Strategic MGMT Chpt 9

A __________ is a strategy in which firms share some of their resources to create economies of scope and is similar to the business-level horizontal complementary strategic alliance. a. joint venture b. synergistic strategic alliance c. diversifying strategic alliance d. dynamic alliance network

. synergistic strategic alliance

A stable alliance network is used in industries characterized by frequent product innovations and short product life cycles.

F

A cross-border strategic alliance can help foreign partners from an operational perspective because the local partner can share information about factors contributing to competitive success.

T

In free-market economies, __________ must decide how rivals can collaborate with their competitors without violating established regulations. a. individual businesses b. the government c. consumers d. the business community

the government

The two dominant types of complementary strategic alliances are: a. vertical and horizontal. b. macro and micro. c. outsourcing and insourcing. d. network and complementary.

vertical and horizontal.

Of the various business-level strategic alliances, __________ alliances have the most probability of creating sustainable competitive advantage, and __________ have the lowest. a. horizontal complementary; vertical complementary b. vertical complementary; competition-reducing c. competition-reducing; horizontal complementary d. uncertainty-reducing; competition-reducing

vertical complementary; competition-reducing

International strategic alliances are less risky than domestic strategic alliances because of diversification across countries.

F

Which of the following types of strategic alliance is best at passing tacit knowledge between partners? a. Primary cooperative strategic alliances b. Joint ventures c. Equity strategic alliances d. Nonequity strategic alliances

Joint ventures

Mutual forbearance is: a. illegal in the United States. b. a type of competition-reducing strategy. c. a variety of risk-sharing by firms in highly fragmented industries. d. exercised when alliance partners refrain from opportunistic behaviors.

a type of competition-reducing strategy.

In general, cross-border strategic alliances are more __________ and __________ than domestic strategic alliances, especially in emerging markets. a. uncertainty-reducing; diversifying b. complex; risky c. highly leveraged; tightly monitored d. flexible; trust-based

complex; risky

A strategy in which firms work together to achieve a shared objective is a: a. functional-level strategy. b. business-level strategy. c. corporate-level strategy. d. cooperative strategy.

cooperative strategy.

A(n) __________ cooperative strategy helps firms diversify in terms of products offered, markets served, or both. a. corporate-level b. business-level c. national-level d. industry-level

corporate-level

When using cooperative strategies, firms most frequently develop strategic alliances that: a. enhance the firm's reputation in the marketplace. b. are long-lived. c. will reduce the firm's political risk. d. create a competitive advantage.

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): a. collusive tactic. b. merger. c. cross-border strategic alliance. d. international acquisition.

cross-border strategic alliance.

The Renault Nissan alliance 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. a. joint venture b. synergistic alliance c. horizontal complementary alliance d. dynamic alliance network

synergistic alliance

The Renault Nissan alliance is an example of a __________ created to gain economies of scope by sharing resources and capabilities. a. diversifying strategic alliance b. vertical complementary alliance c. synergistic strategic alliance d. nonequity-based horizontal complementary alliance

synergistic strategic alliance

All of the following are business-level cooperative strategic alliances EXCEPT: a. synergistic strategic alliances. b. uncertainty-reducing strategic alliances. c. complementary strategic alliances. d. competition-response strategic alliances.

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: a. excessive cooperation. b. joint ventures. c. tacit collusion. d. horizontal strategic alliances.

tacit collusion.

Which of the following statements is true? a. Most cooperative strategies are successful if the basic agreements are well written and include appropriate monitoring strategies. b. As many as 50 percent of cooperative strategies fail. c. Opportunistic behaviors are usually focused on gaining the use of the partner's manufacturing and financial resources. d. Problems with international cooperative strategies usually concern financial-system differences between the partners.

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? a. BPM will own more than 50 percent of the venture and a new company will be formed. b. J3 will own more than 50 percent of the venture and a new company will be formed. c. BPM and J3 will both own 50 percent of the venture and a new company will be formed. d. BPM and J3 will both own 50 percent of the venture but no new company will be formed.

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

__________ strategic alliances have a stronger focus on value creation than do __________ alliances. a. Competition-reducing; complementary b. Complementary; competition-reducing c. Uncertainty-reducing; complementary d. Collusive; uncertainty-reducing

Complementary; competition-reducing

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 MOST accurate interpretation of this announcement? A. Meredith will own a majority equity stake in the new venture. B. JaZz will own a majority equity stake in the new venture. C. Meredith or JaZz will own an equal equity stake in the new venture. d Either Meredith or JaZz will own a majority equity stake, but we do not know which one based on the announcement.

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

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 cross-border strategic alliance occurs when firms based in the same country combine their resources to create a competitive advantage that can be realized in international markets.

F

A major pharmaceutical company formed a nonequity strategic alliance with an outsourcing firm to monitor its drug safety claims. The outsourcing firm did not have the requisite knowledge to identify all possible side effects and categorize their severity. This best illustrates the risk associated with inadequate contracts.

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

Acquisitions are the most common cooperative strategy used in standard-cycle markets.

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

Because of U.S. legal restrictions concerning large foreign acquisitions, American firms can only enter into diversifying alliances with other U.S. firms.

F

Close monitoring, formal contracts, and constant vigilance against opportunism increase the probability of alliance success

F

Cooperation in slow-cycle markets is extremely rare because these industries are declining.

F

Even though they take place in almost every industry, the number of cross-border strategic alliances has been steadily decreasing, probably because of their complexity.

F

Firms often pursue international mergers and acquisitions instead of forming a cross-border strategic alliance because of the increased risk associated with the alliances.

F

Franchising is most attractive in concentrated industries.

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 the cost-minimization approach to managing competitive strategies, the relationship between the firms is based on trust of the other partner.

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

Part of the attractiveness of cross-border alliances is that the full range of entry modes is available in virtually all countries in which firms seek to geographically diversify.

F

Renault and Nissan Motor Company have formed vertical complementary strategic alliance to create synergy.

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 because it results in higher prices for consumers.

F

Using business-level strategic alliances to hedge against risk and uncertainty is most common in the slow-cycle markets.

F

Which of the following statements is false? a. Franchising is most appropriate in fragmented industries. b. Franchising provides corporate growth with less risk than do mergers and acquisitions. c. Successful franchising allows transfer of knowledge and skills from the franchisor to the franchisee. d. Franchising agreements require more trust between firms than do other cooperative strategies.

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

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. Which of the following types of alliance is this? a. Joint venture b. Equity strategic alliance c. Nonequity strategic alliance d. Competition reduction alliance

Nonequity strategic alliance

The risks of being accused of collusion are MOST likely under which of the following types of alliance? a. Equity-based vertical complementary alliance b. Equity-based horizontal complementary alliance c. Nonequity-based vertical complementary alliance d. Nonequity-based horizontal complementary alliance

Nonequity-based horizontal complementary alliance

If a firm pursues a strategic alliance in order to reduce industry overcapacity, that firm most likely operates in what type of market? a. Slow-cycle b. Moderate-cycle c. Standard-cycle d. Fast-cycle

Standard-cycle

A strategic alliance is a cooperative strategy in which firms combine some of their resources to create a competitive advantage.

T

An alliance can be used as a way to determine whether the partners might benefit from a future merger.

T

Collusion is a form of cooperative strategy

T

EllEx Enterprises is entering into a cooperative strategy with YRPA. In order to have the best chance of success, the managers of this strategy should concentrate equally on both tangible and intangible assets.

T

Firms develop a competitive advantage when they are able to develop corporate-level cooperative strategies and manage them in ways that are valuable, rare, imperfectly imitable, and nonsubstitutable.

T

Firms in slow-cycle markets often use strategic alliances to enter restricted markets or to establish a franchise in a new market.

T

Franchising is an alternative to pursuing growth through mergers and acquisitions.

T

High levels of trust allow less formal contracts to govern the relationship between alliance partners and increase the likelihood of alliance success.

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

Network cooperative strategies among Silicon Valley firms have been successful, in part, because they are geographically close together.

T

Of the four business-level cooperative strategies, the competition-reducing strategy has the lowest probability of creating a sustainable advantage.

T

One area in which joint ventures are effective is the transfer of tacit knowledge as illustrated in the joint venture that created Shanghai GM Co.

T

Only about 50 percent of cooperative strategies succeed.

T

Research in the airline industry suggests that tacit collusion reduces service quality and on-time performance.

T

Some cooperative strategies fail when it is discovered that a firm has misrepresented the resources it can bring to the partnership.

T

Strategic alliances have become the cornerstone of many firms' competitive strategy, particularly large global competitors.

T

Tacit collusion is not necessarily illegal in the United States even though it results in higher prices for consumers.

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 cost-minimization approach of managing alliances is more expensive to put into place and to use than is the opportunity-maximization management approach.

T

When two or more firms form a new company in which they each own different percentages, they have entered into an equity strategic alliance.

T

For which of the following reasons are alliances in the airline industry unstable? a. Unstable industries make for unstable alliances. b. The potential for firms to take opportunistic actions is too widespread. c. The industry is declining and profits are not sufficient to divide among alliance partners. d. The alliances require cooperation among firms that must also compete with one another.

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

What might be a reason that the number of cross-border alliances are continuing to increase? a. They are relatively easy to manage. b. They can occur in virtually all industries. c. They create value in the home market. d. They are riskier than mergers, but not as risky as acquisitions.

They can occur in virtually all industries.

__________ are LEAST likely to involve potential or current competitors. a. Mutual forbearance strategies b. Tacit collusion strategies c. Horizontal complementary strategic alliances d. Vertical complementary strategic alliances

Vertical complementary strategic alliances

Stable alliance networks will most often: a. be used to enhance a firm's internal operations. b. appear in mature industries where demand is relatively constant and predictable. c. emerge in industries with short product life cycles. d. emerge in declining industries as a way to increase process innovations.

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

In the franchising strategy, the most important competitive advantage for the franchisee is usually the franchisor's: a. brand name. b. capital resources. c. access to a consolidated market. d. geographic locations.

brand name.

Dynamic alliance networks work best in industries: a. characterized by frequent product innovations and short product life cycles. b. that are mature and stable in nature. c. where the coordination of product and global diversity is critical. d. that are characterized by predictable market cycles and demand.

characterized by frequent product innovations and short product life cycles.

A statewide 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. a. explicit collusion b. economies of scale c. opportunistic behavior d. distribution opportunities

economies of scale

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: a. engaging in tacit collusion. b. following uncertainty-reducing strategies. c. monitoring business competitors for opportunistic behaviors. d. following a competitive response strategy.

engaging in tacit collusion.

Legitimately, a firm may pursue an international strategic alliance for all of the following reasons EXCEPT to: a. enhance the compensation packages of top managers. b. leverage core competencies in new markets. c. operate within government restrictions in the local country. d. escape limited domestic growth opportunities.

enhance the compensation packages of top managers.

A strategic alliance in which the partners own different percentages of the new company they have formed is called a(n): a. equity strategic alliance. b. joint venture. c. nonequity strategic alliance. d. cooperative arrangement.

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): a. joint venture. b. network strategy .c. equity strategic alliance. d. nonequity strategic alliance.

equity strategic alliance.

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. a. vertical complementary b. horizontal complementary c. uncertainty-reducing d. network

ertical complementary

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 market containing products with a 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: a. low-cost labor production facilities in another country. b. similar products that could help the firm establish economies of scale. c. access to franchises in new markets. d. excess resources for investing.

excess resources for investing.

McDonald's, Hilton International, and Subway all license their trademarks and methods to other businesses. In doing so, they rely on the __________ strategy. a. transnational b. network cooperative c. cross-border alliances d. franchising

franchising

. 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: a. get venture capital from Pet Resort. b. gain access to Pet Resort's tacit knowledge. c. collude with Pet Resort to diminish competition in the kennel industry in Atlanta. d. join in a vertical complementary alliance with Pet Resort.

gain access to Pet Resort's tacit knowledge.

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: a. avoid future cooperative alliances because they lack the skills needed to manage them successfully. b. enter into future cooperative alliances only if the alliance is closely monitored by a third party to prevent opportunistic behavior by the alliance partner. c. realize that most cooperative alliances fail and that it should ally itself only with an experienced alliance partner in the future. d. internalize the knowledge about the successes and failures of this alliance so FrameCo can learn from the experience.

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

The use of strategic alliances: a. is unlikely to yield success if partnering firms are headquartered in the same country. b. may be too restrictive to facilitate entry into new markets. c. usually increases the investment necessary to introduce new products. d. is more frequent than other types of cooperative strategies.

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 to create a competitive advantage. a. equality-based strategic alliance b. nonequity strategic alliance c. joint venture d. equity strategic alliance

joint venture

Moon Flower Cosmetics Company's 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 the United States. Beyond being a cross-border alliance, this partnership can be called a(n): a. nonequity strategic alliance. b. joint venture. c. horizontal complementary alliance. d. equity strategic alliance.

joint venture.

In the United States, cooperative strategies to reduce competition may result in __________ if they are explicit. a. increased tax liabilities b. litigation c. government takeover of the firms d. dissolution of the firm

litigation

For the purpose of diversification, a corporate-level cooperative strategy may be preferable to a merger or acquisition for all of the following reasons EXCEPT: a. a host nation may forbid a merger or acquisition. b. opportunistic behaviors are less likely. c. cooperative strategies require fewer resources. d. cooperative strategies allow greater flexibility to diversify.

opportunistic behaviors are less likely.

In a franchising strategy, the franchisee __________ to the franchisor. a. licenses its trademark b. pays an initial franchise fee and ongoing royalties c. licenses its method of doing business d. pays an ongoing franchise fee

pays an initial franchise fee and ongoing royalties

Fujitsu Siemens Computers is a legally independent company of which Fujitsu and Siemens each own 50 percent. This collaboration is an example of a(n) __________, which is effective at transferring __________. a. nonequity strategic alliance; explicit knowledge b. joint venture; tacit knowledge c. joint venture; explicit knowledge d. equity strategic alliance; tacit knowledge

point venture; tacit knowledge

Reduction of competition can be accomplished through all of the following EXCEPT: a. predatory alliances. b. explicit collusion. c. tacit collusion. d. mutual forbearance.

predatory alliances.

A competitive advantage developed through a cooperative strategy often is called a collaborative or __________ advantage. a. economic b. collusive c. alliance d. relational

relational

Firms participate in strategic alliances for all of the following reasons EXCEPT to: a. create value that they could not develop by acting independently. b. enter competitive markets more quickly .c. gain access to resources. d. retain tight control over intangible core competencies.

retain tight control over intangible core competencies.

One reason to use a strategic alliance in a fast-cycle market is to: a. maintain market stability. b. share risky R&D expenses. c. gain access to complementary resources. d. overcome trade barriers.

share risky R&D expenses.

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(n) __________ market in which firms typically use alliances to gain market access. a. fast-cycle b. standard-cycle c. slow-cycle d. intermediate-cycle

slow-cycle

In a cross-border alliance, the local partner is often a useful source of information about: a. sources of capital. b. the strengths of the foreign firm's technology. c. market synergies. d. long-term planning.

sources of capital.

In some countries, the only legal way for foreign firms to invest in the country is through: a. acquisitions. b. mergers. c. greenfield ventures. d. strategic alliance with a local firm.

strategic alliance with a local firm.

Fiat and Chrysler cooperated to produce a Fiat-designed car in Chrysler's Illinois factory. This is a(n) __________ alliance because it allows the firms to share resources and capabilities across multiple functions. a. synergistic b. opportunistic c. horizontal d. diversifying

synergistic

The primary responsibility of the franchisor, such as McDonald's or Hilton International, is to: a. learn about the brand and technology from the franchisee. b. test the franchisee for potential future acquisition. c. transfer to the franchisee knowledge and skills needed to compete at the local level. d. provide feedback to the franchisee regarding how the franchisor could become more effective and efficient.

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

A nonequity strategic alliance exists when: a. two firms join together to create a new company. b. two or more firms develop a contractual relationship to share some of their resources to create a competitive advantage. c. two partners in an alliance own unequal shares in the combined entity. d. the partners agree to sell bonds instead of stock in order to finance a new venture.

two or more firms develop a contractual relationship to share some of their resources to create a competitive advantage.