SB Chapter 9

A partnership in which at least one partner takes partial ownership in the other is a(n) ______.

Equity alliance

An advantage of using a non-equity alliance to govern a strategic alliance is its ______.

Flexibility and ease of inititation

One reason why a firm might enter into a strategic alliance is to _____.

Hedge against uncertainty

Horizontal integration can ______.

Help a firm improve its strategic position in an industry

A firm must decide whether to build, borrow, or buy to answer the question of ______.

How it will achieve growth

Which of the following are benefits of a horizontal integration? (Check all that apply.)

Increased differentiation Reduced competition

What are some managerial advantages of building a firm into a large organization?

Increased power Greater prestige More job security

Which of the following are the three choices in the build-borrow-or-buy framework? (Check all that apply.)

Internal development. Strategic alliances. Acquisition of new resources.

How does Lyft benefit from its strategic alliances with GM and Waymo?

It allows Lyft to more effectively compete against Uber.

Which of the following is true of tacit 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 market of the future, in which private car ownership model is likely to shift in favor of fleet ownership and management.

Which of the following are true of alliance management capability?

It involves partner selection and alliance formation. It involves alliance design and governance.

The three mechanisms to govern alliances are non-equity alliances, equity alliances, and ______.

Joint venture

What three of the following are the primary benefits of horizontal integration? (Check all that apply.)

Lower costs Increased differentiation A reduction in competitive intensity

Gaining new capabilities or competencies is one of the three main reasons companies ______.

Make acquisitions

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.

Merger; acquisition

The most common type of alliance is a(n) ______.

Non-equity alliance

Match the type of alliance (on the left) with its definition (on the right). Instructions

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

What are the three mechanisms that alliances can be governed by? (Check all that apply.)

Non-equity alliances Equity alliances Joint ventures

What are the two necessary conditions for successful alliance formation? (Check all that apply.)

Partner commitment Partner compatiblity

Although the three tasks of alliance management capability often occur at the same time, in general what is the first phase of alliance management?

Partner selection and alliance formation

What are the phases of alliance management? (Check all that apply.)

Partner selection and alliance formation Post-formation alliance management Alliance design and governance

Horizontal integration is a good option if ______.

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

Horizontal integration can reduce ___.

The threat of entry

Which statements about joint ventures are true?

They are the least common of the three types of strategic alliances. They involve the sharing of both explicit and tacit knowledge

What is a true statement about strategic alliances?

They have a high failure rate

Which of the following statements about equity alliances is true?

They require larger investments than non-equity alliances

Which of the following are reasons why firms enter into strategic alliances? (Check all that apply.)

To enter new markets To learn new capabilities To strengthen their competitive position

Which are the three main reasons firms make acquisitions? (Check all that apply.)

To gain access to new distribution channels and markets To gain access to a new capability or competency To preempt rivals

True or false: A horizontal integration strategy leads to industry consolidation.

True

True or false: Because the size of organizations is typically positively correlated with prestige, power, and pay, principal-agent problems might be a reason to pursue M&As.

True

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

True

When companies get involved in a bidding war and the winner overpays for the acquisition, the acquiring company has fallen victim to the ______.

Winner's curse

Which type of knowledge cannot be codified and can only be gained through active participation in the task?

tacit knowledge

How do mergers and acquisitions differ?

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

Vasily is a manager at a large snack foods company. Vasily believes his company would benefit from being larger and thinks the shareholders would support such growth. The company is doing relatively well but needs to focus on stabilizing profits and expenditures. Vasily pushes for an acquisition anyway. The reason for this acquisition is ______.

A principal-agent problem

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

What allows firms to manage both strategic alliances and mergers and acquisitions?

A relational capability

Which of the following terms refers to when one firm purchases or takes over another firm?

Acquisition

What are three options used by executives to drive firm growth? (Check all that apply.)

Acquisitions Alliances Organic growth

Which term refers to a company's ability to handle the three specific tasks related to an alliance concurrently and effectively?

Alliance management capability

What is a major problem for between 30% and 70% of all strategic alliances?

At least one partner in the alliance considers the venture to be a failure.

At which level of the corporation should strategic alliances and mergers and acquisitions be managed?

At the corporate level

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."

Build-borrow-or-buy

A firm might want to use a strategic alliance to ______.

Change the industry structure

How willing the firms in an alliance are to share necessary resources and make sacrifices in the name of long-term rewards is referred to as partner ______.

Commitment

How well the firms in an alliance fit together culturally is referred to as partner ______.

Compatibility

On average, mergers and acquisitions ______ shareholder value.

Destroy

Which of the following forms of agreement do non-equity alliances typically take? (Check all that apply.)

Distribution Licensing Supply

True or false: Firms tend to enter strategic alliances when they have no other choice.

False

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

False

How does horizontal integration affect Porter's Five Forces for the surviving firms? (Check all that apply.)

It reduces the threat of entry It reduces rivalry among existing firms

A standalone organization that two or more parent companies create and own together is a ___.

Joint venture

A firm with alliance management capability is able to effectively manage which of the following tasks? (Check all that apply.)

Post-formation alliance management Alliance design and governance Partner selection and alliance formation

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 ______.

Real-options perspective

Sources of COSTS in a horizontal integration strategy are ______.

Reduced flexibility Integration failure

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

Strategic

Why does Facebook acquire startups?

Strategic Preemption

A voluntary arrangement between firms to share knowledge, resources, and capabilities to develop products, processes, or services is known as a ______.

Strategic alliance

Equity alliances allow for the sharing of ______, which involves information that cannot be codified for completing tasks.

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