Strategic Management Part 1 (1-57)

1. A. overcome its competitive disadvantage against Nike. 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) B. get access to the superior technology of Reebok. A. joint venture. Adidas acquired Reebok primarily to A. overcome its competitive disadvantage against Nike. 3. C. overcome its principal-agent problems. B. acquisition. C. non-equity alliance. D. pursue an unrelated diversification strategy. 2. Although long-standing enemies, Apple and IBM formed an alliance partnership. How did this partnership benefit both Apple and IBM? A. Apple's core competency with consumer services and IBM's core competency with business services complemented each other. D. greenfield venture. 4. C. Apple's core competency with marketing and IBM's core competency with manufacturing complemented each other. D. Apple's core competency with manufacturing and IBM's core competency with marketing complemented each other. A(n) _____ is best described as a partnership in which at least one partner takes partial ownership in the other partner. D. equity alliance A. acquisition A. Apple's core competency with consumer services and IBM's core competency with business services complemented each other. B. Apple's core competency with business services and IBM's core competency with consumer services complemented each other. C. nonequity alliance. B. non-equity alliance C. joint venture D. equity alliance 5. 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. nonequity alliance 6. _____ are best described as contractual alliances in which the participants regularly exchange codified knowledge. B. Licensing agreements 9. A. Cartels 7. A candy company called SweetThings Inc. forms an agreement with another candy company called Reverie Inc. Through this agreement, SweetThings owns 30 percent of Reverie. However, Reverie does not own any part of SweetThings. This type of agreement is called a(n) B. Licensing agreements A. non-equity alliance. C. Equity alliances B. equity alliance. D. Acquisitions C. joint venture. _____ 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 A. Corporate venture capital investments B. Greenfield ventures C. Joint ventures D. capital venture. 10. Comfort Shoes Inc. and InStep Shoes Inc., two competing shoe brands, entered into a strategic alliance to study and acquire each other competencies. Comfort Shoes entered the strategic alliance to acquire the production system pioneered by InStep Shoes. Similarly, InStep Shoes agreed to the strategic alliance to study the designing process of Comfort Shoes. However, Comfort Shoes was more successful and faster than InStep Shoes in accomplishing its alliance goal. What does this scenario best illustrate? D. Loan sharks 8. _____ 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 B. equity alliance. A. network effects B. economies of scope C. learning races D. time compression diseconomies C. learning races 11. 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? D. the VRIO framework 14. B. the amount of investment that can be involved. C. that the alliances cannot be abandoned if not promising. B. the Boston Consulting Group (BCG) matrix D. that they are not useful steppingstones toward full integration of the partner firms. C. the transaction-cost economics model 15. D. the VRIO framework 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. B. some of the firm's proprietary know-how may be appropriated by the foreign partner. C. unrelated diversification. D. hostile takeovers. 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. 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. A. related-linked diversification. 13. B. the amount of investment that can be involved. A. the weaker ties and reduced trust between partners. A. the core competence matrix 12. The downside of equity alliances is D. joint venture. 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. 16. A drawback of joint ventures is that they are characterized by B. double reporting lines. 18. A. involuntary mergers. A. depend on contractual agreements. B. double reporting lines. B. produce weaker ties between partners. C. contractual agreements rather than ownership. C. fail to facilitate the transfer of tacit knowledge. D. weak ties between alliance partners. 17. Equity alliances are less common than nonequity alliances because they Dream Slope Inc. is a leader in producing winter sports equipment, including skis and skates. Recently, the firm decided to expand into the bobsled market and acquired Sleek Phantom Inc. This company produced bobsleds, but its sales had slowed. The managers of Dream Slope convinced themselves that they were able to manage the business of Sleek Phantom more effectively even though they had no experience in the bobsled market. However, this move backfired and the sale of Sleek Phantom's bobsleds plummeted. Which of the following terms is often used to describe this scenario? A. managerial disadvantage B. managerial hubris C. managerial sympathy D. managerial empathy B. managerial hubris D. often require larger investments. D. often require larger investments. 19. EveningStar Inc. and The Luxur Group have together established The Luxur Star Group of hotels. EveningStar owns 49 percent and The Luxur Group has a 51 percent share in The Luxur Star Group of hotels. However, the management of The Luxur 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 20. 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? C. co-opetition 22. B. its strategic position in the U.S. market was well protected through high entry barriers. B. buyout C. this would help the company gain access to large cocoa plantations in China. C. co-opetition D. acquisition 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. A. the U.S. population was growing slowly and becoming more health conscious. A. the U.S. population was growing slowly and becoming more health conscious. A. takeover 21. The Hershey Company, the largest U.S. chocolate manufacturer, decided to enter the Chinese market in 2013 because C. fill gaps in its competency lineup. D. Hershey's main strategic focus was on product and market diversification and not on the domestic market. 23. Horizontal integration through mergers and acquisitions can help firms strengthen their competitive positions by increasing A. competitive intensity. B. differentiation. C. costs. D. managerial efficiency. B. differentiation 24. How did the recent horizontal integration in the U.S. airline industry provide benefits to the surviving carriers? C. by lowering competitive intensity in the industry overall 26. A. by facilitating excess capacity in the industry A. by increasing the threat the surviving firms will face from new entrants B. by preventing mergers from taking place B. by strengthening the rivalry among existing firms C. by lowering competitive intensity in the industry overall C. by requiring the surviving firms to shift their focus from non-price to price competition D. by increasing the threat of entry in the industry 25. How does horizontal integration within an industry affect the surviving firms? 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. 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 27. 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 chocolatemanufacturing industry. C. It has access to convenience stores and a new distribution channel. 28. 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. C. It allows the incumbent firms to buy time and wait for the uncertainty surrounding the market and technology to fade. 30. B. It helps the incumbent firms reduce the value gap they create through their product and service offerings. B. co-opetition. C. explicit knowledge. D. the stakeholder strategy. D. It reduces the incumbent firms' cost of acquisition by enabling them to make the entire investment decision in the beginning itself. In 1984, GM and Toyota formed a joint venture called New United Motor Manufacturing Inc. Each partner was motivated to learn new capabilities. This joint venture is an example of A. creating a real-options perspective. B. accessing complimentary assets. C. using co-opetition. D. forming a conglomerate. A. the realoptions perspective. A. the real-options perspective. C. It allows the incumbent firms to buy time and wait for the uncertainty surrounding the market and technology to fade. 29. 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 31. C. using co-opetition. 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 32. In a strategic alliance, the firm that learns faster B. has the incentive to reduce its knowledge sharing. 34. A. has the tendency to lose its competitive advantage. B. alliance leader C. has the tendency to move up a learning curve. C. alliance regulator D. alliance champion D. has the incentive to invest further in the alliance. In Eli Lilly's Office of Alliance Management, the alliance champion is primarily responsible for 35. 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 alliance training and development? B. the alliance leader B. providing technical expertise and knowledge needed for the specific technical area in an alliance. D. the alliance boss D. serving as an alliance process resource and business integrator between the two alliance partners. C. the alliance manager A. the alliance champion A. making sure that an alliance fits within the firm's existing alliance portfolio and corporate-level strategy. C. providing alliance training and development, as well as diagnostic tools. D. alliance champion A. alliance manager B. has the incentive to reduce its knowledge sharing. 33. In Eli Lilly's Office of Alliance Management, the _____ is a senior, corporate-level executive responsible for high-level support and oversight. C. the alliance manager 36. 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 37. In terms of the build-borrow-orbuy framework, a firm's internal resources are considered to be relevant when they are A. similar to those that need to be developed and superior to those of competitors in the targeted area 39. A. similar to those that need to be developed and superior to those of competitors in the targeted area. B. stakeholder strategy C. relational view of competitive advantage D. non-differentiation strategy C. different from those that need to be developed and superior to those of competitors in the targeted area. 40. D. different from those that need to be developed and inferior to those of competitors in the targeted area. 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-intime inventory system pioneered by GM C. to learn how to implement its lean manufacturing program with an American workforce D. to access GM's distribution system and marketing expertise C. relational view of competitive advantage A. real-options perspective B. similar to those that need to be developed and inferior to those of competitors in the targeted area. 38. The _____ is a strategic management framework that proposes that critical resources and capabilities frequently are embedded in strategic alliances that span firm boundaries. 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. D. realoptions perspective A. cost-leadership approach B. break-even analysis C. to learn how to implement its lean manufacturing program with an American workforce C. market risk framework D. real-options perspective 41. 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 42. _____ is best described as cooperation by competitors to achieve a strategic objective. C. Co-opetition 44. A. Limited liability B. Proprietorship JetStream Airway's decision to acquire Rex 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? C. managerial hubris C. Co-opetition A. managerial empathy D. Commerce 43. 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. B. managerial feasibility C. the horizontal integration activity has the potential to reduce competitive intensity in an industry. C. managerial hubris D. managerial capitalism 45. Luxura Inc. is a large cosmetics company that made an initial small investment in a start-up company, GreenDream, that was developing an organic face lotion. This gave Luxura controlling interests in the start-up company. However, GreenDream soon began to have financial difficulties because of principalagent problems. As a result, Luxura did not invest in the next stage of development and pulled out of the company. This approach to strategic alliance is referred to as a A. break-even analysis. B. partial joint venture. C. credible commitment. D. real-options perspective. D. real-options perspective. 46. The main reason behind Google's decision to acquire the Israeli start-up company Waze for $1 billion was to A. preempt its competitors from buying Waze. 48. A. preempt its competitors from buying Waze. B. share its capabilities with Waze. A. a merger C. support start-up companies with venture capital. B. a joint venture 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 C. principalagent problems. D. an equity alliance 49. Medetect Inc. is a large firm involved in the highly competitive market of high-tech medical equipment. In this market, smaller firms that focus on research are constantly making new technological developments. Which of the following approaches would best serve the needs of Medetect? A. mergers A. time compression diseconomies. B. experience-curve effects. C. principal-agent problems. D. resource ambiguity. C. an acquisition C. an acquisition D. gain access to technology that is alien to it. 47. 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? B. serial mergers C. acquisitions D. serial acquisitions D. serial acquisitions 50. 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 52. A. joint venture B. non-equity alliance C. hostile takeover Olympia Autos Inc. merged with its competitor Vaca Autos Inc. This allowed Olympia Autos to use its technological competencies along with Vaca Autos' 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 B. the display of information in an easytounderstand way A. the organization and analysis of data analytics D. equity alliance 51. One of the first new business apps resulting from the alliance of Apple and IBM will help airline pilots determine the right amount of fuel to carry on a particular flight. This task not only requires significant data analytics but also the need to display the information in an easily understandable way so that pilots can digest it quickly when glancing on their iPad in a cockpit prior to departure. Which of the following parts of this example will Apple be responsible for? B. the display of information in an easy-tounderstand way C. horizontal integration C. the determination of the amount of fuel to carry on a flight D. the arrangement of the cockpit to facilitate the use of the iPad 53. 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. 54. 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) D. equity alliance. 56. A. acquisition. 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. joint venture. A. PureSource Pharma will lower its costs through economies of scale. C. non-equity alliance. D. equity alliance. 55. The process of alliance management begins with A. selecting the best possible partner. B. PureSource Pharma will diminish its economic value creation. A. selecting the best possible partner. C. PureSource Pharma will increase its cost of distribution. D. PureSource Pharma will reduce the size of its sales force. B. choosing an appropriate governance mechanism. 57. C. designing the alliance. D. creating resource combinations that obey the VRIO criteria. 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.