Ch 9 Strategic MGMT

Know what is meant by business-level cooperative strategy and the differences between the strategies o Competition-reducing strategy

Used to reduce competition, collusive strategies differ from strategic alliances in that collusive strategies are often an illegal cooperative strategy. Explicit collusion and tacit collusion are the two types of collusive strategies.

Know what is meant by business-level cooperative strategy and the differences between the strategies § Horizontal

A horizontal complementary strategic alliance is an alliance in which firms share some of their resources from the same stage (or stages) of the value chain for the purpose of creating a competitive advantage. Automobile manufacturers make frequent use of this type of alliance, as do pharmaceutical companies.

Know the types of strategic alliances and how they are different from one another o Joint-venture

A joint venture is a strategic alliance in which two or more firms create a legally independent company to share some of their resources to create a competitive advantage. Typically, partners in a joint venture own equal percentages and contribute equally to the venture's operations. Often formed to improve a firm's ability to compete in uncertain competitive environments, joint ventures can be effective in establishing long-term relationships and in transferring tacit knowledge between partners.

Know the types of strategic alliances and how they are different from one another o Nonequity strategic alliance

A nonequity strategic alliance is an alliance in which two or more firms develop a contractual relationship to share some of their resources to create a competitive advantage In this type of alliance, firms do not establish a separate independent company and therefore do not take equity positions. For this reason, nonequity strategic alliances are less formal, demand fewer partner commitments than do joint ventures and equity strategic alliances, and generally do not foster an intimate relationship between partners;

Strategic Alliance

A strategic alliance is a cooperative strategy in which firms combine some of their resources to create a competitive advantage. Strategic alliances involve firms with some degree of exchange and sharing of resources to jointly develop, sell, and service goods or services.

Understand the reasons firms develop strategic alliances based on market types (Figure 9.1) o Fast-cycle markets

Alliances between firms with current excess resources and those with promising resources help companies competing in fast-cycle markets effectively transition from the present to the future and gain rapid entry into new markets. As such, a "collaboration mindset" is of paramount importance for firms competing in fast-cycle markets

Know the types of strategic alliances and how they are different from one another o Equity strategic alliance

An equity strategic alliance is an alliance in which two or more firms own different percentages of a company that they have formed by combining some of their resources to create a competitive advantage. sometimes form equity alliances in order to refocus their strategy as a means of creating a competitive advantage.

Explicit collusion

Explicit collusion exists when two or more firms negotiate directly to jointly agree about the amount to produce as well as the prices for what is produced.Footnote Explicit collusion strategies are illegal in the United States and most developed economies

Understand the reasons firms develop strategic alliances based on market types (Figure 9.1) o Slow-cycle markets

Firms in slow-cycle markets often use strategic alliances to enter restricted markets or to establish a franchise in a new market. Firms competing in slow-cycle markets should recognize the likelihood that in the future, they will encounter situations in which their competitive advantages become partially sustainable (standard cycle) or unsustainable (fast-cycle market) Very rare in the 21st century

Know what is meant by business-level cooperative strategy and the differences between the strategies o Uncertainty-reducing strategy

Firms sometimes use business-level strategic alliances to hedge against risk and uncertainty, especially in fast-cycle markets. These strategies are also used where uncertainty exists, such as in entering new product markets, especially those within emerging economies.

Understand the reasons firms develop strategic alliances based on market types (Figure 9.1) o Standard-cycle markets

In standard-cycle markets, alliances are more likely to be made by partners that have complementary resources. The alliances formed by airline companies are an example of standard-cycle market alliances.

Tacit collusion

Tacit collusion exists when several firms in an industry indirectly coordinate their production and pricing decisions by observing each other's competitive actions and responses. Tacit collusion tends to take place in industries dominated by a few large firms

Based on what you know about the various cooperative strategies, which is the most costly to implement? a. Corporate-level cooperative strategy b. Business-level cooperative strategy c. Strategic alliance d. Network cooperative strategy

a. Corporate-level cooperative strategy

What are the advantages of choosing a vertical complementary strategic alliance versus a horizontal complementary strategic alliance? a. Firms can partner to share resources for separate parts of the value chain, which helps them if they are pursuing projects in which they do not have previous experience in specific stages of the value chain. b. Firms can partner to share resources for the same parts of the value chain, which helps them if they are pursuing projects in which they do not have previous experience in specific stages of the value chain. c. Firms can prevent their partners from having access to their most valuable resources, which helps the firms prevent opportunistic behavior by their partners. d. A firm can give its partner access to its most valuable resources, which enables both partners to maximize its success.

a. Firms can partner to share resources for separate parts of the value chain, which helps them if they are pursuing projects in which they do not have previous experience in specific stages of the value chain.

How is an opportunity maximization approach a more effective alternative to the cost minimization approach of managing cooperative strategy? a. Opportunity maximization comes with a high level of trust between partners, which lead to an increased likelihood of success. b. Opportunity maximization enables firms to decrease their cost structure, which leads to an increased likelihood of success. c. Opportunity maximization leads to more definite contractual obligations for each partner, which leads to an increased likelihood of success. d. Opportunity maximization allows firms to take advantage of each other's resources without limitations imposed by one another.

a. Opportunity maximization comes with a high level of trust between partners, which lead to an increased likelihood of success.

In order to remain relevant, firms must explore opportunities to maintain or increase their competitive advantage at all times. In doing so, some opportunities may be out of reach of the firm's normal capabilities. By entering into strategic alliances, how can a firm achieve competitive advantage? a. Partnering with another firm in a strategic alliance and trading valuable resources enables both firms to further develop their products or markets to gain competitive advantage. b. Both firms can achieve competitive advantage over one another, even if they are operating in the same product market by using each other's most valuable resources. c. Both firms can behave opportunistically towards one another to keep the other from gaining competitive advantage. d. One firm can gain competitive advantage by taking advantage of its partner's resources and giving its partner less valuable resources.

a. Partnering with another firm in a strategic alliance and trading valuable resources enables both firms to further develop their products or markets to gain competitive advantage.

The main objective of the collaborating firms in a cooperative strategy is to: a. increase competitive advantage. b. neutralize each other's competitive advantage. c. decrease the other's competitive advantage. d. decrease both partners' competitive advantage.

a. increase competitive advantage.

When firms create a strategic alliance in a cooperative strategy, they are seeking to create a competitive advantage by combining: a. resources. b. finances. c. expertise. d. production power.

a. resources.

When a company in a cooperative strategy is implementing mechanisms to ensure that its partner does not use its trade secrets to benefit outside the relationship and alone, a firm is practicing which cooperative strategy management practice? a. Cost maximization b. Cost minimization c. Opportunistic minimization d. Opportunity maximization

b. Cost minimization

Risks associated with cooperative strategies include a partner's failure to present its resources to the other, as well as one firm acting opportunistically towards the other with the use of the partner's resources. How can these two risks be a result of each other? a. If a firm acts fairly towards its partner, the partner might misrepresent its resources in order to keep the firm from gaining any more access. b. If one firm feels that the other will act opportunistically, it might withhold its promised resources to keep the partner from gaining access to proprietary information. c. If one firm presents its resources first, the other will not present its resources to compete against the partner. d. When one firm doesn't present its resources, it is likely that it is going to try to act opportunistically towards its partner.

b. If one firm feels that the other will act opportunistically, it might withhold its promised resources to keep the partner from gaining access to proprietary information.

A common reason firms enter into cross-border strategic alliances is: a. for complete control over their foreign operations. b. limited domestic growth opportunities and foreign government economic policies. c. abundance of domestic growth opportunities and foreign government economic policies. d. help from domestic partners from an operational perspective.

b. limited domestic growth opportunities and foreign government economic policies.

Know what is meant by business-level cooperative strategy and the differences between the strategies o Complementary strategic alliances § Vertical § Horizontal

business-level alliances in which firms share some of their resources in complementary ways to create a competitive advantage. Vertical and horizontal are the two dominant types of complementary strategic alliances

A business-level strategy in which firms share some of their resources from the same stage (or stages) of the value chain for the purpose of creating a competitive advantage is a definition of which strategy? a. Complementary strategic alliance b. Vertical complementary strategic alliance c. Horizontal complementary strategic alliance d. Uncertainty reducing strategy

c. Horizontal complementary strategic alliance

Which is not a risk associated with cooperative strategic alliances? a. When a firm misrepresents the resources it brings to the partnership b. When a firm fails to make the resources available to its partner c. When a firm and its partner agree not to act opportunistically toward each other d. When a firm makes investments that are specific to the alliance while the other partner does not

c. When a firm and its partner agree not to act opportunistically toward each other

When a firm uses a franchise as a form of corporate-level strategy, the franchisee gains the license of the franchisor's trademark and method of doing business through: a. a one-time royalty fee. b. an ongoing franchise royalty rate. c. an initial franchise fee and ongoing royalty rate. d. an initial franchise fee

c. an initial franchise fee and ongoing royalty rate.

As web development continues to grow as a career field, more and more education options are being created for interested mid-career professionals. A software firm that has developed online courses for people to learn web development has decided to partner with a popular computer manufacturer to build a laptop with a special keyboard and interface elements for web development education. The idea comes after a competitor implemented a similar cooperative strategy to develop a smartphone interface compatible with educational software. The following is a motive for the education and computer firms to implement a cooperative strategy: a. to minimize their rivals' returns. b. to gain a higher a price point than their rivals. c. to outperform rivals with a similar idea. d. to neutralize competition with rivals.

c. to outperform rivals with a similar idea.

Know what is meant by business-level cooperative strategy and the differences between the strategies o Competition response strategy

competitors initiate competitive actions (strategic and tactical) to attack rivals and launch competitive responses (strategic and tactical) to their competitors' actions. Strategic alliances can be used at the business level to respond to competitors' attacks.

If firms did not participate in cross-border strategic alliances, what might happen for firms expanding internationally? a. Firms would be more successful in entering a foreign market because they would not be minimally influenced by other firms. b. Firms would be more successful in their domestic markets because they would not be as concerned with establishing themselves in a foreign market. c. There would be no measurable impact if firms did not implement cross-border strategic alliances. d. Firms would struggle to implement international strategies without the ability to use the resources and expertise of local firms in the foreign markets they are trying to enter.

d. Firms would struggle to implement international strategies without the ability to use the resources and expertise of local firms in the foreign markets they are trying to enter.

Why would firms choose to use complementary strategic alliances? a. To reduce competition b. To launch competitive responses to their competitor's actions c. To expand operations d. To focus on long-term product development and distribution opportunities

d. To focus on long-term product development and distribution opportunities

Know what is meant by business-level cooperative strategy and the differences between the strategies § Vertical

vertical complementary strategic alliance, firms share some of their resources from different stages of the value chain for the purpose of creating a competitive advantage. Oftentimes, vertical complementary alliances are formed to adapt to environmental changes; sometimes the changes represent an opportunity for partnering firms to innovate while adapting.