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chapter 9 Business Policy Final
Terms in this set (91)
The success of the Pixar-Disney strategic alliance demonstrated that:
The two entities' conplementary assets matched
Disney became the world's leading media company to a large extent by pursuing a corporate strategy of _____?
Which of the following best illustrates a merger between the two companies GD Inc. and VS Inc. ?
GD Inc and VS inc join together to form a single new company called GDVS inc.
When does a merger between companies typically occur?
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?
Which of the following is true of acquisitions?
Acquisitions can be friendly or hostile.
When large, incumbent firms buy start-up companies, the transaction is generally described as a(n)
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?
Which of the following scenarios best illustrates horizontal integration?
Regal Autos Inc. joins Marcus Motors Inc. one of its direct competitors
How does horizontal integration within an industry affect the surviving firms?
By strengthing the bargaining power of the surviving firms vis-a-vis suppliers and buyers
Which of the following is a result of horizontal integration in terms of Porter's five forces model?
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?
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:
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?
PureSource Pharma will lower its costs through economies of scale.
Which of the following is a disadvantage of a horizontal integration corporate strategy?
It increases the potential for legal repercussions.
How does Kraft Foods benefit from its hostile takeover of Cadbury PLC in 2010?
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:
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:
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
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:
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:
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?
Adisas acquired Reebok primarily to _____.
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) ______.
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?
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.
Which of the following statements is true of strategic Alliances?
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 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.
relational view of competitive advantage
relational view of competitive advantage
What does the relational view of competitive advantage propose?
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?
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 competitve position
c. to enter new markets, either in terms of geography or products and services
d. to learn new capabilities
to replace competitive advantage with competitive parity
How did Apple plan to attack Amazon's stronghold in the e-reader market?
It orchestrated a web of strategic alliances with major publishing houses.
How did Apple's e-book business model affect Amazon?
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:
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?
It entered into a strategic alliance with Yahoo.
Why did Yahoo enter into a strategic alliance with Microsoft?
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.
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 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 _____.
the real-options perspective
How does taking a real-options perspective by entering strategic alliances help incumbent firms?
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?
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:
building downstream complementary assets can be expensive and time-consuming.
______ is best described as cooperation by competitors to achieve a strategic objective
_______ 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.
In the strategic alliance, the firm that learns faster:
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?
New United Motor Manufacturing, Inc. (NUMMI), formed between General Motors (GM) and Toyota in 1984 was the first _____ in the U.S. automobile industry
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?
With regard to New United Motor Manufacturing, Inc. (NUMMI), why did General Motors (GM) enter into a strategic alliance with Toyota?
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)?
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.
Supply, distribution, and licensing contractual agreements between firms, which result in vertical strategic alliances, are all examples of _____.
In a non-equity alliance, which of the following types of information would firms most likely share?
The documented information about the material composition of a product
Which of the following statements is true of explicit knowledge?
Explicit knowledge is shared in non-equity alliance firms
_____ are best described as contractual alliances in which the participants regularly exchange codified knowledge
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) _____.
Which of the following best illustrates a non-equity alliance
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?
They are flexible and easy to initiate and terminate
Which of the following is a disadvantage of equity alliances?
They can entail significant investments
Which of the following statements is true of joint ventures?
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?
Which of the following is an advantage of equity alliances when compared to non-equity alliances?
They produce stronger ties between partners
Don Corning is a company owned by Dow Chemical and Corning. This is most likely an example of a(n) ______
A drawback of joint ventures is that they are characterized by:
Double reporting lines
a(n)____ is best described as a partnership which at least one partner takes partial ownership in the other partner
Equity alliances are less common than non-equity alliances because they:
Often require larger investments
Which of the following statements is true of an equity alliance?
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.
it is regularly shared between partners in a non-equity alliance
Which of the following best illustrates an equity alliance?
A partnership in which RedGate Insurance Inc. has a 40% 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) ______.
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:
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.
Corporate Venture Capital Investments
The downside of equity alliances is:
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) _____.
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?
Which of the following is an advantage of joint ventures?
They create strong ties, trust, and commitment between the partners
Which of the following is a drawback of joint ventures?
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 _____.
Which of the following types of strategic alliances is the least common in terms of frequency?
The process of allianes management begins with _____
Selecting the best possible partner
Partner compatability and partner commitment are necessary conditions for successful alliance formation. Partner compatability captures:
Aspects of cultural fit between different firms in an alliance.
In Eli Lily's Office of Alliance Management, the _____ is a senior, corporate-level executive responsible for high-level support and oversight
In Eli Lily's Office of Alliance Management, who is responsible for providing alliance training and development?
the alliance manager
In Eli Lilly's Office of Alliance Management, the alliance champion is primarily responsible for:
making sure that an alliance fits within the firm's existing alliance portfolio and corporate-level strategy
The alliance Leader
Which of the following is an ineffective practice in alliane management?
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?
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
consider an outright acquisition.
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?
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?
Disney compensated more easily for losses from flops.
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