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Q:
The two basic approaches to successfully manage cooperative strategic alliances involve ____ and ____.
a. cost minimization; opportunity maximization
b. monitoring systems; multiple management approaches
c. contractual systems; financial systems
d. equity approaches; nonequity approaches
Q:
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.
Q:
In practice, the cost minimization strategy can be more expensive than the opportunity maximization strategy. Which of the following is a way in which the cost minimization strategy is less expensive than the opportunity minimization strategy?
a. The loss of unexpected opportunities
b. The cost of extensive monitoring mechanisms
c. The costs of writing detailed contracts
d. The prevention of opportunistic behavior by the partner(s)
Q:
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.
Q:
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.
Q:
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.
Q:
In free-market economies, ____ must decide how rivals can collaborate with their competitors without violating established regulations.
a. the invisible hand
b. the government
c. consumers
d. the business community
Q:
Firms in a standard-cycle market may form alliances in order to:
a. take advantage of opportunities in emerging market countries.
b. more quickly distribute new products.
c. capture economies of scale.
d. share risky R&D investments.
Q:
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 reduction
d. network
Q:
Legitimately, a firm may pursue an international strategic alliance for all of the following reasons EXCEPT:
a. to enhance the compensation packages of top managers.
b. to leverage core competencies in new markets.
c. to operate within government restrictions in the local country.
d. to escape limited domestic growth opportunities.
Q:
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.
Q:
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.
Q:
A cooperative strategy:
a. is an integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage.
b. is a strategy in which firms work together to achieve a shared objective.
c. is an integrated and coordinated set of commitments and actions the firm uses to gain a competitive advantage by exploiting core competencies in specific product markets.
d. specifies actions a firm takes to gain a competitive advantage by selecting and managing a group of different businesses competing in different product markets.
Q:
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
Q:
One disadvantage of developing effective monitoring systems to manage a strategic alliance is that:
a. firms will have to accept greater risks.
b. trust will be eroded.
c. spontaneous opportunities are minimized.
d. power coalitions will still develop.
Q:
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.
Q:
A ____ cooperative strategy helps the firm diversify in terms of products offered, markets served, or both.
a. corporate-level
b. business-level
c. national-level
d. industry-level
Q:
All of the following are business-level cooperative strategic alliances EXCEPT:
a. synergistic strategic alliances.
b. uncertainty reduction strategic alliances.
c. complementary strategic alliances.
d. competition response strategic alliances.
Q:
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.
Q:
Firms participate in strategic alliances for all 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.
Q:
____ strategic alliances have stronger focus on value creation than do ____ alliances.
a. competition reducing; complementary
b. complementary; competition reducing
c. uncertainty reducing; complementary
d. collusive; uncertainty reducing
Q:
Offshore Oil Exploration Partners (OOEP) has entered into a cooperative strategy with Malay Petroleum. The resulting documents are long, formal, and detailed. They specify detailed responsibilities of each partner and include methods of monitoring accounting and technical procedures. OOEP and Malay Petroleum are using the ____ management approach.
a. cost minimization
b. trust but verify
c. opportunity maximization
d. pragmatic realism
Q:
In general, cross-border alliances are more ____ and ____ than domestic alliances, especially in emerging markets.
a. uncertainty reducing; diversifying
b. complex; risky
c. highly leveraged; tightly monitored
d. flexible; trust-based
Q:
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.
Q:
A ____________ is a strategy in which firms share some of their resources and capabilities to create economies of scope and is similar to the business-level horizontal complementary alliance.
a. joint venture
b. synergistic strategic alliance
c. diversifying strategic alliance
d. dynamic alliance network
Q:
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.
Q:
Amylin Pharmaceuticals has an alliance with Eli Lilly & Co. to produce diabetes drugs. Lilly, however, recently signed an alliance agreement with another company to also produce diabetes drugs. As a result, Amylin sued Lilly for breach of the alliance agreement. Which of the following risks of cooperative strategies discussed in the chapter is most likely occurring here?
a. Having a true perception of the partner's trustworthiness
b. Failing to make available to its partners the resources and capabilities that it committed to the cooperative strategy
c. The partner misrepresenting competencies it can bring to the partnership
d. Opportunistic behavior
Q:
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.
Q:
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
Q:
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.
Q:
____ 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
Q:
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 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.
Q:
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.
a. True
b. False
Indicate the answer choice that best completes the statement or answers the question.
Q:
Research in the airline industry suggests that tacit collusion reduces service quality and on-time performance.
a. True
b. False
Q:
Close monitoring, formal contracts, and constant vigilance against opportunism increase the probability of alliance success.
a. True
b. False
Q:
The primary responsibility of the franchiser is to transfer capital to the franchisee.
a. True
b. False
Q:
Of the four business-level cooperative strategies, the competition-reducing strategy has the lowest probability of creating a sustainable advantage.
a. True
b. False
Q:
Some cooperative strategies fail when it is discovered that a firm has misrepresented the competencies it can bring to the partnership.
a. True
b. False
Q:
Horizontal business-level strategic alliances have greater probability of creating sustainable competitive advantage than do vertical business-level strategic alliances.
a. True
b. False
Q:
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).
a. True
b. False
Q:
Acquisitions are the most common cooperative strategy used in standard-cycle markets.
a. True
b. False
Q:
International strategic alliances are less risky than domestic strategic alliances because of diversification across countries.
a. True
b. False
Q:
Strategic alliances have become the cornerstone of many firms' competitive strategy, particularly large global competitors.
a. True
b. False
Q:
A cooperative strategy is a means by which firms work together to achieve a shared objective.
a. True
b. False
Q:
When a firm is in the early stages of geographic diversification, cross-border alliances may be a good learning step before other forms of international expansion.
a. True
b. False
Q:
Strategic alliances are cooperative strategies between firms that combine their resources and capabilities to create a competitive advantage.
a. True
b. False
Q:
If a large Asian cosmetics firm was to engage in a 5050 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.
a. True
b. False
Q:
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.
a. True
b. False
Q:
Nonequity strategic alliances exist when two or more firms join together to create an independent firm.
a. True
b. False
Q:
The probability of alliance success is increased when partnering firms internalize successful alliance experiences.
a. True
b. False
Q:
Using business-level strategic alliances to hedge against risk and uncertainty is most common in the slow-cycle markets.
a. True
b. False
Q:
In the cost minimization approach to managing competitive strategies, the relationship between the firms is based on trust of the other partner.
a. True
b. False
Q:
Firms in standard-cycle markets seek to gain economies of scale through cooperative alliances.
a. True
b. False
Q:
Because of U.S. legal restrictions concerning large foreign acquisitions, American firms can only enter into diversifying alliances with other U.S. firms.
a. True
b. False
Q:
Horizontal complementary strategic alliances are designed so that each partner realizes equal benefits from equal investments in the alliance.
a. True
b. False
Q:
A network strategy involves a series of horizontal acquisitions by firms that are committed to dominating a particular industry.
a. True
b. False
Q:
A stable alliance network is used in industries characterized by frequent product innovations and short product life cycles.
a. True
b. False
Q:
According to the Chapter 9 Mini Case, in addition to their corporate-level alliance, Renault and Nissan have each formed vertical complementary strategic alliances with other companies.
a. True
b. False
Q:
High levels of trust allow less formal contracts to govern the relationship between alliance partners and increases the likelihood of alliance success.
a. True
b. False
Q:
Tacit collusion tends to be least used as a business-level, competition-reducing strategy in highly concentrated industries such as airlines and breakfast cereals even though it results in higher prices for consumers.
a. True
b. False
Q:
An alliance can be used to test whether the partners would benefit from a future merger.
a. True
b. False
Q:
Firms consider entering international alliances because multinational firms outperform firms operating only in their home markets.
a. True
b. False
Q:
Only about 50 percent of cooperative strategies succeed.
a. True
b. False
Q:
Network cooperative strategies among Silicon Valley firms have been successful, in part, because they are geographically close together.
a. True
b. False
Q:
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.
a. True
b. False
Q:
A firm creates a competitive advantage when it develops and manages corporate-level cooperative strategies in a way that is valuable, rare, imperfectly imitable, and nonsubstitutable.
a. True
b. False
Q:
The cost minimization approach of managing alliances is more expensive to put into place and to use than is the opportunity maximization management approach.
a. True
b. False
Q:
Franchising is most attractive in concentrated industries.
a. True
b. False
Q:
The alliance between BP Plc and OAO Rosneft to extract oil from Russia's Arctic Ocean was managed using contracts, i.e., the cost minimization approach.
a. True
b. False
Q:
Collusion is a form of cooperative strategy.
a. True
b. False
Q:
One area in which joint ventures are effective is the transfer of tacit knowledge as illustrated in the Chevron/China National Petroleum joint venture.
a. True
b. False
Q:
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.
a. True
b. False
Q:
Firms in slow-cycle markets can use alliances to enter restricted markets or to establish franchises in new markets.
a. True
b. False
Q:
Although growing in popularity with small and medium-sized firms because they can gain economies of scale, large companies tend to avoid strategic alliances.
a. True
b. False
Q:
Franchising is an alternative to pursuing growth through mergers and acquisitions.
a. True
b. False
Q:
Mutual forbearance is a form of explicit collusion between firms in which competitors avoid attacking rivals they meet in multiple markets.
a. True
b. False
Q:
Identify and describe the major risks of international diversification.
Q:
What are the three basic benefits of international strategies?
Q:
Identify and describe the modes of entering international markets. What are their advantages and disadvantages?
Q:
Discuss the effect of international diversification on a firm's returns.