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MGMT425 Chapter 9

The success of the Pixar-Disney strategic alliance demonstrated that:

A. Disney was in desperate need of Pixar’s graphic display systems.

B. the two entities’ complementary assets matched.

C. it was easier for the alliance partners to reduce the value gap created.

D. the companies were effectively managing an unrelated diversification strategy.

B. the two entities’ complementary assets matched.
Disney became the world’s leading media company to a large extent by pursuing a corporate strategy of _____.

A. related-linked diversification

B. cost-leadership

C. unrelated diversification

D. hostile takeovers

A. related-linked diversification
Which of the following best illustrates a merger between the two companies GD Inc. and VS Inc.?

A. GD Inc. purchases VS Inc. for $80 billion despite VS Inc. being against the purchase.

B. GD Inc. and VS Inc. join together to form a third new entity, while they also operate separately.

C. GD Inc. outsources a few of its business activities to VS Inc. for competitive advantage.

D. GD Inc. and VS Inc. join together to form a single new company called GDVS Inc.

D. GD Inc. and VS Inc. join together to form a single new company called GDVS Inc.
When does a merger between companies typically occur?

A. When two firms of comparable size join to form a combined entity

B. When large, incumbent firms buy startup companies

C. When a target firm does not want to be acquired

D. When two or more firms enter a temporary vertical strategic alliance

A. When two firms of comparable size join to form a combined entity
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?

A. A merger

B. A joint venture

C. An acquisition

D. An equity alliance

C. An acquisition
Which of the following is true of acquisitions?

A. Acquisitions can be friendly or hostile.

B. Acquisitions can occur only when the involved entities are of comparable size.

C. In acquisitions, two independent companies join to form a separate third entity.

D. Acquisitions increase the competitive intensity in an industry.

A. Acquisitions can be friendly or hostile.
When large, incumbent firms buy startup companies, the transaction is generally described as a(n) _____.

A. joint venture

B. partnership

C. acquisition

D. alliance

C. acquisition
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?

A. Backward integration

B. Forward integration

C. Horizontal integration

D. Vertical integration

C. Horizontal integration
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.

D. Regal Autos Inc. joins with Marcus Motors Inc., one of its direct competitors.
How does horizontal integration within an industry affect the surviving firms?

A. By increasing the threat the surviving firms will face from new entrants

B. By strengthening the rivalry among existing firms

C. By requiring the surviving firms to shift their focus from non-price to price competition

D. By strengthening the bargaining power of the surviving firms vis-à-vis suppliers and buyers

D. By strengthening the bargaining power of the surviving firms vis-à-vis suppliers and buyers
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.

B. There is a reduction of excess capacity in the market.
How did the recent horizontal integration in the U.S. airline industry provide benefits to the surviving carriers?

A. By facilitating excess capacity in the industry

B. By preventing mergers from taking place

C. By lowering competitive intensity in the industry overall

D. By increasing the threat of entry in the industry

C. By lowering competitive intensity in the industry overall
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:

A. the horizontal integration activity changes the industry structure from oligopolistic to monopolistically competitive.

B. the surviving firms will need to be protected against the increasing bargaining power of the suppliers.

C. the horizontal integration activity has the potential to reduce competitive intensity in an industry.

D. the surviving firms will need protection against the relaxed entry barriers.

C. the horizontal integration activity has the potential to reduce competitive intensity in an industry.
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?

A. PureSource Pharma will lower its costs through economies of scale.

B. PureSource Pharma will diminish its economic value creation.

C. PureSource Pharma will increase its cost of distribution.

D. PureSource Pharma will reduce the size of its sales force.

A. PureSource Pharma will lower its costs through economies of scale.
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.

B. It increases the potential for legal repercussions
How does Kraft Foods benefit from its hostile takeover of Cadbury PLC in 2010?

A. Its main strategic focus is now on the domestic market.

B. It opens a market for it that is growing slowly but has high profit margins.

C. It has access to convenience stores and a new distribution channel.

D. It automatically gains monopoly in the chocolate-manufacturing industry.

C. It has access to convenience stores and a new distribution channel.
The Hershey Company, the largest U.S. chocolate manufacturer, decided to enter the Chinese market in 2013 because:

A. the U.S. population was growing slowly and becoming more health conscious.

B. its strategic position in the U.S. market was well protected through high entry barriers.

C. this would help the company gain access to large cocoa plantations in China.

D. Hershey’s main strategic focus was on product and market diversification and not on the domestic market.

A. the U.S. population was growing slowly and becoming more health conscious.
Google, the leader in online search and advertisement, engaged in a number of smaller acquisitions of tech ventures. It did this in order to:

A. imitate the actions of its competitors like Apple and Facebook.

B. solve its principal-agent problems.

C. fill gaps in its competency lineup.

D. expand through unrelated diversification.

C. fill gaps in its competency lineup.
Which of the following reasons motivated Facebook to acquire Instagram, a photo and video-sharing social media site, for $1 billion in 2012?

A. The desire to gain a new capability

B. The need to enter a new geographical market

C. The need to reduce its level of horizontal integration

D. The desire to pursue an unrelated diversification strategy

A. The desire to gain a new capability
The main reason behind Google’s decision to acquire the Israeli startup company Waze for $1 billion was to:

A. preempt its competitors from buying Waze.

B. share its capabilities with Waze.

C. support startup companies with venture capital.

D. gain access to technology that is alien to it.

A. preempt its competitors from buying Waze.
The managers at Movo Automobile Inc. want to diversify their business by acquiring a consumer electronics company. This acquisition would mean increased job security, higher compensation, and greater decision-making authority for the managers. The managers correlate this acquisition to greater power for them rather than to the appreciation in shareholder value. In this scenario, this acquisition by Movo Automobile is most likely a result of:

A. time compression diseconomies.

B. experience-curve effects.

C. principal-agent problems.

D. resource ambiguity.

C. principal-agent problems.
FlyOne Airway’s decision to acquire TrueGear Fuels Inc. proved to be ill-fated because its managers had overestimated their abilities and skills. They believed that they had the skills to manage such diversified businesses and create additional shareholder value. However, the acquisition failed to create the anticipated synergies because the managers’ capabilities were restricted to the airlines industry. What does this scenario best illustrate?

A. Managerial empathy

B. Managerial feasibility

C. Managerial hubris

D. Managerial capitalism

C. Managerial hubris
Adidas acquired Reebok primarily to _____.

A. overcome its competitive disadvantage against Nike

B. get access to the superior technology of Reebok

C. overcome its principal-agent problems

D. pursue an unrelated diversification strategy

A. overcome its competitive disadvantage against Nike
To position itself more strongly after the 2001 bursting of the Internet and tech stock bubble, Cisco Systems embarked on a(n) _____.

A. harvest strategy

B. acquisitions-led growth strategy

C. unrelated diversification strategy

D. exit strategy

B. acquisitions-led growth strategy
While Cisco Systems has been successful in selecting and buying both big and small technology ventures, HP had to write off some of its recent technology acquisitions. Which of the following statements best explains this scenario?

A. Cisco was successful due to its unrelated diversification, whereas HP failed by pursuing a related-linked diversification strategy.

B. Cisco treated the management of the larger firms it took over more like acquisitions, whereas HP treated its acquisitions as strategic alliances.

C. The acquisitions were successful as the learning and experience curve effects were low.

D. Acquisition and integration capabilities were not equally distributed across firms.

D. Acquisition and integration capabilities were not equally distributed across firms.
A _____ is best described as a voluntary arrangement between firms that involves the sharing of knowledge, resources, and capabilities with the intent of developing processes, products, or services.

A. proprietorship

B. cooperative

C. strategic alliance

D. leveraged buyout

C. strategic alliance
Which of the following statements is true of strategic alliances?

A. They are always focused on joining the same value chain activities.

B. They enable firms to achieve goals faster, but at higher costs.

C. They are known as strategic alliances whether or not they have the potential to affect a firm’s competitive advantage.

D. They are most beneficial when they join together resources and knowledge in a combination that obeys the VRIO principles.

D. They are most beneficial when they join together resources and knowledge in a combination that obeys the VRIO principles.
Vibgyor Inc., a manufacturer of smartphones, has entered into a 15-year partnership with a software company to develop sophisticated operating systems and innovative mobile applications for its cell phones. This would mean that both the companies will have to mutually share their resources, knowledge, and capabilities to develop a superior product. What is the relationship between Vibgyor and the software company best referred to as in this scenario?

A. An acquisition

B. A strategic alliance

C. A leveraged buyout

D. A proprietorship

B. A strategic alliance
The _____ is a strategic management framework that proposes that critical resources and capabilities frequently are embedded in strategic alliances that span firm boundaries.

A. real-options perspective

B. stakeholder strategy

C. relational view of competitive advantage

D. non-differentiation strategy

C. relational view of competitive advantage
What does the relational view of competitive advantage propose?

A. A strategic alliance has the potential to help a firm gain a competitive advantage when it joins together resources that are common, inexpensive, and easy to imitate.

B. The locus of competitive advantage is often not found within the individual firm but within a strategic partnership.

C. Strategic alliances fail to provide competitive advantage when they involve joining different parts of a firm’s value chain, such as R&D and marketing.

D. A firm has a competitive advantage over its rivals when it can provide goods or services similar to the competitors’ at a higher price.

B. The locus of competitive advantage is often not found within the individual firm but within a strategic partnership.
How did the strategic alliance between HP and DreamWorks Animation SKG affect HP?

A. It helped HP pursue a taper integration strategy.

B. It enabled HP to compete head on with Cisco’s videoconferencing solution.

C. It resulted in depreciation of HP’s shareholder value.

D. It failed because HP lacked the expertise in selecting and integrating technology acquisitions.

B. It enabled HP to compete head on with Cisco’s videoconferencing solution.
Which of the following is NOT a reason why firms enter alliances?

A. To replace competitive advantage with competitive parity

B. To strengthen competitive position

C. To enter new markets, either in terms of geography or products and services

D. To learn new capabilities

A. To replace competitive advantage with competitive parity
How did Apple plan to attack Amazon’s stronghold in the e-reader market?

A. It orchestrated a web of strategic alliances with major publishing houses.

B. It directly imitated Amazon’s Kindle product technology.

C. It acquired startup publishing houses prior to launching its iPad product.

D. It sold e-books at prices lesser than that of Amazon.

A. It orchestrated a web of strategic alliances with major publishing houses.
How did Apple’s e-book business model affect Amazon?

A. Amazon had to further reduce the prices of its e-books.

B. The bargaining power of suppliers, the content providers, increased from Amazon’s perspective.

C. The industry structure changed from oligopoly to monopoly.

D. Amazon acquired the power to set the sales prices of e-books directly for the end consumers.

B. The bargaining power of suppliers, the content providers, increased from Amazon’s perspective.
A drawback involved in using cross-border strategic alliances to enter new foreign markets is that:

A. the foreign firm will need to make larger investments when compared to entering the new market on its own.

B. some of the firm’s proprietary know-how may be appropriated by the foreign partner.

C. all potential business risks in the new market will have to be faced alone by the foreign firm.

D. the shareholder value of the foreign partner will decline drastically.

B. some of the firm’s proprietary know-how may be appropriated by the foreign partner.
What did Microsoft do to gain a foothold in the online search and advertising market dominated by Google?

A. It acquired Yahoo.

B. It entered into a strategic alliance with Yahoo.

C. It sold part of its equity to Yahoo.

D. It outsourced its non-core business activities to Yahoo.

B. It entered into a strategic alliance with Yahoo.
Why did Yahoo enter into a strategic alliance with Microsoft?

A. To pursue an unrelated diversification strategy

B. To overcome its competitive disadvantage in comparison to Google

C. To invest its excess cash flow in Microsoft’s superior technology

D. To share its continuously updated search technology with Microsoft

B. To overcome its competitive disadvantage in comparison to Google
A _____ is best described as an approach to strategic decision making that breaks down a larger investment decision into a set of smaller decisions that are staged sequentially over time.

A. cost-leadership approach

B. break-even analysis

C. market risk framework

D. real-options perspective

D. real-options perspective
Fervana Autos Inc., a large automobile company, made an initial small investment in a startup company that was developing a solar-powered car. This gave Fervana Autos controlling interests in the startup company. However, Fervana Autos had no obligations to make continued investments in the experiments of the startup company. It could invest in small amounts depending on the new product’s success at each stage of its development. If the product proved to be successful, Fervana Autos would have the right to buyout the startup company. This approach to strategic alliance is referred to as _____.

A. a break-even analysis

B. a real-options perspective

C. credible commitment

D. transaction cost economics

B. a real-options perspective
In 1990, Roche, a Swiss pharmaceutical company, initially invested $2.1 billion to purchase a controlling interest in the biotech startup Genentech. In 2009, after witnessing the success of Genentech’s drug discovery and development projects, Roche spent $47 billion to purchase the remaining minority interest in Genentech, making it a wholly owned subsidiary. In terms of strategic alliances, this scenario best indicates _____.

A. the real-options perspective

B. co-opetition

C. explicit knowledge

D. the stakeholder strategy

A. the real-options perspective
How does taking a real-options perspective by entering strategic alliances help incumbent firms?

A. It helps the incumbent firms gain the confidence of the partnering company by making credible commitments.

B. It helps the incumbent firms reduce the value gap they create through their product and service offerings.

C. It allows the incumbent firms to buy time and wait for the uncertainty surrounding the market and technology to fade.

D. It reduces the incumbent firms’ cost of acquisition by enabling them to make the entire investment decision in the beginning itself.

C. It allows the incumbent firms to buy time and wait for the uncertainty surrounding the market and technology to fade.
When North Autos Inc. wanted to sell its cars in the country of Balvia, it lacked access to distribution channels and marketing expertise in the country. Thus, North Autos had to enter into a strategic alliance with a local automobile company to get access to the foreign partner’s well-established distribution channels. Which of the following reasons for entering into a strategic alliance is best illustrated in this scenario?

A. Increasing competitive intensity

B. Accessing critical complementary assets

C. Procuring additional capital investments

D. Reducing differentiation of product and service offerings

B. Accessing critical complementary assets
When entering a foreign market, it is advisable for a new venture that has a core competency only in R&D to form a strategic alliance with a local partner because:

A. the local partner can better protect its proprietary know-how.

B. building downstream complementary assets can be expensive and time-consuming.

C. the strategic alliance will reduce the differentiation of its product and service offerings.

D. the value gap created by the firm can be easily lowered in an alliance.

B. building downstream complementary assets can be expensive and time-consuming.
_____ is best described as cooperation by competitors to achieve a strategic objective.

A. Limited liability

B. Proprietorship

C. Co-opetition

D. Commerce

C. Co-opetition
_____ are best described as situations in which both partners in a strategic alliance are motivated to form an alliance for learning, but the rate at which the firms learn may vary.

A. Learning races

B. Learning networks

C. Learning effects

D. Learning matrices

A. Learning races
In a strategic alliance, the firm that learns faster:

A. has the tendency to lose its competitive advantage.

B. has the incentive to reduce its knowledge sharing.

C. has the tendency to move up a learning curve.

D. has the incentive to invest further in the alliance.

B. has the incentive to reduce its knowledge sharing.
FR Pharmaceuticals Inc., BioCure Pharma Inc., and Regime Pharma Inc. are three rival firms who have set up an alliance to conduct research and find a cure for cancer. They have made almost equal contributions to the research, and they also share their expertise with each other. However, the three firms will continue to behave as competitors in markets for other drugs and vaccines. What is this arrangement best referred to as?

A. Takeover

B. Buyout

C. Co-opetition

D. Acquisition

C. Co-opetition
New United Motor Manufacturing, Inc. (NUMMI), formed between General Motors (GM) and Toyota in 1984 was the first _____ in the U.S. automobile industry.

A. joint venture

B. non-equity alliance

C. hostile takeover

D. equity alliance

A. joint venture
Aro Shoes Inc. and Mova Shoes Inc., two competing shoe brands, entered into a strategic alliance to study and acquire each other competencies. Aro Shoes entered the strategic alliance to acquire the production system pioneered by Mova Shoes. Similarly, Mova Shoes agreed to the strategic alliance to study the designing process of Aro Shoes. However, Aro Shoes was more successful and faster than Mova Shoes in accomplishing its alliance goal. What does this scenario best illustrate?

A. Network effects

B. Economies of scope

C. Learning races

D. Time compression diseconomies

C. Learning races
With regard to New United Motor Manufacturing, Inc. (NUMMI), why did General Motors (GM) enter into a strategic alliance with Toyota?

A. To transfer its knowledge of a completely new production system

B. To learn the lean manufacturing system pioneered by Toyota

C. To better understand the American work force

D. To get access to Toyota’s distribution system and marketing expertise

B. To learn the lean manufacturing system pioneered by Toyota
In the New United Motor Manufacturing, Inc. (NUMMI) joint venture, why did Toyota enter into a strategic alliance with General Motors (GM)?

A. To access GM’s completely new production system

B. To learn and implement the just-in-time inventory system pioneered by GM

C. To learn how to implement its lean manufacturing program with an American work force

D. To access GM’s distribution system and marketing expertise

C. To learn how to implement its lean manufacturing program with an American work force
A(n) _____ occurs when firms enter into a partnership based on contractual agreements, which results in vertical strategic alliances, that connect different parts of the industry value chain.

A. equity alliance

B. joint venture

C. non-equity alliance

D. greenfield venture

C. non-equity alliance
Supply, distribution, and licensing contractual agreements between firms, which result in vertical strategic alliances, are all examples of _____.

A. cartel arrangements

B. non-equity alliances

C. joint ventures

D. equity alliances

B. non-equity alliances
In a non-equity alliance, which of the following types of information would firms most likely share?

A. A manager’s knowledge related to solving non-routine problems

B. A top-level manager’s experience related to making strategic decisions

C. The documented information about the material composition of a product

D. The employees’ entrepreneurial skills

C. The documented information about the material composition of a product
Which of the following statements is true of explicit knowledge?

A. Explicit knowledge is about knowing how to do a certain task.

B. Explicit knowledge is knowledge that cannot be codified.

C. Explicit knowledge is shared in non-equity alliance firms.

D. Equity knowledge is acquired only through actively participating in a process.

C. Explicit knowledge is shared in non-equity alliance firms.
_____ are best described as contractual alliances in which the participants regularly exchange codified knowledge.

A. Cartels

B. Licensing agreements

C. Equity alliances

D. Acquisitions

B. Licensing agreements
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) _____.

A. joint venture

B. acquisition

C. non-equity alliance

D. greenfield venture

C. non-equity alliance
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.

A. A contractual agreement that provides Motor Source Inc. non-exclusive rights to supply component parts to Pristine Autos Inc.
Which of the following is an advantage of non-equity alliances?

A. They produce strong ties between alliance partners as they are permanent in nature.

B. They are flexible and easy to initiate and terminate.

C. They facilitate the sharing of tacit knowledge between the alliance partners.

D. They are based on ownership rather than contracts.

B. They are flexible and easy to initiate and terminate.
Which of the following is a disadvantage of equity alliances?

A. They are reflective of weaker ties between firms.

B. They do not permit the exchange of explicit knowledge.

C. They can bring about a lack of commitment.

D. They can entail significant investments.

D. They can entail significant investments.
Which of the following statements is true of joint ventures?

A. They enable the exchange of both tacit and explicit knowledge.

B. They reduce the possibilities of trust and commitment.

C. They are characterized by single reporting lines.

D. They cannot entail long negotiations.

A. They enable the exchange of both tacit and explicit knowledge.
Which alliance type is the Renault-Nissan alliance, where Nissan owns 15 percent of Renault, and Renault owns 44.4 percent in Nissan?

A. Equity alliance

B. Non-equity alliance

C. Greenfield venture

D. Joint venture

A. Equity alliance
Which of the following is an advantage of equity alliances when compared to non-equity alliances?

A. They are more flexible and easy to initiate and terminate.

B. They require smaller capital investments.

C. They produce stronger ties between partners.

D. They are based on contracts rather than ownership.

C. They produce stronger ties between partners.
Dow Corning is a company owned by Dow Chemical and Corning. This is most likely an example of a(n) _____.

A. equity alliance

B. sole proprietorship

C. non-equity alliance

D. joint venture

D. joint venture
A drawback of joint ventures is that they are characterized by:

A. involuntary mergers.

B. double reporting lines.

C. contractual agreements rather than ownership.

D. weak ties between alliance partners.

B. double reporting lines.
A(n) _____ is best described as a partnership in which at least one partner takes partial ownership in the other partner.

A. acquisition

B. non-equity alliance

C. joint venture

D. equity alliance

D. equity alliance
Equity alliances are less common than non-equity alliances because they:

A. depend on contractual agreements.

B. produce weaker ties between partners.

C. fail to facilitate the transfer of tacit knowledge.

D. often require larger investments.

D. often require larger investments.
Which of the following statements is true of an equity alliance?

A. An equity alliance is based on contractual agreements rather than partial ownership.

B. In an equity alliance, the partners frequently exchange personnel to make the acquisition of tacit knowledge possible.

C. In an equity alliance, a standalone organization is created that is jointly owned by two or more parent companies.

D. An equity alliance creates weaker ties between the alliance partners when compared to a non-equity alliance.

B. In an equity alliance, the partners frequently exchange personnel to make the acquisition of tacit knowledge possible.
Which of the following statements is NOT true of tacit knowledge?

A. It is concerned with knowing how to do a certain task.

B. It is knowledge that cannot be easily codified.

C. It is regularly shared between partners in a non-equity alliance.

D. It is acquired only through actively participating in the process.

C. It is regularly shared between partners in a non-equity alliance.
Which of the following best illustrates an equity alliance?

A. A contractual agreement that provides Ocia Pharma Inc. the exclusive rights to distribute the drugs of Marvel Pharma Inc. in the Asian market

B. An alliance between GoldWing Systems Inc. and GM Computers Inc. that results in GM Wing Inc., an independent third company

C. A collusion between two competitors, Torque Steels Inc. and Vizor Metals Inc., to fix prices

D. A partnership in which RedGate Insurance Inc. has a 40 percent ownership claim in TwinTrust Finance Inc.

D. A partnership in which RedGate Insurance Inc. has a 40 percent ownership claim in TwinTrust Finance Inc.
The partnership between Toyota and Tesla Motors, in which Toyota has made a $50 million investment in the California startup company to learn new knowledge and gain a window into new technology, is an example of a(n) _____.

A. acquisition

B. joint venture

C. non-equity alliance

D. equity alliance

D. equity alliance
Toyota’s President, Akio Toyoda, hopes that a transfer of tacit knowledge will take place through its equity alliance with Tesla Motors. He is referring to:

A. the lean manufacturing process pioneered by tesla.

B. the entrepreneurial spirit in tesla.

C. the safety measures followed in tesla, recorded in its user manuals.

D. the product information documented in tesla’s database.

B. the entrepreneurial spirit in tesla.
_____ are best described as equity investments by large established firms making in entrepreneurial ventures to gain access to new, and potentially disruptive, technologies.

A. Corporate venture capital investments

B. Greenfield ventures

C. Joint ventures

D. Loan sharks

A. Corporate venture capital investments
The downside of equity alliances is:

A. the weaker ties and reduced trust between partners.

B. the amount of investment that can be involved.

C. that the alliances cannot be abandoned if not promising.

D. that they are not useful stepping stones toward full integration of the partner firms.

B. the amount of investment that can be involved.
When a standalone organization is created and owned by two or more parent companies together, the strategic alliance is referred to as a(n) _____.

A. non-equity alliance

B. equity alliance

C. proprietorship

D. joint venture

D. joint venture
NorthStar Inc. and The Royal Group have together established The Royal Star Group of hotels. NorthStar owns 49 percent and The Royal Group has a 51 percent share in The Royal Star Group of hotels. However, the management of The Royal Star Group of hotels is separate from its parent companies. What alliance type does this scenario best illustrate?

A. Sole Proprietorship

B. Non-equity alliance

C. Equity alliance

D. Joint venture

D. Joint venture
Which of the following is an advantage of joint ventures?

A. They create strong ties, trust, and commitment between the partners.

B. They are based on contractual agreements rather than partial ownership.

C. They require the lowest amount of investment relative to the other alliance types.

D. They can be easily initiated and terminated.

A. They create strong ties, trust, and commitment between the partners.
Which of the following is a drawback of joint ventures?

A. They produce weak ties, trust, and commitment between the partners.

B. They are based on contractual agreements rather than partial ownership.

C. They do not enable the transfer and sharing of tacit knowledge.

D. They necessitate the sharing of rewards between the partners.

D. They necessitate the sharing of rewards between the partners.
Wave Motors Inc., a Kempa-based automobile company, has entered into a partnership with Sphere Autos Inc. headquartered in United Cadvia. The parent companies, together, have established a standalone firm called Genuine Autos Inc. This arrangement best exemplifies a _____.

A. joint venture

B. partnership

C. non-equity alliance

D. proprietorship

A. joint venture
Which of the following types of strategic alliances is the least common in terms of frequency?

A. Mergers

B. Acquisitions

C. Equity alliances

D. Joint ventures

D. Joint ventures
The process of alliance management begins with _____.

A. selecting the best possible partner

B. choosing an appropriate governance mechanism

C. designing the alliance

D. creating resource combinations that obey the VRIO criteria

A. selecting the best possible partner
Partner compatibility and partner commitment are necessary conditions for successful alliance formation. Partner compatibility captures:

A. aspects of cultural fit between different firms in an alliance.

B. features of the financial health of the different alliance partners.

C. the readiness to accept short-term sacrifices to ensure long-term awards.

D. the willingness to make available necessary resources.

A. aspects of cultural fit between different firms in an alliance.
In Eli Lilly’s Office of Alliance Management, the _____ is a senior, corporate-level executive responsible for high-level support and oversight.

A. alliance manager

B. alliance leader

C. alliance regulator

D. alliance champion

D. alliance champion
In Eli Lilly’s Office of Alliance Management, who is responsible for providing alliance training and development?

A. The alliance champion

B. The alliance leader

C. The alliance manager

D. The alliance boss

C. The alliance manager
In Eli Lilly’s Office of Alliance Management, the alliance champion is primarily responsible for:

A. making sure that an alliance fits within the firm’s existing alliance portfolio and corporate-level strategy.

B. providing technical expertise and knowledge needed for the specific technical area in an alliance.

C. providing alliance training and development, as well as diagnostic tools.

D. serving as an alliance process resource and business integrator between the two alliance partners.

A. making sure that an alliance fits within the firm’s existing alliance portfolio and corporate-level strategy.
In Eli Lilly’s Office of Alliance Management, who is responsible for providing the technical expertise and knowledge needed for the specific technical area and the day-to-day management of the alliance?

A. The alliance champion

B. The alliance leader

C. The alliance manager

D. The alliance boss

B. The alliance leader
Which of the following is an ineffective practice in alliance management?

A. Coordinating a firm’s portfolio of alliances

B. Establishing knowledge-sharing routines between alliance partners

C. Developing relational capabilities to manage mergers and acquisitions

D. Focusing on developing an alliance-management capability in isolation

D. Focusing on developing an alliance-management capability in isolation
A consumer electronics company is in the process of evaluating whether it should pursue an internal development strategy or an external growth strategy. To make this decision, the management needs to assess whether the company’s internal resources are superior to those of competitors in the targeted area. Which of the following strategic management models would be most useful in this assessment?

A. The core competence matrix

B. The Boston Consulting Group (BCG) matrix

C. The transaction-cost economics model

D. The VRIO framework

D. The VRIO framework
When a firm does not have the resource required for pursuing a growth strategy, and if the resource in question is not easily tradable, the implication for the strategist is most likely to:

A. borrow via a contractual agreement.

B. pursue internal development.

C. enter into a licensing agreement.

D. consider an outright acquisition.

D. consider an outright acquisition.
When should mergers and acquisitions (M&A) be considered the “buy” option for a strategist trying to determine which corporate strategy to implement?

A. When the resource in question is highly tradable

B. Before the strategist has considered borrowing the necessary resources through integrated strategic alliances

C. After it has been established that the firm’s internal resources are sufficient to build

D. When extreme closeness to the resource partner is necessary to understand and obtain its underlying knowledge

D. When extreme closeness to the resource partner is necessary to understand and obtain its underlying knowledge
Under CEO Robert Iger, Disney has followed an acquisition-led growth strategy. Which of the following was a result of this corporate strategy?

A. Disney attempted full integration with the subsidiaries it acquired after its merger with Pixar.

B. Disney’s revenue streams from its various activities became less predictable.

C. Disney became a less diversified company.

D. Disney compensated more easily for losses from flops.

D. Disney compensated more easily for losses from flops.

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