BUS 497A CHAKRAVARTY TEST 2
A network strategy involves a series of horizontal acquisitions by firms that are committed to dominating a particular industry.
F
A related acquisition involves two firms in the same industry.
F
A stable alliance network is used in industries characterized by frequent product innovations and short product life cycles.
F
According to the Chapter 9 Opening Case, in addition to their corporate-level alliance, Renault and Nissan have each formed vertical complementary strategic alliances with other companies.
F
Acquisitions are the most common cooperative strategy used in standard-cycle markets.
F
All of Krispy Kreme's revenues come from its one main product, doughnuts. It can be considered a classic example of a firm following a related constrained strategy.
F
Although growing in popularity with small and medium-sized firms because they can gain economies of scale, large companies tend to avoid strategic alliances.
F
An advantage of using horizontal, vertical, or related acquisitions is that they are not subject to regulatory review.
F
Announced in February 2011, the alliance between Nokia and Microsoft calls for Nokia to transition its smartphone portfolio to Microsoft's Windows phone platform. This is an example of using an alliance in a standard-cycle market to speed up the development of new products and services.
F
As noted in the Chapter 7 Strategic Focus, the current Chinese cross border strategy is to focus on buying global brands, sales networks, and goodwill in in branded products.
F
Because of U.S. legal restrictions concerning large foreign acquisitions, American firms can only enter into diversifying alliances with other U.S. firms.
F
Because of the lack of protection of intellectual property in some foreign countries, licensing arrangements are one of the best ways for a firm to protect its technology from being appropriated by potential competitors.
F
Because there are still several industrial and consumer markets in which only domestic firms compete, many firms do not have to be able to compete internationally.
F
Citigroup's acquisitions and mergers were driven by the concept of a "financial supermarket" (Chapter 7 Strategic Focus) and was a success since very little or restructuring was later required.
F
Location advantages are influenced by costs of production, access to natural resources and critical supplies, as well as the needs of customers, but not culture.
F
Mutual forbearance is a form of explicit collusion between firms in which competitors avoid attacking rivals they meet in multiple markets.
F
Nonequity strategic alliances are formed when one partner owns a much larger (or inequitable) share of the joint venture than do the remaining partner(s).
F
One advantage of an unrelated diversification strategy in a developed economy is that competitors cannot easily imitate the financial economies whereas they can easily replicate the value gained through the use of a related diversification strategy.
F
Private synergies exist between a potential acquisition target and all firms seeking to acquire it.
F
Quality affects the degree of rivalry in that firms lacking quality are likely to me more aggressive in their competitive actions until the quality problems are corrected.
F
Quality begins at the bottom of the organization where employees must create values for quality that permeate the entire organization.
F
Research evidence suggests that horizontal acquisitions of firms with dissimilar characteristics result in higher performance levels.
F
Research has shown that the more different the acquired firm is in terms of competencies and resources than the acquiring firm, the more likely the acquisition is to be successful.
F
Research suggests that the performance of the global strategy in enhanced if it deploys in areas where regional integration across countries is occurring.
F
Revenues for United Parcel Service (UPS) are derived from the following business segments: 60 percent from U.S. package delivery operations, 22 percent from international package delivery, and 18 percent from non-packaging operations. The best description of the corporate level strategy of UPS is unrelated diversification.
F
Since the 1950s, U.S. government policy regarding antitrust concerns has remained constant.
F
South Korea's success in international markets is primarily a result of its abundant natural resources.
F
Starbucks' international strategy for success in China is a cost leadership business-level strategy coupled with a multidomestic corporate-level strategy
F
Strategic alliances tend to increase the risk associated with international expansion for the U.S. partner because of the greater dependence on the foreign firm.
F
Tacit collusion tends to be least used as a business-level, competition-reducing strategy in highly concentrated industries such as airlines and breakfast cereals even though it results in higher prices for consumers.
F
The "liability of foreignness" will have a greater negative impact on a firm using a multidomestic strategy than on a firm using a global strategy.
F
The acquisition of Sun Microsystems (a computer hardware producer) by Oracle (a software firm) is an example of a horizontal acquisition.
F
The best acquisitions are driven by either strategic or defensive reasons. For example, the Teva Pharmaceuticals' acquisition of Cephalon should be driven by strategic factors (e.g., cost and revenue synergies) or defensive reasons (e.g., to gain sales revenue in the short run).
F
The chief risks in the international environment are political and cultural.
F
The global strategy offers greater opportunities to take innovations developed at the corporate level in one market and apply them to other markets.
F
The post-acquisition integration phase is less important for acquisition success than characteristics of the deal itself.
F
The primary responsibility of the franchiser is to transfer capital to the franchisee.
F
The recent financial crisis made it difficult for firms to complete "megadeals" and the slowdown in merger and acquisition has continued in 2011.
F
The three corporate-level international strategies are cost leadership, differentiation, and focus.
F
Top managers typically become overly focused on acquisitions because only they can perform most of the tasks involved, such as performing due diligence on the target firm.
F
Under the framework of competitive action and response, "ability" refers to an attacking or responding firm's knowledge of the competitive market characteristics.
F
United Technologies Corp. (UTC) uses acquisitions of firms such as Otis Elevator Company (elevators, escalators, and moving walkways) and Carrier Corporation (heating and air conditioning systems) as the foundation for implementing its related diversification strategy.
F
Unrelated diversified firms become over diversified with a smaller number of business units than do firms using an related diversification strategy.
F
Using business-level strategic alliances to hedge against risk and uncertainty is most common in the slow-cycle markets.
F
Wal-Mart has recently opened a store in Alsatia, Missouri. Several local small retailers have decided that choosing not to respond to Wal-Mart's competitive actions is a viable long-term option, because although the companies have high market commonality they have little resource similarity. These small retailers are correct in their decision.
F
Wal-Mart's aggressive pricing strategy is a strategic action that plays a major role in how it competes.
F
When the country risk is high, firms prefer to enter with a greenfield investment rather than a joint venture.
F
While there are multiple means of entering new international markets, firms should use one method consistently with all of its various products and across its different markets in order to reduce administrative complexity.
F
Wilberforce Press is a small book publishing firm in Iowa that has been owned by the same family since 1895. It is being purchased by Ozarka Publishing, another family-run business in Nebraska, which has been a specialty publisher for 77 years. Each company is known for its unique culture passed down from its founders. Executives and employees in both firms have "grown up" with their companies. Since both these companies have a long, stable history in highly related industries, this acquisition has a high probability of success.
F
"Competitive dynamics" indicates that firms and their strategic actions are independent.
FALSE
According to the Chapter 5 Strategic Focus, the global automobile producing industry has high market commonality but low resource similarity.
FALSE
Bayou Belle Water markets water drawn only from a single artesian well in Southern Louisiana. It has a loyal following in its region. Since Bayou Belle markets the water, just as Coca-Cola, Nestle, and PepsiCo do, Bayou Belle has high resource similarity with these international firms.
FALSE
Two firms, such as Fed Ex and UPS that have similar resources and common markets would be direct and mutually acknowledged competitors.
FALSE
Two firms, such as a small local, family-owned Italian restaurant and Olive Garden share few markets and have little similarity in resources, but are nonetheless direct and mutually acknowledged competitors.
FALSE
A firm can predict that a competitor whose products suffer from poor quality is likely to be less aggressive in its competitive actions until those quality problems are corrected.
T
A firm creates a competitive advantage when it develops and manages corporate-level cooperative strategies in a way that is valuable, rare, imperfectly imitable and non- substitutable.
T
A horizontal acquisition involves two firms in the same industry.
T
A increase in the value of the U.S. dollar is an example of an economic risk in that it can reduce the value of U.S. multinational firms' international assets and earnings in other countries.
T
A major incentive for the use of international an strategy by French-based Carrefour Group is the potential for large demand for goods and services from emerging markets such as China and India.
T
A major problem with buying other companies in order to gain access to their product lines is that the acquiring firm may lose its own ability to innovate.
T
A merger is a strategy through which two firms agree to integrate their operations on a relatively coequal basis.
T
A reason that firms use international strategies is to secure needed resources, especially minerals and energy.
T
A significant benefit of an internal capital market is limiting competitors' access to information about the performance of the individual businesses within the corporation.
T
A significant benefit of an internal capital market is that corporate headquarters has access to detailed and accurate information regarding the performance of the company's portfolio and can thus make better capital allocation decisions.
T
A transnational strategy is difficult to use because of its conflicting goals.
T
Acquisitions, greenfield ventures, and sometimes joint ventures are appropriate when firms want to establish a strong presence in an international market.
T
Although Citigroup (Chapter 7 Strategic Focus) is still involved in many financial services sectors, those that will remain after its restructuring will be more solidly focused on its on its main business, consumer and investment banking.
T
Although governments in free-market economies allow rivals to collaborate to improve competitiveness, the challenge is to make sure the alliance does not lead to price fixing.
T
Although leaders in Russia have tried to reassure potential investors about their property rights, political risks in the form of weak laws and commonplace government corruption make firms leery of investing in Russia.
T
Although the price Microsoft paid for the acquisition of Skype went up significantly from the earlier acquisition price for Skype paid by Silver Lake, the acquisition price per user went down significantly
T
Among the drivers of competitive actions and responses, motivation refers to the perceived gains that will result from a firm which initiates an attack. If a firm perceives that its position will improve, it is more likely to attack.
T
An acquisition occurs when one firm buys a controlling or 100% interest in another firm and the acquired firm becomes a subsidiary business.
T
An alliance can be used to test whether the partners would benefit from a future merger.
T
An effective corporate strategy creates aggregate returns across all businesses that exceed what those returns would be without the strategy and contributes to the firm's strategic competitiveness and ability to earn above-average returns.
T
An organization with high profitability, such as Wal-Mart, will be able to develop high organizational slack.
T
An unrelated diversification strategy can create value through two types of financial economies: (1) efficient internal capital allocations, and (2) purchasing other firms, restructuring their assets, and selling them.
T
As an indication of the importance of economies of scale, Ford Motor Company runs a single global business developing cars and trucks that can be built and sold through the world. By 2015, Ford intends for about 75% of the vehicles it sells to be variants of about 5 basic platforms.
T
As nations industrialize, the demand for some products and services such as Starbucks (Chapter 8 Opening Case) becomes more similiar as a result of similar lifestyles in those nations.
T
Awareness tends to be greatest when firms have highly similar resources and compete in multiple markets.
T
Both the size and the nature of a country's domestic demand for a particular industry's good or service are important in Porter's determinants of national advantage.
T
Bucyrus took on a significant amount of debt because of several acquisitions and subsequently had to file for bankruptcy.
T
By choosing a region where markets are more similar, the firm may be able to better understand those markets and cater to their needs, but also achieve economies through sharing of resources.
T
Carl has just graduated with a management degree. He has a good understanding of his personal strengths and weaknesses and knows he would fit best in a stable organizational environment. In his job search, Carl should target firms in slow-cycle markets.
T
China remains a challenging environment for investors and political and legal obstacles make acquisitions in China risky and difficult.
T
Collusion is a form of cooperative strategy.
T
Companies in emerging markets frequently use the unrelated diversification strategy because of the absence of a "soft infrastructure" in those markets.
T
Compared to diversification that is grounded in intangible resources, diversification based on financial resources only is more visible to competitors and thus more imitable and less likely to create value on a long term basis.
T
Competitors are more likely to respond to strategic or tactical actions when they are taken by a market leader.
T
Cultural differences affect location advantages in that business transactions are less difficult for a firm to complete when there is a strong match among the cultures with which the firm is involved.
T
Different incentives to diversify sometimes exist, and the quality of a firm's resources may permit only diversification that is value neutral rather than value creating.
T
Diversification strategies can be used with both value-creating and value-neutral objectives.
T
Downscoping makes management of the firm more effective because it allows the top management team to better understand the remaining businesses.
T
Economies of scope are cost savings resulting from a firm successfully leveraging, either through sharing or transferring, some of its capabilities and competencies developed in one business to another business.
T
Embracing the global marketplace is important to Starbucks because it commands less than one percent of the global coffee market suggesting that there is room for growth.
T
Equator, a U.S. manufacturer of pharmaceuticals, has acquired a firm in the same industry in Ireland. It plans to move one of its key managers from its plant in St. Louis to Ireland. This can be considered a method of transferring corporate-level core competencies.
T
Evidence suggests that returns to shareholders of acquired firms are greater than those for acquiring firms.
T
Large firms with significant slack resources (i.e., are able to launch a greater number of competitive actions) but who remain flexible and act like small firms (i.e., are able to launch a variety of actions) will be more successful against rivals.
T
Low firm performance is associated with increased diversification.
T
Many manufacturing firms are de-integrating and moving to independent supplier networks.
T
Market power exists when a firm is able to sell its products above the existing competitive level or decrease the costs of its primary and support activities below the competitive level, or both.
T
Michael Porter's Determinants of National Advantage describe factors associated with the firm's domestic environment that contribute to its dominance in a particular global industry.
T
Strategic alliances are cooperative strategies between firms that combine their resources and capabilities to create a competitive advantage.
T
Strategic alliances have become the cornerstone of many firms' competitive strategy, particularly large global competitors such as BMW.
T
Synergistic strategic alliances such as the Renault-Nissan alliance discussed in the Opening Case focus on economies of scope by sharing their resources and capabilities to develop manufacturing platforms that can be used to Renault or Nissan cars.
T
Synergy exists when the value created by business units working together exceeds the value that those same units create working independently.
T
Synergy is created by the efficiencies derived from economies of scale and economies of scope and by sharing resources across the businesses in the merged firm.
T
Tacit collusion is not explicitly illegal in the United States even though it results in higher prices for consumers.
T
Takeovers are unfriendly acquisitions where the target firm does not solicit the acquiring firm's bid.
T
The "conglomerate discount" occurs in large, highly diversified businesses and results from analysts not knowing how to value the vast array of large businesses with complex financial reports.
T
The "liability of foreignness" means that many firms need to focus more on local adaptation or risk problems such as the Walt Disney Company faced opening its theme park in France.
T
The "regionalization" environmental trend means that firms can focus on a region (customization) but also have some standardization or sharing within the region.
T
The Chapter 7 Strategic Focus shows that the first attempts at cross-border acquisitions by Chinese companies ended in failure.
T
The Haier Group would be an example of a company pursuing international diversification since it has expanded into multiple markets and regions rather than just a few
T
The Renault Nissan approach to managing its collaboration involves less reliance on contracts and more reliance on trust, respect, and transparency (i.e., the opportunity-maximization approach to managing cooperative strategies).
T
The advantages of alliances designed to respond to competition and to reduce uncertainty are more temporary than those developed through complementary alliances, such as vertical and horizontal strategic alliances.
T
The amount of diversification in a firm's international operations that can be managed varies from company to company and is affected by manager's abilities to deal with ambiguity and complexity.
T
The cost minimization approach of managing alliances is more expensive to put into place and to use than is the opportunity maximization management approach.
T
The equity strategic alliance between GE's NBC Universal, News Corporation, and Walt Disney (Hulu.com) was formed to develop new sources of competitive advantages in the fast-cycle entertainment business.
T
The greenfield venture option is useful when control of proprietary technology is important in an international expansion.
T
The more dependent a firm is on its market, the more aggressively it will defend it from another competitor.
T
The probability of alliance success is increased when partnering firms internalize successful alliance experiences.
T
The quickest and easiest way for a firm to diversify its portfolio of businesses is to make acquisitions.
T
The reasons why a firm would overpay for a company that it acquires include inadequate due diligence.
T
The three basic benefits of international strategies are 1) increased market size; 2) increased economies of scale and learning; and 3) development of competitive advantages through location.
T
To be a first mover, the firm must have readily available resources to invest in R&D as well as to rapidly and successfully produce and market a stream of innovative products.
T
Top manager participation in and overseeing the activities required for making acquisitions can divert managerial attention from other matters that are necessary for long-term competitive success.
T
Transaction costs resulting from an acquisition refer to the direct and indirect costs resulting from the use of acquisition strategies to create synergies.
T
Typical returns on acquisitions for acquiring firms are close to zero.
T
United Technologies, Textron, Samsung, and Hutchison Whampoa Limited are examples of diversified firms that have no relationships between their businesses. These firms all use the strategy of unrelated diversification.
T
Vertical integration allows the firm to gain market power as the firm develops the ability to save on its operations, avoid market costs, improve product quality, and possibly protect its technology from rivals.
T
Vertical integration exists when a company produces its own inputs (forward integration) or owns its own source of output distribution (backward integration).
T
Walmart depends on its distribution, warehousing, logistics, and data management core competencies developed in domestic markets when entering international markets
T
When a firm initially pursues an international business-level strategy, the resources and capabilities established in the home country frequently allow the firm to pursue the strategy into markets located in other countries.
T
When a firm is in the early stages of geographic diversification, cross-border alliances may be a good learning step before other forms of international expansion.
T
When implementing a restructuring strategy, a company would do best by focusing on mature, low-technology businesses rather than high-technology or service businesses.
T
Without available resources (such as financial capital and people), the firm lacks the ability to attack a competitor or respond to its actions.
T
fter a firm decides to compete internationally, it must select its strategy and choose a mode of entry into international markets.
T
A strategy's success is determined not only by the firm's initial competitive actions but also by how well it anticipates competitors' responses to them and by how well the firm anticipates and responds to its competitors initial actions.
TRUE
Coca Cola and PepsiCo compete across a number of products (e.g., soft drinks, bottled water) and geographic markets (U.S. and foreign markets) indicating that both companies have market commonality.
TRUE
Competitive dynamics refers to the total set of actions and responses taken by all firms competing within a market.
TRUE
Competitive rivalry is the set of competitive actions and responses that occur among firms as they maneuver for an advantageous market position.
TRUE
Firms operating in the same market, offering similar products and targeting similar customers are competitors.
TRUE
Firms with high market commonality and highly similar resources are direct and mutually acknowledged competitors.
TRUE
Intensified rivalry within an industry results in decreased average profitability for the firms within it.
TRUE
Market commonality is concerned with the number of markets with which the firm and a competitor are jointly involved and the degree of importance of the individual markets to each.
TRUE
Research suggests that a firm with greater multimarket contact is less likely to initiate an attack, but more likely to respond aggressively when attacked.
TRUE
The drivers of competitive behavior are awareness of the competitor, motivation to take action or respond, and the organization's ability in terms of resources and flexibility.
TRUE
The global automobile producing industry has high market commonality and high resource similarity, and are aware, motivated, and have the ability to compete for market share in each segment and country they have entered (Chapter 5 Strategic Focus).
TRUE
Toyota's hybrid power train (e.g., the Prius) has been dominant for a number of years but rivals such as Porche, Chrysler, Hyundai and GM have all developed competing hybrid systems. The developments aimed at improving fuel efficiency illustrate competitive rivalry or "actions and responses" by firms in the global automobile industry (Chapter 5 Strategic Focus).
TRUE
Two firms that have similar resources, but do not share markets would not be direct and mutually acknowledged competitors.
TRUE
Large or extraordinary debt is defined as overpaying for an acquired firm.
F
A multi-domestic strategy is an international strategy in which a firm's home office determines the strategies business units are to use in each region.
F
A major risk of a network cooperative strategy is that firms gain access to their partner's partners thus exposing their proprietary processes to loss or theft.
F
It is relatively common for a firm to develop new products internally to diversify its product lines.
F
A U.S. manufacturer of pigments for household paint that exports about 40 percent of its production to European markets will find its sales will be harmed by a weak dollar.
F
A cooperative agreement between a hotel chain and a casino operator would be viewed as a horizontal complementary strategic alliance because as separate entities, the two firms would compete for the same customer.
F
A lack of awareness leads to a reduction in competition.
F
Coca Cola and PepsiCo approach international growth differently. Coca Cola is the world's largest snack-food producer and relies on overseas sales to make up for slower sales volumes in North America. In contrast, PepsiCo which is less diversified, derives only 32% of it sales from North America, an indication of the importance of international markets to its performance.
F
Coca Cola and PepsiCo are examples of firms that have found it unnecessary to aggressively pursue international strategies because of extensive growth opportunities available in the U.S. market.
F
Companies creating financial economies through restructuring typically focus on high-technology businesses primarily because these firms are human-resource dependent.
F
Contract manufacturers who manage their customers' entire product line, and offer services ranging from inventory management to delivery and after-sales services are prime examples of vertical integration.
F
Cooperation in slow-cycle markets is extremely rare because these industries are declining.
F
Corporate tax laws, rather than tax laws affecting individuals, have had the most impact on the firm's use of free cash flows for investment in acquisitions.
F
Corporate-level strategies are strategies a firm uses to diversify its operations from a single business competing in a single market into several product markets and, most commonly, into several businesses.
F
Decisions to expand a firm's portfolio of businesses to reduce managerial risk can have a positive effect on the firm's value.
F
Downscoping represents a reduction in the number of a firm's employees and sometimes in the number of its operating units, but it may or may not represent a change in the composition of businesses in the corporation's portfolio.
F
Establishing a wholly-owned subsidiary provides the quickest access to a new market.
F
Even if effectively implemented, the transnational strategy often produces lower performance than does the implementation of either the multidomestic or global strategies.
F
Even if the effects of a competitor's strategic action on the focal firm are significant (e.g., loss of market share), little response is likely from that firm.
F
Extensive outsourcing contributes to the firm's core competencies and helps the firm transfer those competencies to other business units in the diversified firm.
F
Firms are likely to imitate the actions of a competitor that is noted for risky, complex, and unpredictable behavior because this is a way to imitate unobservable core competencies.
F
Firms seeking to create value through corporate relatedness use the related constrained strategy.
F
Firms with both operational and corporate relatedness are favorites of investment analysts because the transparency and clarity of their financial statements clearly show the value-creation resulting from the combination of multiple businesses.
F
First movers can gain a sustained competitive advantage when they reduce their costs through reverse engineering.
F
Franchising is most attractive in concentrated industries.
F
GE (discussed in the Chapter 6 Opening Case) is an example of a firm following the related constrained diversification strategy (i.e., different businesses that are highly related).
F
GE (discussed in the Chapter 6 Opening Case) is an example of a firm that used its corporate strategy to achieve competitive advantage by selecting and managing a group of different businesses competing in different product markets.
F
Google increasing use of a vertical integration strategy is in line with the extensive use of that strategy by many manufacturing firms.
F
Having substantial supplies of critical basic natural resources is a necessary condition for a country to support businesses which can successfully compete in international markets.
F
Horizontal acquisitions and related acquisitions tend to contribute less to a firm's competitiveness than do unrelated acquisitions.
F
Horizontal complementary strategic alliances are designed so that each partner realizes equal benefits from equal investments in the alliance.
F
In a vertical complementary alliance, firms share some of their resources and capabilities from the same stage of the value chain to create a competitive advantage.
F
In order to preserve its competitive advantage in low-cost operations, Walmart uses only new wholly-owned subsidiaries (greenfields) to enter international markets
F
In the Chapter 6 Strategic Focus, the Publicis Groupe has three major groups of businesses, each in a highly related but unique market area: advertising, media, and digital. This form of diversification strategy is known as related linked.
F
In the comparison of the acquisition strategies of Chinese versus Indian firms (Chapter 7 Strategic Focus) in the agricultural sector, the Indian firms were more aggressive and likely to take greater risks. In comparison, Chinese firms were more cautious and had very strict payback rules for their acquisitions.
F
In the cost minimization approach to managing competitive strategies, the relationship between the firms is based on trust of the other partner.
F
In the current global landscape, firms from North America and Europe use the acquisition strategy more frequently than firms from other nations.
F
International strategic alliances are less risky than domestic strategic alliances because of diversification across countries.
F
It is much easier for a competitor to implement strategic actions than tactical actions.
F
Restructuring strategies are commonly used to correct or deal with the results of ineffective mergers and acquisitions.
Restructuring strategies are commonly used to correct or deal with the results of ineffective mergers and acquisitions
A company that chooses a truly global corporate-level strategy assumes that the liability of foreignness will be minimal.
T
A company that tries to balance both operational and corporate relatedness and fails risks incurring diseconomies of scope.
T
A competitive action is a strategic or tactical action taken by a firm to gain or defend a competitive advantage or improve its market position.
T
A cooperative strategy is a means by which firms work together to achieve a shared objective.
T
A firm based in a country with a national competitive advantage is not guaranteed success as it implements its chosen international business-level strategy. Instead the actual strategic choices managers make may be the most compelling reasons for success or failure.
T
A firm can expect that every launch of a successful new product will be followed by a counterattack by competitors, even in a slow-cycle market.
T
Large firms are likely to initiate more competitive actions along with more strategic actions during a given period.
T
Evidence suggests that, in general, using an international cost leadership strategy when exporting to developed countries has the most positive effect on firm performance while using an international differentiation strategy with larger scale when exporting to emerging economies leads to the greatest amounts of success.
T
Export, licensing, and the strategic alliance entry modes are all appropriate for early market development.
T
Exporting and licensing are the most appropriate ways for smaller firms to first enter international markets.
T
Facebook's acquisition strategy is similar to that of Microsoft and Google in that it allows the acquired companies to survive as independent companies
T
Failure of a partner to contribute needed resources and capabilities to a cooperative venture is a particular risk in international ventures especially in emerging economies.
T
Financial economies are cost savings realized through improved allocations of financial resources based on investments inside or outside the firm.
T
Firms are more likely to enter a market through acquisition when high product loyalty is present in the industry.
T
Firms often use the downscoping and downsizing strategies simultaneously as did Citigroup in its restructuring
T
Firms that sold off related units in which resource sharing was a possible source of economies of scope have been found to produce lower returns than those that sold off businesses unrelated to the firm's core businesses.
T
Firms using the related constrained strategy share activities in order to create value.
T
Fluctuation in the value of different currencies is a major economic risk associated with international diversification.
T
Four types of distances are associated with the liability of foreignness: cultural, administrative, geographic, and economic.
T
GE (discussed in the Chapter 6 Opening Case) is an example of a firm that has used internal capital market allocation as a means of creating value even though it competes using a related linked rather than an unrelated diversification strategy.
T
Google's acquisition strategy is different than Microsoft in that Google usually acquires earlier-stage companies such as YouTube.
T
Google's diversification could lead the firm towards a related linked strategy and give the firm advantages in multipoint competition with competitors such as Facebook and Microsoft (Chapter 6 Strategic Focus).
T
If a large Asian cosmetics firm was to engage in a 50-50 partnership with a large American chemical company to form a new company focused on creating advanced skin care products, this would be considered a joint venture.
T
If managers diversify a firm in a way that does not produce value, the firm risks capital market intervention.
T
In a diversified firm, capital allocation can be adjusted according to more specific criteria than is possible with external market allocation of capital.
T
In a money-making effort, a small private university has decided to institute consulting services using its business faculty as consultants whose services would be sold to clients. This university is attempting to use its faculty to gain economies of scope.
T
In general, strategic actions elicit fewer competitive responses than do tactical actions.
T
In place of relatively stable and predictable domestic markets, firms across the globe find that they are competing in relatively unstable and unpredictable global markets.
T
In some industries, technology drives globalization because the economies of scale necessary to reduce costs cannot be met by competing in domestic markets alone.
T
In spite of the challenges associated with it, a number of firms continue to use the unrelated diversification strategy, especially in Europe and in emerging markets.
T
In the final analysis, firms use merger and acquisition strategies to improve their ability to create value for all stakeholders, including stockholders.
T
International associations such as the European Union, the Organization of American States, and the North American Free Trade Association encourage regionalization of competition rather than globalization.
T
International diversification can help to reduce a firm's overall risk through the stabilization of returns.
T
International diversification is a strategy through which a firm expands the sale of its goods and services across borders of global regions and countries into a potentially large number of geographic locations of markets. Instead of entering one or a few markets, international diversification means that the firm enters multiple markets.
T
International strategic alliances have played an important role in helping manufacturers of jet aircraft engines respond to increasing fuel prices and tougher environmental regulations.
T
It can be difficult for investors to actually observe the value created by a firm (such as Walt Disney) as it shares activities and transfers core competencies.
T
It is more likely that locally-owned, one-location cafes in a small town will respond more rapidly to tactical actions by each other than they will to strategic actions by the Burger King franchise that has recently moved to their town.
T
Italy has become the leader in the shoe industry because of related and supporting industries such as a well-established leather-processing industry which provides the leather needed to construct shoes and related products.
T
Junk bonds are a financing option through which risky acquisitions are financed with debt that provides a large potential return to bondholders.
T
Mighty Mike's, a manufacturer of power tools for the home hobbyist, has seen its main competitor, My Tools, bring out a line of power tools that are smaller sized, lighter weight, and suitable for women and older hobbyists who have weaker hands than the typical male workshop hobbyist. Mighty Mike is waiting to see whether MyTool's new line is a success. Mighty Mike could be classified as a second mover.
T
Moon-in-June, a designer and manufacturer of wedding dresses, has decided to purchase a retail chain specializing in bridal wear. This purchase will be useful in gaining more market power for Moon-in-June.
T
Most acquisitions that are designed to achieve greater market power entail buying a competitor, a supplier, a distributor, or a business in a highly related industry.
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Multinational firms have many opportunities to learn from their experiences in international markets, but they must have a strong R&D system to absorb the knowledge.
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Network cooperative strategies among Silicon Valley firms have been successful, in part, because they are geographically close together.
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Of the four business-level cooperative strategies, the competition-reducing strategy has the lowest probability of creating a sustainable advantage.
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One area in which joint ventures are effective is the transfer of tacit knowledge as illustrated in the Fujitsu Siemens joint venture
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One of the most effective ways to test the feasibility of a future merger or acquisition is for the firms to first engage in a strategic alliance.
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One of the potential problems associated with acquisitions is that the additional costs required to manage the larger firm will exceed the benefits of economies of scale and additional market power.
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One reason why firms pursue international opportunities is to extend the product's life cycle.
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Only about 50% of cooperative strategies succeed.
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P&G's acquisition of Gillette reshaped its competitive scope by giving P&G a stronger presence in some products for whom men are the target market.
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Part of Japan's success in the video game industry is derived from two related and support industries: cartoons and animation, and electronics.
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Patent laws and regulatory requirements such as required FDA (Food and Drug Administration) approval to launch new products shield pharmaceutical companies' positions in this slow-cycle market.
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Private synergies are unique to the acquired and acquiring firms and could not be developed by combining either firm's assets with another company.
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Procter & Gamble (P&G) has a paper towel and baby diaper business that both use paper products. This is an example of value created through the sharing of activities.
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Quality is a universal theme and is a necessary, but not a sufficient, condition for competitive success.
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Renault has a cooperative relationship with Bajaj Auto Ltd. of India for the purposes of producing a minicar to compete against Tata Motors' Nano (currently the world's cheapest car). This alliance is an example of a horizontal complementary strategic alliance.
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Research evidence shows that increased firm size and greater levels of diversification are correlated with increased executive compensation.
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Research evidence suggests that horizontal acquisitions result in higher performance when the firms have similar strategies, assets, and capabilities.
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Research has shown that maintaining a low or moderate level of firm debt is critical to the success of an acquisition, even when substantial leverage was used to finance the acquisition itself.
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Research has shown that, as international diversification increases, firms' returns decrease initially but then increase quickly as firms learn to manage international expansion.
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Research in the airline industry suggests that tacit collusion reduces service quality and on-time performance.
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Research shows that in times of high or increasing stock prices, due diligence is relaxed and firms often overpay for acquisitions and the long-run performance of the newly formed form suffers.
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Research suggests (Chapter 7 Strategic Focus) that government ownership of emerging economy firms leads to overpayment in cross-border acquisitions and that overpayment reduces value for minority shareholders (nongovernment shareholders).
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Research suggests that emerging economy firms pay a higher premium than other firms when making cross-border acquisitions (Chapter 7 Strategic Focus).
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Research suggests that wholly-owned subsidiaries and expatriate staff are inappropriate for service industries because those industries require close contact with customers, high levels of professional skills, specialized know-how, and customization.
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Restructuring refers to changes in the composition of a firm's set of businesses or its financial structure.
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Rivals Airbus and Boeing have multiple manufacturing facilities and outsource activities partly for the purpose of developing economies of scale as a source of being able to create value for customers.
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Some cooperative strategies fail when it is discovered that a firm has misrepresented the competencies it can bring to the partnership.
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Some of the costs incurred by firms pursuing international diversification may derive from higher coordination expenses, trade barriers, and lack of familiarity with local cultures.
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Starbucks implements the transnational strategy by using its core competencies to standardize its operations to gain global efficiences while decentralizing decision making responsibilities to local units.
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