MGT 301 CH. 9
The downside of equity alliances is A) the weaker ties and reduced trust between partners. B) the amount of investment that can be involved. C) that the alliances cannot be abandoned if not promising. D) that they are not useful stepping-stones toward full integration of the partner firms.
B
What causes the winner's curse? A) buying a firm with principal-agent problems B) overpaying for an acquisition C) buying a firm with a competitive disadvantage D) underpaying for an acquisition
B
Tyrell Corporation, a manufacturer of smartphones, has entered into a 15-year partnership with a software company to develop sophisticated operating systems and innovative mobile applications for its phones. This would mean that both the companies will have to mutually share their resources, knowledge, and capabilities to develop a superior product. What is the relationship between Tyrell Corporation and the software company best referred to as in this scenario? A) an acquisition B) a strategic alliance C) a leveraged buyout D) a proprietorship
B
What is the main reason that most mergers and acquisitions negatively affect shareholder value? A) The entire market becomes an oligopoly or a monopoly. B) Promised synergies never take place. C) Market conditions change too quickly. D) Companies that resist acquisitions are subject to the "winner's curse."
B
A candy company called Blackzim Inc. forms an agreement with another candy company called Streethex Inc. Through this agreement, Blackzim owns 30 percent of Streethex. However, Streethex does not own any part of Blackzim. This type of agreement is called a(n) A) nonequity alliance. B) equity alliance. C) joint venture. D) capital venture.
B
Which of the following is true of acquisitions? A) They can be friendly or hostile. B) They can occur only when the involved entities are of comparable size. C) In acquisitions, two independent companies join to form a separate third entity. D) Acquisitions increase the competitive intensity in an industry.
A
Several notable firms like Eli Lilly, HP, Procter & Gamble, and IBM each wish to become the alliance "partner of choice" for small technology ventures, colleges, and inventors. They each know that ________ is a necessary and critical element for an alliance to be a success. A) sharing explicit knowledge B) building interorganizational trust C) a hostile takeover D) partner implementation
B
Which of the following is an advantage of equity alliances when compared to nonequity alliances? A) They are more flexible and easy to initiate and terminate. B) They require smaller capital investments. C) They produce stronger ties between partners .D) They are based on contracts rather than ownership.
C
Because strategic alliances rarely work as well as managers expect they will, why do companies continue to go through with them? A) Recent advances in management science have greatly improved the success rate of strategic alliances. B) Many owners, managers, and business analysts believe they are essential to survive in an industry. C) Government entities such as the Federal Trade Commission or the European Union sometimes force companies into strategic alliances. D) These alliances have an excellent record of success if managers have enough confidence in the outcome.
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
What is horizontal integration? A) the process of merging with a competitor at a different stage of the value chain B) the process of merging with a competitor at the same stage of the value chain C) the process of acquiring a competitor at a higher stage of the value chain D) the process of acquiring a competitor at a lower stage of the value chain
B
Which of the following is a disadvantage of a horizontal integration corporate strategy? A) It increases competitive intensity within an industry. B) It increases the potential for legal repercussions. C) It increases the costs associated with increasing value. D) It increases the threat of new entrants in an industry.
B
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
Which of the following scenarios best illustrates horizontal integration? A) Silis Inc. enters into a licensing contract with a distributor in a new international market. B) Silis Inc. acquires a component parts manufacturer who previously supplied to Silis' competitor. C) Silis Inc. sets up its own distribution channel and retail stores. D) Siliss Inc. joins with Cancity Inc., one of its direct competitors.
D
Horizontal integration through M&A can help firms strengthen their competitive position by increasing the differentiation of their product and service offerings.
true
If two large movie theater chains decide to merge, the result is likely a horizontal integration that creates a more favorable industry structure by decreasing competition.
true
Companies must evaluate the relevancy of their internal resources. This happens in two ways: they test whether resources are (1) similar to those the firm needs to develop and (2) superior to those of competitors in the targeted area. Which of the following is the best way in which firms assess the second test? A) Firms can apply the VRIO framework for the second test. B) Firms can implement various financial metrics like NPV and IRR. C) Firms can employ external analysis tool like PESTEL and Porters Five Forces. D) Firms can use an international framework to determine global relevancy.
A
Grace wants to form a voluntary arrangement with another firm in order to gain more flexibility in her supply chain, complementarity to a few of her support activities via her value chain, and strengthen her firm's overall competitive position. Grace is looking for a simple and common type of alliances, like A) a nonequity alliance. B) an equity alliance. C) a joint venture .D) a merger.
A
A voluntary arrangement between firms that involves the sharing of knowledge, resources, and capabilities with the intent of developing processes, products, or services is best described as a A) proprietorship. B) cooperative. C) strategic alliance. D) leveraged buyout.
C
In a nonequity alliance, which of the following types of information would firms most likely share? A) a manager's knowledge related to solving nonroutine problems B) a top-level manager's experience related to making strategic decisions C) the documented information about the material composition of a product D) the employees' entrepreneurial skills
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
Victoria's Jewelry Inc. is considering a takeover of its competitor, Ace Diamond LLC. In general, Victoria's should go ahead with the acquisition as long as Ace Diamond is more valuable as a continued standalone company than it would be inside Victoria's.
false
When deciding whether to build, borrow, or buy as a means of growth, firms no longer need to consider the need for physical closeness to their resource partners.
false
A company that wants to enter a new geographic market within China or Saudi Arabia should avoid joint ventures with companies that are based in that country. Partnering with a foreign entity props up that entity's business rather than weakening it through competition.
false
Even if a merger may not increase shareholder value as planned, it is often a wise idea to champion it so that managers will have the greater opportunities of working at an expanding company.
false
Firms tend to share only explicit knowledge in an equity alliance.
false
In terms of the build-borrow-or-buy framework, a firm's internal resources are considered to be relevant when they are A) similar to those that need to be developed and superior to those of competitors in the targeted area. B) similar to those that need to be developed and inferior to those of competitors in the targeted area. C) different from those that need to be developed and superior to those of competitors in the targeted area. D) different from those that need to be developed and inferior to those of competitors in the targeted area.
A
NoRu Inc. is a publicly traded firm that does not wish to be acquired by FRESHPoP Corporation, a much larger publicly traded firm, who is planning an acquisition of NoRu Inc. This is an example of a A) hostile takeover. B) friendly takeover. C) joint venture. D) strategic alliance.
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) nonequity alliances that contain contractual agreements C) equity alliances D) joint ventures
A
When does a merger between companies typically occur? A) when two firms of comparable size join to form a combined entity B) when large, incumbent firms buy start-up companies C) when a target firm does not want to be acquired D) when two or more firms enter a temporary vertical strategic alliance
A
Which of the following is a common drawback of a nonequity alliance? A) lack of trust between partners B) difficulty initiating the contract C) difficulty terminating the contract D) lack of flexibility for the partners
A
Which of the following statements is true of joint ventures? A) They enable the exchange of both tacit and explicit knowledge. B) They reduce the possibilities of trust and commitment. C) They are characterized by single reporting lines. D) They cannot entail long negotiations.
A
A drawback involved in using cross-border strategic alliances to enter new foreign markets is that A) the foreign firm will need to make larger investments when compared to entering the new market on its own. B) some of the firm's proprietary know-how may be appropriated by the foreign partner. C) all potential business risks in the new market will have to be faced alone by the foreign firm. D) the shareholder value of the foreign partner will decline drastically.
B
Dana wishes to strengthen her firm's marketing department by partnering with a large marketing firm that can complement her existing value chain. However, she fears potential legal repercussions including potential lawsuits filed by U.S. federal agencies such as the Federal Trade Commission (FTC). Which of the following strategic options should Dana pursue? A) Dana should implement green field operations with the marketing firm to strengthen her interanion reach. B) Dana should consider forming a strategic alliance with the marketing firm. C) Dana should move forward with a hostile takeover of the marketing firm. D) Dana should purchase the marketing firm outright via an acquisition.
B
Which of the following statements is true of an equity alliance? A) An equity alliance is based on contractual agreements rather than partial ownership. B) In an equity alliance, the partners frequently exchange personnel to make the acquisition of tacit knowledge possible. C) In an equity alliance, a standalone organization is created that is jointly owned by two or more parent companies. D) An equity alliance creates weaker ties between the alliance partners when compared to a nonequity alliance.
B
The Konex Hotel Group purchased Green-Plus Hotels for an estimated value of $120 billion. All the hotels previously owned by Green-Plus Hotels are now managed by the Konex Hotel Group and are known as Konex hotels. What does this scenario best illustrate? A) a merger B) a joint venture C) an acquisition D) an equity alliance
C
Which of the following statements is true of explicit knowledge? A) Explicit knowledge is about knowing how to do a certain task. B) Explicit knowledge is knowledge that cannot be codified .C) Explicit knowledge is shared in nonequity alliance firms. D) Equity knowledge is acquired only through actively participating in a process.
C
om Terry is the CEO of BuildIt.com but wants a physical retail presence. In order to accomplish this, Tom formed a joint venture with a major real estate tycoon who has a significant foothold in the commercial property sector. This venture will require exchanging more than just codified information; as such, Tom should expect to share A) his knowledge of financial markets. B) his firm's supply chain. C) both tacit and explicit knowledge. D) only explicit knowledge.
C
How does horizontal integration within an industry affect the surviving firms? A) by increasing the threat the surviving firms will face from new entrants B) by strengthening the rivalry among existing firms C) by requiring the surviving firms to shift their focus from nonprice to price competition D) by strengthening the bargaining power of the surviving firms vis-à-vis suppliers and buyers
D
Which of the following accurately describes a common difference between a merger and an acquisition? A) A merger tends to include mostly small firms; an acquisition can often involve large firms. B) A merger involves the combination of three or more firms; an acquisition involved the combination of two firms. C) A merger involves firms of different size; an acquisition involved firms of the same size. D) A merger tends to be friendly; an acquisition can be friendly or unfriendly.
D
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
________ enables firms to increase their organizational boundaries because the number of competitors decreases. This is demonstrated through the ________ model. A) Vertical integration; horizontal integration B) Horizontal integration; vertical integration C) Vertical integration; Porter's Five Forces D) Horizontal integration; structure-conduct-performance
D
In general, it is short-sighted to acquire companies as a defensive move to prevent rival organizations from gaining access to certain patents, technology, or customer bases.
false
Organizations seeking strategic alliances often pursue nonequity alliances because they are the easiest to create and to sever. However, the short duration of these alliances often means there is little trust or commitment on either side.
true
