Chapter 9

_____ are best described as equity investments by large established firms making in entrepreneurial ventures to gain access to new, and potentially disruptive, technologies. A. Corporate venture capital investments B. Greenfield ventures C. Joint ventures D. Loan sharks

A. Corporate venture capital investments

Which alliance type is the Renault-Nissan alliance, where Nissan owns 15 percent of Renault, and Renault owns 44.4 percent in Nissan? A. Equity alliance B. Non-equity alliance C. Greenfield venture D. Joint venture

A. Equity alliance

_____ are best described as situations in which both partners in a strategic alliance are motivated to form an alliance for learning, but the rate at which the firms learn may vary. A. Learning races B. Learning networks C. Learning effects D. Learning matrices

A. Learning races

PureSource Pharma Inc. recently acquired BioChem Pharmaceuticals Inc. It now sells its own products along with the products originally sold by BioChem Pharmaceuticals. As a result, PureSource Pharma's sales force will also be marketing the acquired company's products. How will this horizontal integration most likely affect PureSource Pharma? A. PureSource Pharma will lower its costs through economies of scale. B. PureSource Pharma will diminish its economic value creation. C. PureSource Pharma will increase its cost of distribution. D. PureSource Pharma will reduce the size of its sales force.

A. PureSource Pharma will lower its costs through economies of scale.

Which of the following is NOT a reason why firms enter alliances? A. To replace competitive advantage with competitive parity B. To strengthen competitive position C. To enter new markets, either in terms of geography or products and services D. To learn new capabilities

A. To replace competitive advantage with competitive parity

New United Motor Manufacturing, Inc. (NUMMI), formed between General Motors (GM) and Toyota in 1984 was the first _____ in the U.S. automobile industry. A. joint venture B. non-equity alliance C. hostile takeover D. equity alliance

A. joint venture

Disney became the world's leading media company to a large extent by pursuing a corporate strategy of _____. A. related-linked diversification B. cost-leadership C. unrelated diversification D. hostile takeovers

A. related-linked diversification This is because some, but not all, of Disney's business activities share some common resources, capabilities, and competencies.

_____ are best described as contractual alliances in which the participants regularly exchange codified knowledge. A. Cartels B. Licensing agreements C. Equity alliances D. Acquisitions

B. Licensing agreements

Which of the following is a result of horizontal integration in terms of Porter's five forces model? A. The industry structure becomes less consolidated. B. There is a reduction of excess capacity in the market. C. The industry structure becomes potentially less profitable. D. There is an increase in rivalry among existing firms.

B. There is a reduction of excess capacity in the market.

A drawback of joint ventures is that they are characterized by: A. involuntary mergers. B. double reporting lines. C. contractual agreements rather than ownership. D. weak ties between alliance partners.

B. double reporting lines. (two bosses)

_____ is best described as cooperation by competitors to achieve a strategic objective. A. Limited liability B. Proprietorship C. Co-opetition D. Commerce

C. Co-opetition

How does Kraft Foods benefit from its hostile takeover of Cadbury PLC in 2010? A. Its main strategic focus is now on the domestic market. B. It opens a market for it that is growing slowly but has high profit margins. C. It has access to convenience stores and a new distribution channel. D. It automatically gains monopoly in the chocolate-manufacturing industry.

C. It has access to convenience stores and a new distribution channel.

Which of the following is a disadvantage of equity alliances? A. They are reflective of weaker ties between firms. B. They do not permit the exchange of explicit knowledge. C. They can bring about a lack of commitment. D. They can entail significant investments.

D. They can entail significant investments.

When a firm does not have the resource required for pursuing a growth strategy, and if the resource in question is not easily tradable, the implication for the strategist is most likely to: A. borrow via a contractual agreement. B. pursue internal development. C. enter into a licensing agreement. D. consider an outright acquisition.

D. consider an outright acquisition.

A _____ is best described as an approach to strategic decision making that breaks down a larger investment decision into a set of smaller decisions that are staged sequentially over time. A. cost-leadership approach B. break-even analysis C. market risk framework D. real-options perspective

D. real-options perspective A real-options perspective to strategic decision making breaks down a larger investment decision into a set of smaller decisions that are staged sequentially over time.

In Eli Lilly's Office of Alliance Management, who is responsible for providing alliance training and development? A. The alliance champion B. The alliance leader C. The alliance manager D. The alliance boss

C. The alliance manager

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. They enable the exchange of both tacit and explicit knowledge.

In Eli Lilly's Office of Alliance Management, the alliance champion is primarily responsible for: A. making sure that an alliance fits within the firm's existing alliance portfolio and corporate-level strategy. B. providing technical expertise and knowledge needed for the specific technical area in an alliance. C. providing alliance training and development, as well as diagnostic tools. D. serving as an alliance process resource and business integrator between the two alliance partners.

A. making sure that an alliance fits within the firm's existing alliance portfolio and corporate-level strategy.

The Hershey Company, the largest U.S. chocolate manufacturer, decided to enter the Chinese market in 2013 because: A. the U.S. population was growing slowly and becoming more health conscious. B. its strategic position in the U.S. market was well protected through high entry barriers. C. this would help the company gain access to large cocoa plantations in China. D. Hershey's main strategic focus was on product and market diversification and not on the domestic market.

A. the U.S. population was growing slowly and becoming more health conscious.

In a strategic alliance, the firm that learns faster: A. has the tendency to lose its competitive advantage. B. has the incentive to reduce its knowledge sharing. C. has the tendency to move up a learning curve. D. has the incentive to invest further in the alliance.

B. Has the incentive to reduce its knowledge sharing. The firm that learns faster and accomplishes its goal more quickly has an incentive to exit the alliance or, at a minimum, to reduce its knowledge sharing.

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. It increases the potential for legal repercussions. Disadvantages of horizontal integration include reduced flexibility and increased potential for legal repercussions

In Eli Lilly's Office of Alliance Management, who is responsible for providing the technical expertise and knowledge needed for the specific technical area and the day-to-day management of the alliance? A. The alliance champion B. The alliance leader C. The alliance manager D. The alliance boss

B. The alliance leader

What does the relational view of competitive advantage propose? A. A strategic alliance has the potential to help a firm gain a competitive advantage when it joins together resources that are common, inexpensive, and easy to imitate. B. The locus of competitive advantage is often not found within the individual firm but within a strategic partnership. C. Strategic alliances fail to provide competitive advantage when they involve joining different parts of a firm's value chain, such as R&D and marketing. D. A firm has a competitive advantage over its rivals when it can provide goods or services similar to the competitors' at a higher price.

B. The locus of competitive advantage is often not found within the individual firm but within a strategic partnership.

Fervana Autos Inc., a large automobile company, made an initial small investment in a startup company that was developing a solar-powered car. This gave Fervana Autos controlling interests in the startup company. However, Fervana Autos had no obligations to make continued investments in the experiments of the startup company. It could invest in small amounts depending on the new product's success at each stage of its development. If the product proved to be successful, Fervana Autos would have the right to buyout the startup 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. a real-options perspective

The success of the Pixar-Disney strategic alliance demonstrated that: A. Disney was in desperate need of Pixar's graphic display systems. B. the two entities' complementary assets matched. C. it was easier for the alliance partners to reduce the value gap created. D. the companies were effectively managing an unrelated diversification strategy.

B. the two entities' complementary assets matched.

How did the recent horizontal integration in the U.S. airline industry provide benefits to the surviving carriers? A. By facilitating excess capacity in the industry B. By preventing mergers from taking place C. By lowering competitive intensity in the industry overall D. By increasing the threat of entry in the industry

C. By lowering competitive intensity in the industry overall

Titan Autos Inc. merged with its competitor, Cadvia Autos Inc. This allowed Titan Autos to use its technological competencies along with Cadvia Autos's marketing capabilities to capture a larger market share than what the two entities individually held. What does this scenario best illustrate? A. Backward integration B. Forward integration C. Horizontal integration D. Vertical integration

C. Horizontal integration Horizontal integration is the process of merging with a competitor at the same stage of the value chain.

Which of the following statements is NOT true of tacit knowledge? A. It is concerned with knowing how to do a certain task. B. It is knowledge that cannot be easily codified. C. It is regularly shared between partners in a non-equity alliance. D. It is acquired only through actively participating in the process.

C. It is regularly shared between partners in a non-equity alliance. Equity alliances allow for the sharing of tacit knowledge—knowledge that cannot be codified. Tacit knowledge is concerned with knowing how to do a certain task. It can be acquired only through actively participating in the process. In an equity alliance, therefore, the partners frequently exchange personnel to make the acquisition of tacit knowledge possible

FlyOne Airway's decision to acquire TrueGear Fuels Inc. proved to be ill-fated because its managers had overestimated their abilities and skills. They believed that they had the skills to manage such diversified businesses and create additional shareholder value. However, the acquisition failed to create the anticipated synergies because the managers' capabilities were restricted to the airlines industry. What does this scenario best illustrate? A. Managerial empathy B. Managerial feasibility C. Managerial hubris D. Managerial capitalism

C. Managerial hubris The scenario best illustrates managerial hubris. Managers of the acquiring company convince themselves that they are able to manage the business of the target company more effectively and, therefore, create additional shareholder value. This justification is often used for an unrelated diversification strategy. This can lead to managerial hubris

Which of the following is an advantage of equity alliances when compared to non-equity 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. They produce stronger ties between partners.

Google, the leader in online search and advertisement, engaged in a number of smaller acquisitions of tech ventures. It did this in order to: A. imitate the actions of its competitors like Apple and Facebook. B. solve its principal-agent problems. C. fill gaps in its competency lineup. D. expand through unrelated diversification.

C. fill gaps in its competency lineup.

A(n) _____ occurs when firms enter into a partnership based on contractual agreements, which results in vertical strategic alliances, that connect different parts of the industry value chain. A. equity alliance B. joint venture C. non-equity alliance D. greenfield venture

C. non-equity alliance The most common type of alliance is a non-equity alliance, which is based on contracts between firms. These contractual agreements are vertical strategic alliances, connecting different parts of the industry value

The _____ is a strategic management framework that proposes that critical resources and capabilities frequently are embedded in strategic alliances that span firm boundaries. A. real-options perspective B. stakeholder strategy C. relational view of competitive advantage D. non-differentiation strategy

C. relational view of competitive advantage

It is necessary for government authorities such as the Federal Trade Commission (FTC) and/or the European Commission to approve any large horizontal integration activity because: A. the horizontal integration activity changes the industry structure from oligopolistic to monopolistically competitive. B. the surviving firms will need to be protected against the increasing bargaining power of the suppliers. C. the horizontal integration activity has the potential to reduce competitive intensity in an industry. D. the surviving firms will need protection against the relaxed entry barriers.

C. the horizontal integration activity has the potential to reduce competitive intensity in an industry. Because of the potential to reduce competitive intensity in an industry, government authorities such as the FTC and/or the European Commission usually must approve any large horizontal integration activity.

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 non-price to price competition D. By strengthening the bargaining power of the surviving firms vis-à-vis suppliers and buyers

D. By strengthening the bargaining power of the surviving firms vis-à-vis suppliers and buyers

Which of the following is an ineffective practice in alliance management? A. Coordinating a firm's portfolio of alliances B. Establishing knowledge-sharing routines between alliance partners C. Developing relational capabilities to manage mergers and acquisitions D. Focusing on developing an alliance-management capability in isolation

D. Focusing on developing an alliance-management capability in isolation

In Eli Lilly's Office of Alliance Management, the _____ is a senior, corporate-level executive responsible for high-level support and oversight. A. alliance manager B. alliance leader C. alliance regulator D. alliance champion

D. alliance champion

Equity alliances are less common than non-equity alliances because they: A. depend on contractual agreements. B. produce weaker ties between partners. C. fail to facilitate the transfer of tacit knowledge. D. often require larger investments.

D. often require larger investments.