MGMT 464 test 3
patent
A _____ is best described as a form of intellectual property that gives the inventor exclusive rights to benefit from commercializing a technology for a specified time period in exchange for public disclosure of the underlying idea.
the supplying firm has no incentive to make any transaction-specific investments to increase performance or quality
A drawback of short-term contracting as an alternative to making a component in-house is that:
it is easy to initiate and terminate
A non-equity alliance is the most common type of strategic alliance because
non-equity alliance
Amiware Inc., a manufacturer of ceramic cookware, has entered into a contractual agreement with Micoware Inc. The agreement involves vertical strategic alliances connecting different parts of the industry value chain. This arrangement between the two companies best illustrates a(n) _____.
Information asymmetry
Bill is in an interview for a sales job that requires no experience. He is trying to portray himself as a highly enthusiastic, energetic person with high-level communication and interpersonal skills. The interviewer is convinced that Bill should be hired as a sales person in the company. However, in his resume, Bill had not mentioned his previous work experience as he was fired from that job on the account of using illegal drugs. Which of the following does this scenario best illustrate?
acquisition
When large, incumbent firms buy startup companies, the transaction is generally described as a(n) _____.
cash cows
DiskOne Inc. holds the highest market share in the low-growth compact disk industry. With the introduction of flash drives, the market for compact disks has reduced. However, DiskOne has been able to generate sufficient revenues for the parent company by selling its products in less developed countries. In the Boston Consulting Group (BCG) growth-share matrix, DiskOne will be categorized
often require larger investments
Equity alliances are less common than non-equity alliances because they
Licensing
Hitoro Inc. developed a superior touchscreen technology for tablet computers that enabled multiple users to operate the screen at the same time. The technology was leased to Revox Inc., a consumer electronics company, for five years. Which of the following alternatives to integration does this best illustrate?
By lowering competitive intensity in the industry overall
How did the recent horizontal integration in the U.S. airline industry provide benefits to the surviving carriers?
By strengthening the bargaining power of the surviving firms vis-à-vis suppliers and buyers
How does horizontal integration within an industry affect the surviving firms?
the horizontal integration activity has the potential to reduce competitive intensity in an industry.
It is necessary for government authorities such as the Federal Trade Commission (FTC) and/or the European Commission to approve any large horizontal integration activity because:
Principal-agent problem
Managers in a firm hired to improve the firm's profitability and ultimately the shareholders' value will add to the overall costs if they pursue their own self interests. What does this best illustrate?
PureSource Pharma will lower its costs through economies of scale.
PureSource Pharma Inc. recently acquired BioChem Pharmaceuticals Inc. It now sells its own products along with the products originally sold by BioChem Pharmaceuticals. As a result, PureSource Pharma's sales force will also be marketing the acquired company's products. How will this horizontal integration most likely affect PureSource Pharma?
question marks
Strategic business units that have a relatively low market share but have the potential to grow are best categorized under _____ in the Boston Consulting Group (BCG) growth-share matrix.
An acquisition
The Mansion Hotel Group purchased Red Brick Hotels for an estimated value of $120 billion. All the hotels previously owned by Red Brick Hotels are now managed by the Mansion Hotel Group and are known as Mansion hotels. What does this scenario best illustrate?
stars
The smartphone division of the large consumer electronics company, True Electra Inc., has a significant market share in the fast-growing cell phone market. If the company invests further into this division, it will be able to reap increased cash flows. In the Boston Consulting Group (BCG) growthshare matrix, the smartphone division of True Electra will be categorized under:
Horizontal integration
Titan Autos Inc. merged with its competitor, Cadvia Autos Inc. This allowed Titan Autos to use its technological competencies along with Cadvia Autos's marketing capabilities to capture a larger market share than what the two entities individually held. What does this scenario best illustrate?
acquisitions-led growth strategy
To position itself more strongly after the 2001 bursting of the Internet and tech stock bubble, Cisco Systems embarked on a(n) _____.
the two entities' complementary assets matched.
What makes strategic alliances successful?
It made a credible commitment by taking an equity stake in Orocobre.
When Toyota wanted to secure a long-term supply of lithium, it had to create a bond of trust with an Australian company, Orocobre Ltd. Orocobre wanted to establish the bond of trust before making huge investments in specialized equipment required to extract the high-quality lithium. What did Toyota do to instill this trust?
patent
When TrueHeal Pharma Inc. released a new drug to treat insomnia, its chemical composition was disclosed at the back of the drug's cover. However, any attempts by competitors to copy the chemical composition would result in infringement of TrueHeal Pharma's intellectual property rights. Thus, the drug is protected by a _____.
Information asymmetry
When approaching a bank for a loan, the borrower has better knowledge than the lender about his or her own ability to repay the loan without defaulting. What is this situation referred to as?
GD Inc. and VS Inc. join together to form a single new company called GDVS Inc.
When do mergers occur?
When two firms of comparable size join to form a combined entity
When does a merger between companies typically occur?
A contractual agreement that provides Motor Source Inc. non-exclusive rights to supply component parts to Pristine Autos Inc.
Which of the following best illustrates a non-equity alliance? A. A contractual agreement that provides Motor Source Inc. non-exclusive rights to supply component parts to Pristine Autos Inc. B. An alliance between RedGate Systems Inc. and DB Computers Inc. that results in DB Gate Inc., an independent third company C. A collusion between two competitors, RP Pharma Inc. and Vital Pharma Inc., to fix prices D. An alliance that allows Virtue Insurance Inc. to claim 49 percent ownership in Mercury Finance Inc.
It increases the potential for legal repercussions.
Which of the following is a disadvantage of a horizontal integration corporate strategy? A. It increases competitive intensity within an industry. B. It increases the potential for legal repercussions. C. It increases the costs associated with increasing value. D. It increases the threat of new entrants in an industry.
There is a reduction of excess capacity in the market.
Which of the following is a result of horizontal integration in terms of Porter's five forces model? A. The industry structure becomes less consolidated. B. There is a reduction of excess capacity in the market. C. The industry structure becomes potentially less profitable. D. There is an increase in rivalry among existing firms.
Regal Autos Inc. joins with Marcus Motors Inc., one of its direct competitors.
Which of the following scenarios best illustrates horizontal integration? A. Regal Autos Inc. enters into a licensing contract with a distributor in a new international market. B. Regal Autos Inc. acquires a component parts manufacturer who previously supplied to Regal Autos' competitor. C. Regal Autos Inc. sets up its own distribution channel and retail stores. D. Regal Autos Inc. joins with Marcus Motors Inc., one of its direct competitors.
Strategic alliances
_____ are best described as voluntary arrangements between firms that involve the sharing of knowledge, resources, and capabilities with the intent of developing processes, products, or services to lead to competitive advantage.
cash cow
_____ are strategic business units that compete in a low-growth market but hold considerable market share.
Licensing
_____ is best described as a form of long-term contracting in the manufacturing sector that enables firms to commercialize intellectual property.
Horizontal integration
_____ is best described as the process of merging with a competitor at the same stage of the value chain.
Restructuring
_____ is best described as the process of reorganizing and divesting business units and activities to refocus a company in order to leverage its core competencies more fully.
credible commitment
ioGrow Pharma Inc. wanted its research partner, an R&D company, to develop a cancer vaccine. However, the project required huge capital investments, and its research partner was not ready to solely face the risks involved. Thus, to gain its partner's confidence and to prove its involvement, BioGrow Pharma invested $100 million in the project. This investment made by BioGrow Pharma will result in a _____.
