., a firm that merges technology with commercial hardware. She has been struggling with the decision to allocate her resources for the development of a new system or go to the market and search for an already established system.The Board of Directors for JustFixIt Inc. suggested that enter a contractual agreement with a partner. This scenario best illustrates the concept of A) buy-sell-or-trade framework. B) build-borrow-or-buy framework. C) the horizontal and vertical integration frameworks. D) the strategic alliance framework

B

Tom is the CEO of Endless Possibilities Inc. and proudly boasts his firm'sslogan,WeGuarantee Success! However, Tom's constituents presented him with data on their latest project which suggests that they should not move forward. Tom, undeterred with this data,decides that he will still accept the project because he believes that he can't lose. This is a classic example of A) CEO dedication. B) managerial hubris. C) strategic intent. D) cost benefit analysis

B

Which of the following summarizes the benefit of the strategic alliance between HP and DreamWorks? A) HP and DreamWorks each strengthened their separate markets without impinging on each other's markets. B) Both HP and DreamWorks were able to enter a new market that they would not have been able to pursue alone. C) HP was able to enter a new market, and DreamWorks was able to strengthen its old market. D) DreamWorks was able to enter a new market, and HP was able to strengthen its old market.

B

How has Kraft Foods benefited from its hostile takeover of Cadbury PLC? A) Its main strategic focus is now on the domestic market. B) It has opened a market that is growing slowly but has high profit margins. C) It has access to convenience stores and a new distribution channel. D) It gained a monopoly in the chocolate-manufacturing industry

C

InGen Pharmaceuticals Inc., Desktop Pharma Inc., and WEN Pharma Inc. are three rival firms who have set up an alliance to conduct research and find a cure for cancer. They have made almost equal contributions to the research, and they also share their expertise with one another. However, the three firms will continue to behave as competitors in markets for other drugs and vaccines. What is this arrangement best referred to as? A) takeover B) buyout C) co-opetition D) acquisition

C

Several drawbacks exist when it comes to horizontal integration. Which of the following below is not one of the drawbacks? A) the possibility for legal repercussions from the FTC B) integration failure C) higher costs D) reduced flexibility

C (lower costs would be a benefit in horizontal integration)

Which of the following best illustrates a merger between the two companies Scotfind Inc.and Inity Inc.? A) Scotfind Inc. purchases Inity Inc. for $80 billion despite Inity Inc. being against the purchase. B) Scotfind Inc. and Inity Inc. join together to form a third new entity, while they also operate separately. C) Scotfind Inc. outsources a few of its business activities to Inity Inc. for competitive advantage. D) Scotfind Inc. and Inity Inc. join together to form a single new company called ScotfindInity Inc

D

to be a source of competitive advantage, the partnership has to create

VRIO resource combinations

purchase of one company by another, can be friendly or not, considered a hostile takeover when target firm doesn't wish to be acquired

acquisition

strengthen competitive position, enter new markets, hedge against uncertainty, access critical complementary resources, learn new capabilities

alliance formation reasons

reduction in competitive intensity, lower costs, increased differentiation

benefits of horizontal integration

external growth through a contract/strategic alliance

borrow

internal organic growth through development

build

how firms achieve growth

build, borrow, buy

provides a conceptual model that aids strategic leaders in deciding whether to pursue internal development, enter a contractual arrangement or strategic alliance , or acquire new resources, capabilities, and competencies

build-borrow-or-buy framework

external growth through acquiring new resources, capabilities, competencies

buy

equity alliances, joint ventures, enables resource borrowing

closeness

how close do you need to be to your external resource partner?

closeness

cooperation by competitors to achieve a strategic objective

co-opetition

one partner takes partial ownership in the other

equity alliances

contractual agreement, equity alliances, joint venture

governance mechanisms

the process of merging with a competitor, occurs at the same stage of value chain

horizontal integration

conditions are low relevancy, low tradability, high need for closesness

integration

how well can you integrate the targeted firm should you determine to acquire?

integration

critical dimension of alliance sucess

inter-organizational trust

a standalone organization, jointly owned by 2 or more companies

joint ventures

a form of self-delusion, may lead to ill-fated business deals

managerial hubris

joining of 2 independent companies, forms a combined entity, tends to be friendly

merger

- Do not create competitive advantage. - Do not realize anticipated synergies. - Result in destroyed shareholder value.

mergers and acquisitions

partnerships based on contracts

non-equity alliances

strategic alliances can be governed by

non-equity alliances, equity alliances, joint ventures

managers may have personal incentives to build large empire, recieve prestige, power, money, managerial hubris

principal-agent problems

allows a firm to obtain additional information at predetermined stages, allows the firm to buy timeuntil sufficient information for a go versus no-go decision is revealed

real-options perspective

similar to those the firm needs to develop, superior to those of competitors in the targeted area

relevance

How relevant are the firm's existing internal resources to solving the resource gap

relevancy

main issues in the build-borrow-buy framework

relevancy, tradability, closeness, integration

voluntary arrangement between firms

strategic alliances

equity alliances allow for this, concerns knowing how to do a certain task, partners frequently exchange personnel

tacit knowledge

How tradeable are the targeted resources that may be available externally?

tradability

transfer ownership, allow use of the resource

tradability

principal agent problems, desire to overcome competitive disadvantage, superior acquisition and integration capability

why mergers take place