MAN4720 CH 9 Quiz Questions

A partnership that is based on contracts between companies is referred to as a(n) ______. - non-equity alliance - allowance alliance - diversification - wholly owned subsidiary

Non-equity alliance

In order to build alliance management capabilities in small companies, it is recommended that firms take the ______ approach. - "learning-by-doing" - "necessary conglomerate" - "comprehensive integrated" - "tacit knowledge"

"learning-by-doing"

How do mergers and acquisitions differ? - A merger is when two firms are forced to join together; an acquisition is when two firms join willingly - A merger describes the joining of two independent companies, while an acquisition describes the purchase or takeover of a firm - A merger is when two firms join together; an acquisition is when more than two firms join together - A merger describes the domestic takeover of a firm, while an acquisition describes the international takeover of a firm

- A merger describes the joining of two independent companies, while an acquisition describes the purchase or takeover of a firm

Select all that apply What are downsides of equity alliances? (Check all that apply.) - The amount of investment involved - The time and effort for assembling the partnership - Low levels of trust - Their resulting relatively weak ties

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

Select all that apply What are common reasons a firm might pursue a merger? (Check all that apply.) - To increase strategic alliances in secondary markets - To overcome competitive disadvantage - To gain superior acquisition and integration capability - To address principal-agent problems

- To overcome competitive disadvantage - To gain superior acquisition and integration capability - To address principal-agent problems

Select all that apply A firm with alliance management capability is able to effectively manage which of the following tasks? (Check all that apply.) - alliance design and governance - purchase of the alliance partner - partner selection and alliance partner - partner and alliance formation - post-formation alliance management

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

Select all that apply Sources of COSTS in a horizontal integration strategy are ______. - integration failure - reduced flexibility - displaced competitive intensity - reduced potential for legal repercussions

- integration failure - reduced flexibility

Select all that apply What are the three mechanisms that alliances can be governed by? (Check all that apply.) - non-equity alliances - equity alliances - upstream alliance - joint ventures - downstream alliance

- non-equity alliances - equity alliances - joint ventures

Select all that apply What are sources of value creation in a horizontal integration strategy? (Check all that apply.) - restricted access to suppliers and distribution channels - reduction in competitive intensity - decreased differentiation - lower costs

- reduction in competitive intensity - lower costs

Select all that apply Which of the following are advantages of joint ventures? (Check all that apply.) - strong ties - managerial efficiency - commitment - trust - parental control

- strong ties - commitment - trust

Select all that apply Which of the following forms of agreement do non-equity alliances typically take? (Check all that apply.) - supply - distribution - innovation - licensing - marketing

- supply - distribution - licensing

Why might a firm create a joint venture when entering a new geographic market? - to access local contacts - to access local expertise - to adhere to domestic law - to adhere to local law

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

The management at Fast Autos Inc. and All Start Automobiles Inc. realized that by combining the two entities, the stakeholders of both the companies would benefit. Their core competencies would act as complementary assets to each other. Consequently, All Start Automobiles joined with FastAutos to form a combined entity called Just All Start Inc. Which of the following does this scenario best illustrate? - a hostile takeover - a merger - a franchisee arrangement - a cartel

A merger

Which approach to strategic decision making takes a larger investment decision and divides it into multiple smaller decisions that happen over time? - a real-options perspective - a one-to-many approach - a staged-options perspective - a net present value perspective

A real-options perspective

There are several benefits of horizontal integration. Which of the following below is not a benefit? - reducing competitive intensity - access to new marketing and sales divisions - lowering costs - increasing differentiation

Access to new marketing and sales divisions

In order to rejuvenate its floundering product lineup, Disney - acquired Pixar - merged with Lucasfilm - outsourced its movies to Lucasfilm - purchased Pixar's graphic display systems

Acquired Pixar

Builder's Square, a do-it-yourself home improvement store recently purchased Tiny Tool Inc, a smaller incumbent. This would be best described as a(n) - acquisition - merger - equity alliance - strategic alliance

Acquisition

The purchase or takeover of one company by another is a(n) - acquisition - merger - cartel venture - joint venture

Acquisition

Trek Inc., a large conglomerate, took over a small startup company that had made some breakthrough innovations in the field of telecommunications. This purchase would help Trek to gain access to the startup company's superior technology and human capital. This transaction is an example of a(n) - acquisition - affiliate leadership - joint venture - cartel

Acquisition

Which of the following best illustrates a strategic alliance? - ACME Inc., a large conglomerate, taking over a startup company against its will - the electronics subsidiary unit of Holsten Corp. deploying a few of its human resources to the automobile subsidiary of the company - All Pharma Inc. teaming up with a research company to invent and market breakthrough vaccines - EZ Clothes Inc. taking over one of its fabric suppliers in a less developed nation

All Pharma Inc. teaming up with a research company to invent and market breakthrough vaccines

Which term refers to a company's ability to handle the three specific tasks related to an alliance concurrently and effectively? - alliance management capability - alliance governance - formative specification - partner alliance design

Alliance management capability

What happens in the third phase of alliance management? - Alliance partners choose an appropriate governance mechanism - The incumbent firm designs the alliance - The firm initiating the alliance selects its partner - Alliance partners make relation-specific investments

Alliance partners make relation-specific investments

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

Borrowed

Disney's early distribution and licensing agreement with Pixar is an example of borrowing a strategic resource. Which of the following is correct? - The only reason to borrow a strategic resource is if you can't build it - The only reason to borrow a strategic resource is if you can't buy it - The income from borrowed resources accrues to the original owner - Borrowing a strategic resource is often the lowest risk way to acquire the resource - A lease is the best way to borrow a strategic resource

Borrowing a strategic resource is often the lowest risk way to acquire the resource

Internal development should occur when the firm's resources are _____ to those of competitors in the targeted area. - only superior - neither similar nor superior - only similar - both similar and superior

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." - organic growth - capability development - internal-versus-external growth - build-borrow-or-buy

Build-borrow-or-buy

A real option gives a firm the right to continue making investments ______. - if it uses a non-interest bearing trust account - but does not obligate the firm to do so - but only if they act within a year - and requires at least half of the remaining investments be completed

But does not obligate the firm to do so

How can horizontal integration increase product differentiation? - by distributing high profit margins - by using international suppliers and distributors - by producing revenues from outsourcing - by filling the empty spaces in a firm's offerings

By filling the empty spaces in a firm's offerings

A firm might want to use a strategic alliance to ______. - lower Internet discounted prices in the primary market - release proprietary information to rival firms - change the industry structure - increase the threat of rivalry

Change the industry structure

The local real estate companies in a city have joined together and arranged a "Property Fair." The sponsors will equally share the expenses of the event. Although many companies compete against each other, they have joined together because the medium will help the companies market themselves through a dedicated forum at an extremely low cost. This arrangement is best referred to as - co-opetition - merging - a cartel - bootstrapping

Co-opetition

How well the firms in an alliance fit together culturally is referred to as partner ______. - commitment - compatibility - governance - capability

Compatibility

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 ______. - real options - potential legal repercussinos - increased differentiation - critical complementary assets

Critical complementary assets

A strategic alliance has the potential to help a firm gain and sustain a competitive advantage when it joins resources and knowledge that are - common in the industry - inexpensive to acquire - less differentiated - difficult to imitate

Difficult to imitate

Non-equity alliances tend to share ______, which allows the firms to understand a certain process or product. - explicit knowledge - tacit knowledge - all personnel - vertically integrated resources

Explicit knowledge

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

False

How do foreign governments typically influence a firm's use of strategic alliances to enter new markets? - Governments may require the Securities and Exchange Commission and the Internal Revenue Service to review transactions - Governments may require that foreign firms have a local joint venture partner in order to conduct business within the country's borders - Governments typically do not allow a foreign firm to enter if a domestic company already provides the same products or services - Governments may require financial and commercial transparency from political officials

Governments may require that foreign firms have a local joint venture partner in order to conduct business within the country's borders

Firms enter strategic alliances to - increase fixed and variable costs for itself and competitors - have a positive effect on economic value creation - encourage competitors to enter an underserved market - prevent allies from discovering new information

Have a positive effect on economic value creation

The process of merging with a competitor at the same stage of the value chain is best described as - backward integration - forward integration - horizontal integration - taper integration

Horizontal integration

To secure a strong strategic position in fast-growing emerging markets, which of the following corporate strategies did Kraft Foods primarily pursue by acquiring Cadbury? - strategic outsourcing - horizontal integration - unrelated diversification - focused diversification

Horizontal integration

When a firm wishes to consolidate the industry in which they compete by merging with their competitors, they are engaging in - vertical integration - horizontal integration - a hostile acquisition - value chain enlargement

Horizontal integration

When two competitors merge, leading to industry consolidation, they are engaging in ______. - horizontal integration - forward diversification - vertical integration - backward integration

Horizontal integration

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? - managerial hubris - integration failure - increased differentiation - lower costs

Increased differentiation

Which of the following is true of tacit knowledge? - It can only be acquired through actively participating in the process - It cannot be acquired - It is exchanged only during non-equity alliances - It is nonspecific knowledge

It can only be acquired through actively participating in the process

In what way does the strategic alliance between GM and Lyft allow GM to hedge against uncertainty? - It gives GM access to the as-yet-untapped insurance market - It provides GM with the funds needed to acquire Uber, the market leader - It allows GM to learn how to manage large fleets of cars - It gives GM access to the market of the future, in which traditional private car ownership no longer exists

It gives GM access to the market of the future, in which traditional private car ownership no longer exists

A non-equity alliance is the most common type of strategic alliance because - it is easy to initiate and terminate - it produces the strongest ties between alliance partners - it is based on partial ownership - it is the least flexible of all strategic alliances

It is easy to initiate and terminate

Zoe is a manager at a large company engaged in the acquisition of a smaller company. The smaller company has operated at a loss for the last three years under three different managers, but Zoe is convinced that she can turn the company around despite the evidence to the contrary. Zoe is engaging in ______. - managerial hubris - leveraged acquisition capability - competence instability - integration complacency

Managerial hubris

A(n) ________ is used to describe the combining of two companies that are equal in size. - merger - joint venture - acquisition - co-opetition

Merger

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 has superior acquisition and integration capability - Peter's Pans is positioning itself for a merger - Peter's Pans is experiencing principal-agent problems - Peter's Pans is trying to overcome competitive disadvantage

Peter's Pans is trying to overcome competitive disadvantage

When a company makes incremental investments as part of a larger investment and takes the time to analyze the information gained following each incremental investment, the company is taking a ______. - tradable position - co-opetition perspective - real-options perspective - non-equity approach

Real-options perspective

Which of the following best illustrates horizontal integration? - CHOAM Autos Inc. sets up its own component-part manufacturing units to have strong control over production - Soylent Corporation sets up its own retail stores to sell its skincare products directly to customers rather than selling them through large departmental stores - Rich Industries Inc. acquires its competitor, Keenbean Electronics Inc., to gain access to its core competencies - Sirius Cybernetics Corporation outsources its production to contract manufacturers in labor-intensive countries

Rich Industries Inc. acquires its competitor, Keenbean Electronics Inc., to gain access to its core competencies

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

Strategic

A voluntary arrangement between firms to share knowledge, resources, and capabilities to develop products, processes, or services is known as a ______. - wholly owned subsidiary - merger - strategic alliance - hostile takeover

Strategic alliance

Which type of knowledge cannot be codified and can only be gained through active participation in the task? - tacit knowledge - explicit knowledge - strategic knowledge - perceptual knowledge

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 - sufficient - permanent - intangible

Temporary

Which of the following statements is true of the real-options perspective? - The approach obligates the incumbent firm to make continued investments when demanded by its partner - The approach fails to provide the incumbent firm a hedge against uncertainty - The approach involves making large investments at the end of a project, irrespective of whether the project is successful or not - The approach allows the incumbent firm to obtain additional information at predetermined stages

The approach allows the incumbent firm to obtain additional information at predetermined stages

Disney eventually bought Pixar because - Disney had the excess cash, so it was no big deal if the acquisition was successful or not - the capabilities Disney needed were so embedded within Pixar that Disney had to buy the whole Pixar corporation to acquire them - Pixar's executives valued and respected what Disney had been planning to do with the Pixar sequels Disney had the right to, so it was a good cultural fit - Pixar had a strong lineup of characters that Disney could leverage across its platform of theme parks, media networks, and consumer goods - Disney had a strong line of characters, but needed Pixar's technology

The capabilities Disney needed were so embedded within Pixar that Disney had to buy the whole Pixar corporation to acquire them

Which of the following is an example of explicit knowledge? - the creative ability of a manager to recognize potential business opportunities - the findings of a research published in a scientific journal - the decision-making capability that is intrinsic to an employee - the entrepreneurial skills of a manager

The findings of a research published in a scientific journal

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 - the tradability of the resource is high - the owner of the firm does not wish to sell the resource

The resource is not easily traded

Horizontal integration is a good option if ______. - the target firm is more valuable as a continued standalone company - the target firm is in a different industry than the acquiring firm - the acquiring firm is new to the industry and has no competitors - the target firm will have more value when combined with the acquiring firm

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

Which of the following statements about equity alliances is true? - they result in weak ties between the partners - They are more common than contractual, non-equity alliances - They are based on full ownership - They require larger investments than non-equity alliances

They require larger investments than non-equity alliances

How can firms build alliance management capability? - through regular use of established knowledge-sharing routines - by being perfect the first time an alliance is pursued - by teaming up with an inexperienced partner - through repeated experiences over time

Through repeated experiences over time

Which of the following is one of the reasons that firms make acquisitions? - to shift the industry structure from oligopoly to perfect competition - to move up a learning curve - to standardize their product and service offerings and reduce the levels of differentiation - to gain access to a new capability or competency

To gain access to a new capability or competency

Why do incumbent companies enter into strategic alliances with startups? - to spend as much free cash flow as possible - to address principal-agent problems - to conceal managerial hubris - to hedge against uncertainty

To hedge against uncertainty

True or false: Firms can use strategic alliances to strengthen their competitive advantage when competing in battles to control industry standards.

True

Match the type of alliance (on the left) with its definition (on the right). Instructions - non-equity alliance - equity alliance - joint venture to - partnership in which at least one partner takes partial ownership in the other - partnership based on contracts between firms - standalone organization created and owned by two or more parent companies

non-equity alliance-> partnership based on contracts between firms Equity alliance-> partnership in which at least one partner takes partial ownership in the other joint venture-> standalone organization created and owned by two or more parent companies

Select all that apply What are the two necessary conditions for successful alliance formation? (Check all that apply.) - partner compatibility - partner commitment - partner selection - partner globalization

- partner compatibility - partner commitment

Select all that apply What are three advantages of equity alliances? (Check all that apply.) - possible emergence of trust and commitment - stronger ties - easy initiation and termination - an institutional setting requirement - a window into new technology (option value)

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

Select all that apply Which of the following are reasons why firms enter into strategic alliances? (Check all that apply.) - to learn new capabilities - to decrease economies of scale - to strengthen their competitive position - to increase outsourcing - to enter new markets

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

A partnership in which at least one partner takes partial ownership in the other is a(n) ______. - equity alliance - joint venture - non-equity alliance - tacit cooperation

Equity alliance

An advantage of using a non-equity alliance to govern a strategic alliance is its ______. - use of tacit knowledge - flexibility and ease of initiation - long-term planning period - ability to distract new entrants to the industry

Flexibility and ease of initiation

Disney's inability to produce a hit animated film in the 1990s in contrast to Pixar's success indicated that Disney was suffering - from a lack of family audiences - from the change in distribution of the films - from a strategic resource gap - from a lack of execution - from a change in management

From a strategic resource gap

One reason why a firm might enter into a strategic alliance is to _____. - weaken competitive position - hedge against uncertainty - increase the number of entrants in the market - exit markets

Hedge against uncertainty

The starting point of the build-borrow-or-buy framework is management's - evaluation of the firm's existing internal resources to check if they are relevant - comparison of the internal transaction costs against the external transaction costs - identification of a strategic resource gap that will impede future growth - evaluation of the alliance partners' compatibility and commitment

Identification of a strategic resource gap that will impede future growth

How does Lyft benefit from its strategic alliances with GM and Waymo? - It gives Lyft access to new markets that Uber is unaware of - It gives Lyft a winner-take-all advantage - It provides Lyft with shares of GM and unlimited funds - It allows Lyft to more effectively compete against Uber

It allows Lyft to more effectively compete against Uber

Which of the following is a disadvantage of a joint venture? - The government is typically overbearing in terms of support and guidance - Strong ties, trust, and commitment develop between the partners - Control over partner selection and alliance formation is essentially nonexistent - Knowledge shared with the new partner could be misappropriated by opportunistic behavior

Knowledge shared with the new partner could be misappropriated by opportunistic behavior

"A form of self-delusion in which managers convince themselves of their superior skills in the face of clear evidence to the contrary" is the definition of - self-actualization - managerial myopia - self-efficacy - managerial hubris

Managerial hubris

When managers of acquiring companies incorrectly convince themselves that they are able to manage the business of the target company more effectively than its current managers, they are engaging in ______. - horizontal integration - managerial hubris - integration capability problems - the superhero delusion

Managerial hubris

"The process of joining two independent companies with their consent to form a combined entity on a permanent basis" is the definition of a - joint venture - takeover - merger - cartel

Merger

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. - non-equity alliance; joint venture - joint venture; non-equity alliance - acquisition; merger - merger; acquisition

merger; acquisition

Which framework can companies use to assess whether their internal resources are superior to those of competitors in the targeted area? - Vertical integration framework - PESTEL framework - VRIO framework - Porter's five forces

VRIO framework

When companies get involved in a bidding war and the winner overpays for the acquisition, the acquiring company has fallen victim to the ______. - strategic preemption - hostile takeover - principal-agent problem - winner's curse

Winner's curse

Select all that apply Which of the following are the three choices in the build-borrow-or-buy framework? (Check all that apply.) - acquisition of new resources - internal development - elimination of product costs - strategic alliances

- acquisition of new resources - internal development - strategic alliances

Marketing, manufacturing, and after-sale service are examples of ______. - critical complementary assets - critical non-complementary assets - hedges against uncertainty - new markets

Critical complementary assets

Knowledge that can be codified is also called ______ knowledge. - indirect - tacit - perceptual - explicit

Explicit

Which of the following was one of the primary reasons why Adidas acquired Reebok? - to reduce the levels of differentiation - to gain competitive advantage - to gain the advantages of vertical integration - to overcome a competitive disadvantage

To overcome a competitive disadvantage