Chapter 9

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?

PureSource Pharma will lower its costs through economies of scale

What does the relational view of competitive advantage propose?

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

Which of the following is a result of horizontal integration in terms of Porter's five forces model?

There is a reduction of excess capacity in the market

Which of the following is a disadvantage of equity alliances?

They can entail significant investments.

Which of the following statements is true of joint ventures?

They enable the exchange of both tacit and explicit knowledge.

Which of the following is a drawback of joint ventures?

They necessitate the sharing of rewards between the partners.

Which of the following aspects of alliance management capability is paired with partner selection?

alliance formation

Which of the following is the best definition of a complementary asset?

an asset a firm needs to complete the value chain from upstream innovation to downstream commercialization

When entering a foreign market, it is advisable for a new venture that has a core competency only in R&D to form a strategic alliance with a local partner because

building downstream complementary assets can be expensive and time-consuming.

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

consider an outright acquisition.

Horizontal integration through mergers and acquisitions can help firms strengthen their competitive positions by increasing

differentiation.

Which of the following is an ineffective practice in alliance management?

focusing on developing an alliance-management capability in isolation

EveningStar Inc. and The Luxur Group have together established The Luxur Star Group of hotels. EveningStar owns 49 percent and The Luxur Group has a 51 percent share in The Luxur Star Group of hotels. However, the management of The Luxur Star Group of hotels is separate from its parent companies. What alliance type does this scenario best illustrate?

joint venture

When entering new geographic markets, some governments, such as those of Saudi Arabia and China, require that foreign firms have a local

joint venture partner.

There is a reduction of excess capacity in the market

the horizontal integration activity has the potential to reduce competitive intensity in an industry.

Why did incumbent pharmaceutical firms enter into hundreds of strategic alliances with biotech start-ups?

to make small-scale investments in ventures poised to disrupt existing market economics

In 1984, GM and Toyota formed a joint venture called New United Motor Manufacturing Inc. Each partner was motivated to learn new capabilities. This joint venture is an example of

using co-opetition.