GEB4981 Learnsmart Ch9
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 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.
A partnership that is based on contracts between companies is referred to as a(n) ______.
non-equity alliance
Which bodies regulate mergers and acquisitions?
- Federal Trade Commission - European Commission
What are downsides of equity alliances? (Check all that apply.)
- The time and effort for assembling the partnership - The amount of investment involved
What are three advantages of equity alliances? (Check all that apply.)
- a window into new technology (option value) - stronger ties - possible emergence of trust and commitment
Sources of COSTS in a horizontal integration strategy are ______.
- reduced flexibility - integration failure
Which of the following are reasons why firms enter into strategic alliances? (Check all that apply.)
- to enter new markets - to strengthen their competitive position - to learn new capabilities
Which of the following is a disadvantage of a joint venture?
Knowledge shared with the new partner could be misappropriated by opportunistic behavior.
Which of the following occurs when a targeted firm is unwillingly acquired?
a hostile takeover
Marketing, manufacturing, and after-sale service are examples of ______.
critical complementary assets
Which of the following are advantages of joint ventures? (Check all that apply.)
- commitment - strong ties - trust
What are sources of value creation in a horizontal integration strategy? (Check all that apply.)
- reduction in competitive intensity - lower costs
When competitors enter strategic alliances and become collaborators, ______ ensues and can result in learning races.
co-opetition
Which type of knowledge cannot be codified and can only be gained through active participation in the task?
tacit knowledge
What are common reasons a firm might pursue a merger? (Check all that apply.)
- To address principal-agent problems - To gain superior acquisition and integration capability - To overcome competitive disadvantage
What are the most expensive, complicated, and difficult to undo options used to grow a firm?
- acquisitions - mergers
What are the three mechanisms that alliances can be governed by? (Check all that apply.)
- non-equity alliances - joint ventures - equity alliances
What are the two necessary conditions for successful alliance formation? (Check all that apply.)
- partner compatibility - partner commitment
What are the phases of alliance management? (Check all that apply.)
- partner selection and alliance formation - post-formation alliance management - alliance design and governance
An unfriendly acquisition of one company of another is known as a(n) ______.
hostile takeover
At which level of the corporation should strategic alliances and mergers and acquisitions be managed?
at the corporate level
How can firms build alliance management capability?
through repeated experiences over time
What is the main goal of corporate venture capital investments?
to create real options in terms of gaining access to new technologies
Which of the following is true of firms' acquisition and integration capabilities?
Some firms can consistently use mergers and acquisitions to increase their competitive advantage.
True or false: Firms can use strategic alliances to strengthen their competitive advantage when competing in battles to control industry standards.
True
A firm might want to use a strategic alliance to ______.
change the industry structure
How well the firms in an alliance fit together culturally is referred to as partner ______.
compatibility
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.
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
In general, if a resource is highly tradable, then it should be ______ using a license or contractual agreement.
borrowed
A firm has a core competency in R&D but little else, so it enters into a strategic alliance with a larger firm to gain distribution channels and marketing expertise. In this case, distribution channels and marketing expertise would be examples of ______.
critical complementary assets
When Pfizer and Wyeth merged, they reduced the size of their combined sales force while also increasing the number of drugs they could promote. This is an example of which source of value creation for M&As?
decreased costs
What must strategic alliances do in order to create the foundation for a competitive advantage?
form unique resource combinations that obey the VRIO criteria
Horizontal integration can ______.
help a firm improve its strategic position in an industry
Gaining new capabilities or competencies is one of the three main reasons companies ______.
make acquisitions
Why do incumbent companies enter into strategic alliances with startups?
to hedge against uncertainty
In order to build alliance management capabilities in small companies, it is recommended that firms take the ______ approach.
"learning-by-doing"
Which of the following are true of alliance management capability? (Select all that apply.)
- A firm may need to employ it with several different alliances. - It involves partner selection and alliance formation.
What are the components of post-formation alliance management? (Check all that apply.)
- Establish knowledge-sharing routines. - Make relation-specific investments. - Build inter-firm trust.
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.
Strategy scholars believe that firms should create a dedicated alliance function with which of the following features? (Check all that apply.)
- It should have its own resources and support staff. - It should be led by a vice president or director of alliance management.
What are true statements about mergers and acquisitions?
- Some firms are able to successfully complete mergers and acquisitions. - There is an unequal distribution of acquisition and integration capabilities across firms.
A firm with alliance management capability is able to effectively manage which of the following tasks? (Check all that apply.)
- alliance design and governance - partner selection and alliance formation - post-formation alliance management
Eli Lilly, a company known for its alliance management, manages its alliances using a three-person team consisting of which of the following? (Check all that apply.)
- an alliance manager - an alliance champion - an alliance leader
What are some managerial advantages of building a firm into a large organization? (Check all that apply.)
- increased power - more job security - greater prestige
What three of the following are the primary benefits of horizontal integration? (Check all that apply.)
- lower costs - a reduction in competitive intensity - increased differentiation
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
Which of the following are the three choices in the build-borrow-or-buy framework? (Check all that apply.)
- strategic alliances - acquisition of new resources - internal development
Why might a firm create a joint venture when entering a new geographic market?
- to access local contacts - to adhere to local law - to access local expertise
Which of the following are reasons to pursue horizontal integration as a corporate strategy?
- to lower costs - to provide such benefits as complementary products in their offering - to enhance their economic value creation
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 do foreign governments typically influence a firm's use of strategic alliances to enter new markets?
Governments may require that foreign firms have a local joint venture partner in order to conduct business within the country's borders.
What is an important aspect of alliance success?
Inter-organizational trust
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 traditional private car ownership no longer exists.
Which of the following is true regarding the government and horizontal integration?
Large horizontal integration activity typically needs to be approved by government authorities.
Peter's Pans makes cast-iron cookware. It decides to acquire another similar-sized cast-iron cookware company in the hope that its larger size will enable it to snag some market share away from Iron Maiden, the industry leader. What is Peter's Pans strategy?
Peter's Pans is trying to overcome competitive disadvantage.
Which of the following best exemplifies the relational view of competitive advantage?
The strategic alliance between company A and company B creates more value than either company individually.
True or false: A horizontal integration strategy leads to industry consolidation.
True
Which framework can companies use to assess whether their internal resources are superior to those of competitors in the targeted area?
VRIO framework
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
What allows firms to manage both strategic alliances and mergers and acquisitions?
a relational capability
Which of the following did Kraft see as an advantage of integration with Cadbury?
access to new markets
Which of the following terms refers to when one firm purchases or takes over another firm?
acquisition
Strategists can grow their firms by growing organically through internal development or externally through alliances and ______.
acquisitions
Internal development should occur when the firm's resources are _____ to those of competitors in the targeted area.
both similar and superior
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 real option gives a firm the right to continue making investments ______.
but does not obligate the firm to do so
How can horizontal integration increase product differentiation?
by filling the empty spaces in a firm's offerings
When an established firm makes an equity investment in an entrepreneurial venture it is known as a(n) ______ investment.
corporate venture capital
On average, mergers and acquisitions ______ shareholder value.
destroy
A partnership in which at least one partner takes partial ownership in the other is a(n) ______.
equity alliance
What is a component of post-formation alliance management?
establishing knowledge-sharing routines
Knowledge that can be codified is also called ______ knowledge.
explicit
Non-equity alliances tend to share ______, which allows the firms to understand a certain process or product.
explicit knowledge
An advantage of using a non-equity alliance to govern a strategic alliance is its ______.
flexibility and ease of initiation
In 2010 Kraft Foods bought UK-based Cadbury PLC in a hostile takeover. Kraft felt that a ______ with Cadbury would help Kraft break into emerging countries because of the strong position Cadbury had in India, Egypt, Thailand. and other countries.
horizontal integration
A firm must decide whether to build, borrow, or buy to answer the question of ______.
how it will achieve growth
The acquisition of PeopleSoft enabled Oracle to offer its customers expertise in human resource management systems (PeopleSoft's core competency) in addition to database management systems (Oracle's core competency). This is an example of which source of value creation of M&As?
increased differentiation
A firm should consider using mergers and acquisitions only when ______.
it is important to be extremely close to the resource partner in order to understand underlying information
A standalone organization that two or more parent companies create and own together is a ___.
joint venture
Some foreign countries require companies to be structured as __ in order to enter that foreign market. The companies gain access to the market, while the country gains advanced technology and know-how.
joint ventures
When two firms that have formed a strategic alliance to learn vary in the rate at which they learn, a(n) __ may result.
learning race
When managers of acquiring companies incorrectly convince themselves that they are able to manage the business of the target company more effectively than its current managers, they are engaging in ______.
managerial hubris
Zoe is a manager at a large company engaged in the acquisition of a smaller company. The smaller company has operated at a loss for the last three years under three different managers, but Zoe is convinced that she can turn the company around despite the evidence to the contrary. Zoe is engaging in ______.
managerial hubris
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
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
In order for an alliance to qualify as ______, it must have the potential to alter a company's competitive advantage.
strategic
A voluntary arrangement between firms to share knowledge, resources, and capabilities to develop products, processes, or services is known as a ______.
strategic alliance
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
A firm should use an equity alliance, a joint venture, or an outright acquisition in order to gain use of a resource when ______.
the resource is not easily traded
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
Why does Facebook acquire startups?
to preempt rivals
If an alliance between two firms succeeds, it is likely that the firms in the alliance _____.
trust each other