MAN4720 CH 9

In the franchising strategy, the most important competitive advantage for the franchisee is the franchisor's:

brand name.

Firms in a standard-cycle market may form alliances in order to:

capture economies of scale.

Dynamic alliance networks work best in industries:

characterized by frequent product innovations and short product life cycles.

____ strategic alliances have stronger focus on value creation than do ____ alliances.

complementary; competition reducing

In general, cross-border alliances are more ____ and ____ than domestic alliances, especially in emerging markets.

complex; risky

A strategy in which firms work together to achieve a shared objective is a:

cooperative strategy.

A ____ cooperative strategy helps the firm diversify in terms of products offered, markets served, or both.

corporate-level

Offshore Oil Exploration Partners (OOEP) has entered into a cooperative strategy with Malay Petroleum. The resulting documents are long, formal, and detailed. They specify detailed responsibilities of each partner and include methods of monitoring accounting and technical procedures. OOEP and Malay Petroleum are using the ____ management approach.

cost minimization

The Microsoft/Nokia alliance that had hundreds of pages to specify each partner's responsibilities would be closest to the _______ approach to managing cooperative ventures. In contrast, the Renault/Nissan alliance (Chapter 9 Mini Case) was based on trust, respect, and transparency and is an example of the ________ approach to managing cooperative ventures.

cost minimization; opportunity maximization

The two basic approaches to successfully manage cooperative strategic alliances involve ____ and ____.

cost minimization; opportunity maximization

When using cooperative strategies, firms most frequently develop strategic alliances that:

create a competitive advantage.

The collaboration between Volvo Aero (a subsidiary of Sweden's AB Volvo) and U.S.-based Pratt & Whitney to produce a new jet engine would be characterized as a(n):

cross-border strategic alliance.

A state-wide alliance of independent hospitals has formed in order to do group purchasing of medical supplies. Group purchasing allows the hospital alliance to negotiate lower prices with suppliers because of the large quantity of materials ordered. This is an example of the advantage of ____ resulting from an alliance.

economies of scale

Firms entering into synergistic strategic alliances expect to attain

economies of scope.

The three main luxury hotels in a major tourist destination keep very close track of their competitors' room pricing, restaurant offerings, tour packages, and special services, such as airport transportation and spa privileges. When one hotel makes adjustments in prices or offerings, the other hotels follow suit. It is possible that these hotels are:

engaging in tacit collusion.

A strategic alliance in which the partners own different percentages of the new company they have formed is called a(n):

equity strategic alliance.

Japanese telecom NTT DoCoMo Inc. and Chinese Internet search operator Baidu Inc. established an alliance to distribute games and other mobile-phone content. Baidu will own 80 percent of this collaboration with DoCoMo holding the remaining 20 percent. This collaborative arrangement is an example of a(n):

equity strategic alliance.

A relatively young firm has developed a method of transferring photographic images of surface textures onto any type of hard surface. This potentially has a huge market in the home-decorating field as well as any hard surface that is typically painted, such as car bodies. The type of alliance partner this firm would be searching for would be one with:

excess resources for investing.

McDonald's, Hilton International, and Subway all heavily rely on the ____ strategy

franchising cooperative

A businessperson in Atlanta who wishes to develop a luxury pet kennel approaches the owner of the highly successful Pet Resort and Day Spa in Houston to see if the owner is interesting in franchising the Pet Resort brand. The Atlanta businessperson's goal is to:

gain access to Pet Resort's tacit knowledge.

Within the Renault Nissan alliance (Chapter 9 Mini Case), both Renault and Nissan have each formed ____________ strategic alliances at the business-unit level with other companies.

horizontal complementary

FrameCo, a maker of commercial greenhouses, has just extricated itself from a failing cooperative alliance with another firm. The expected synergies never were achieved, and FrameCo lost most of its investment. The top management of FrameCo should:

internalize the knowledge about the successes and failures of this alliance so FrameCo can learn from the experience.

A cooperative strategy:

is a strategy in which firms work together to achieve a shared objective.

The use of strategic alliances:

is more frequent than other types of cooperative strategies.

In a(n) ____, two or more firms create a legally independent company to share some of their resources and capabilities to develop a competitive advantage.

joint venture

Moon Flower cosmetics company executives are aware that their Asian customer base is interested in advanced skin care treatments beyond Moon Flower's traditional herbal and organic compounds. Moon Flower and a large American chemical company are in discussions to create a 50- 50 partnership in a new firm, which would create skin care treatments based on innovative chemical formulations that would be marketed both in Asia and in the United States. Beyond being a cross- border alliance, this partnership can be called a(n):

joint venture.

Fujitsu Siemens Computers is a legally independent company of which Fujitsu and Siemens each own 50 percent. This collaboration is an example of a ________, which is effective at transferring ________.

joint venture; tacit knowledge

In the United States, cooperative strategies to reduce competition may result in ____ if they are explicit.

litigation

DDD Partners, a U.S. business consulting firm is considering a cooperative alliance with an Indian business consulting firm that has a wide practice in the Middle East and Asia. DDD has some European clients, but it sees the Middle East and Asia as growth opportunities. It hopes to learn how to navigate the different cultures and business practices in this part of the world from its alliance with the Indian firm. DDD's greatest risk here is that the Indian firm will:

not fully share its intangible resources.

For the purpose of diversification, a corporate-level cooperative strategy may be preferable to a merger or acquisition for all the following reasons EXCEPT:

opportunistic behaviors are less likely.

Reduction of competition can be accomplished through all of the following EXCEPT:

predatory alliances.

A competitive advantage that is developed through a cooperative strategy is called a collaborative or a(n) ____ advantage.

relational

Firms participate in strategic alliances for all the following reasons EXCEPT to:

retain tight control over intangible core competencies.

U.S. Steel and Nucor (the two remaining major players in the U.S. steel industry) have been forming alliances as a means to enter markets in Europe and Asia. The steel industry is an example of a ________ market in which firms typically use alliances to gain market access.

slow-cycle

In a cross-border alliance, the local partner is often a useful source of information about:

sources of capital.

One disadvantage of developing effective monitoring systems to manage a strategic alliance is that:

spontaneous opportunities are minimized.

In some countries, the only legal way for foreign firms to invest in the country is through:

strategic alliance with a local firm.

In the Chapter 9 Mini Case, the cooperation between Fiat and Chrysler to produce a Fiat- designed car in Chrysler's Illinois factory is a(n) _________ alliance because it allows the firms to share resources and capabilities across multiple functions.

synergistic

The Renault Nissan alliance discussed in the Mini Case is an example of a ________ in that the firms seek to create economies of scope by sharing their resources and capabilities to develop manufacturing platforms that can be used to produce cars that will be either a Renault or a Nissan.

synergistic alliance

A ____________ is a strategy in which firms share some of their resources and capabilities to create economies of scope and is similar to the business-level horizontal complementary alliance

synergistic strategic alliance

The Renault Nissan alliance (Chapter 9 Mini Case) is an example of a _______ created to gain economies of scope by sharing resources and capabilities.

synergistic strategic alliance

All of the following are business-level cooperative strategic alliances EXCEPT:

synergistic strategic alliances.

The fact that the prices consumers pay for branded breakfast cereals are above the prices that would exist if there were true competition suggests that the cereal manufacturers are engaging in:

tacit collusion.

The opportunity maximization approach is more difficult to establish in international relationships than in domestic relationships because of differences in all EXCEPT:

technology.

In free-market economies, ____ must decide how rivals can collaborate with their competitors without violating established regulations.

the government

To increase the likelihood of success between partners assuming that trust exists, ____ approach(es) should be used to manage cooperative strategies.

the opportunity maximization

Legitimately, a firm may pursue an international strategic alliance for all of the following reasons EXCEPT:

to enhance the compensation packages of top managers.

The primary responsibility of the franchisor, such as McDonald's or Hilton International is to:

transfer to the franchisee knowledge and skills needed to compete at the local level.

In managing cooperative strategies, research indicates that ____ can be a capability that is valuable, rare, imperfectly imitable, and often nonsubstitutable giving these firms a competitive advantage.

trustworthiness

A nonequity strategic alliance exists when:

two or more firms have a contractual relationship to share resources and capabilities.

The two types of complementary strategic alliances are:

vertical and horizontal.

A manufacturer of specialty jams and jellies has decided to ally itself with an orchard and vineyard growing rare strains of fruit. This is a(n) ____ strategy.

vertical complementary

Of the various business-level strategic alliances, ____ alliances have the most probability of creating sustainable competitive advantage, and ____ have the lowest.

vertical complementary; competition reducing

Which of the following statements is TRUE?

As many as 50 percent of cooperative strategies fail.

BPM Corp. is a manufacturer of radar systems for regional-sized jet aircraft. The company has announced plans to enter into a joint venture with J3 Composites, a producer of advanced composite materials. The announced venture will produce a new, combined product consisting of the radar unit and protective composite cover. Which of the following ownership arrangements would be most typical for a joint venture?

BPM and J3 will both own 50 percent of the venture and a new company will be formed.

Meredith Inc. is a manufacturer of art supplies. The company has announced plans to enter into an equity strategic alliance with JaZz Paper to develop a line of specialty papers for use with a line of specialty paints Meredith manufactures. Which of the following would be the accurate interpretation of this announcement?

Either Meredith or JaZz will own a majority equity stake, but we do not know which one based on the announcement.

Which of the following statements is FALSE?

Franchising agreements require more trust between firms than do other cooperative strategies.

Which of the following is NOT a risk for firms engaged in cooperative strategies?

Insufficient variation in firms' core competencies

Which type of strategic alliance is best at passing tacit knowledge between firms?

Joint ventures

Burgess Corp. manufactures a line of heavy construction equipment. The company has announced a contractual relationship with FS Electronics whereby FS will supply Burgess with advanced GPS navigation and guidance systems. These systems will be an option on all bulldozers, dump trucks, and road graders Burgess produces. What type of alliance is this?

Nonequity strategic alliance

The risks of being accused of collusion are MOST likely under what type of alliance?

Nonequity-based horizontal complementary alliance

Amylin Pharmaceuticals has an alliance with Eli Lilly & Co. to produce diabetes drugs. Lilly, however, recently signed an alliance agreement with another company to also produce diabetes drugs. As a result, Amylin sued Lilly for breach of the alliance agreement. Which of the following risks of cooperative strategies discussed in the chapter is most likely occurring here?

Opportunistic behavior

Why are alliances in the airline industry unstable?

The alliances require cooperation among firms that must also compete with one another.

In practice, the cost minimization strategy can be more expensive than the opportunity maximization strategy. Which of the following is a way in which the cost minimization strategy is less expensive than the opportunity minimization strategy?

The prevention of opportunistic behavior by the partner(s)

____ are LEAST likely to involve potential or current competitors.

Vertical complementary strategic alliances

Greentech, Inc., is a bioengineering firm specializing in food crops. It is considering a cooperative alliance with an Asian agribusiness firm, AsiaFoods, to jointly produce improved crops for the Asian market. The risks that Greentech should consider before entering this alliance include all of the following EXCEPT:

Will Greentech be able to use a cost-minimization management strategy in the AsiaFoods alliance?

Mutual forbearance is:

a type of competition-reducing strategy.

Stable alliance networks will most often:

appear in mature industries where demand is relatively constant and predictable.