Strategies for Firm Growth Part 2

37) Which of the following is the primary advantage of a wholly owned subsidiary as a foreign market entry strategy? A) Provides a firm total control over its operations B) Easier to raise capital to implement than other foreign market entry strategies C) Gaining an appreciation of local customs and market preferences D) Low transportation costs E) The ability to give employees foreign market experience Answer: A 38) The majority of entrepreneurial firms first enter foreign markets as exporters. Answer: TRUE 39) ________ growth strategies rely on establishing relationships with third parties, such as mergers, acquisitions, strategic alliances, joint ventures, licensing, and franchising. A) Internal B) Domestic C) Outside D) External E) Peripheral Answer: D 40) Brian Ramsey owns a firm that develops and sells smartphone accessories. He is currently trying to grow his firm through strategic alliances and joint ventures. Brian is pursuing a(n) ________ growth strategy. A) domestic B) external C) subsidiary D) internal E) secondary Answer: B 41) Which of the following is an example of an external growth strategy? A) New product development B) Mergers and acquisitions C) Market penetration D) Product line extension E) Geographic expansion Answer: B 42) Rachel Watts owns a chain of office supply stores. Over the past three years, Rachel has significantly increased her sales through the outright purchase of additional office supply stores. Rachel is pursuing a(n) ________ strategy. A) acquisition B) merger C) strategic alliance D) joint venture E) licensing Answer: A 43) A(n) ________ is the pooling of interests to combine two or more firms into one. A(n) ________ is the outright purchase of one firm by another. A) acquisition; merger B) merger; acquisition C) licensing agreement; acquisition D) joint venture; strategic alliance E) strategic alliance; joint venture Answer: B 44) In an acquisition, the surviving firm is called the ________, and the firm that is acquired is called the ________. A) target; acquirer B) goal; objective C) objective; aggressor D) acquirer; target E) aggressor; objective Answer: D 45) Two years ago, Cameron Jones and Mary Scott each owned a small chain of smoothie restaurants in New York City. Just recently, they decided to pool their interests and combine their individual chains of restaurants into one chain. What Cameron and Mary did with their firms is called a(n) ________. A) licensing agreement B) strategic alliance C) acquisition D) joint venture E) merger Answer: E 46) Which of the following is a disadvantage of growth by means of external growth strategies? A) Diversification of business risk B) Economies of scale C) Getting access to proprietary products or services D) Reducing competition E) Loss of organizational flexibility Answer: E 47) Which of the following is an advantage of growth by means of external growth strategies? A) Gaining access to new products and markets B) Increased business complexity C) Clash of corporate cultures D) Antitrust implications E) Loss of organizational flexibility Answer: A 48) The two primary steps involved in finding an appropriate acquisition candidate are (1) Make a "short list" of appropriate acquisition candidates and (2) ________. A) carefully screen each candidate to determine its suitability for acquisition B) interview the CEO of each candidate to determine his/her openness to an acquisition C) determine if acquiring each candidate is financially feasible D) meet with each candidate's top management team to discern if they are compatible with your top management team E) hire a consulting firm to determine the best acquisition candidate Answer: A 49) ________ is the granting of permission by one company to another company to use a specific form of its intellectual property under clearly defined conditions. A) Verifying B) Confirming C) Endorsing D) Licensing E) Certifying Answer: D 50) The ________ is the company that owns the intellectual property. The ________ is the company purchasing the right to use it. A) endorsee; endorser B) licensor; licensee C) licensor; endorsee D) endorser; endorsee E) licensee; licensor Answer: B 51) ________ licensing is the licensing of proprietary technology that the licensor typically controls by virtue of a utility patent. A) Skill B) Intellectual property C) Utility D) Technology E) Expertise Answer: D 52) Qualcomm, a high-tech company headquartered in San Diego, owns the rights to several of the key components that permit cell phones to work. Instead of selling cell phones itself, Qualcomm grants permission to many companies to use specific forms of its intellectual property in exchange for monetary compensation. Qualcomm in engaging in an external growth strategy referred to as ________. A) licensing B) strategic alliances C) acquisitions D) new product development E) joint ventures Answer: A 53) ________ licensing is the licensing of a recognized trademark or brand that the licensor typically controls through a registered trademark or copyright. A) Goods and character B) Products and trademark C) Products and brand D) Merchandise and character E) Products and services Answer: D 54) Merchandise and character licensing is the licensing of a recognized trademark or brand that the licensor typically controls through a registered ________. A) trade secret or copyright B) patent or copyright C) trademark or patent D) patent or trade secret E) trademark or copyright Answer: E 55) Samantha Jones owns a chain of ice cream stores in New England. To draw attention to her stores, she adopted a very colorful and distinctive logo several years ago, which depicts a funnylooking cow churning ice cream. Recently, a dairy company asked Samantha if it could use a characterization of her funny-looking cow on a line of yogurt it is coming out with, and offered to pay Samantha's company 3 cents for every carton of yogurt it sells that has the cow's image on the carton. If Samantha accepts this proposal, she will need to enter into a(n) ________ agreement with the dairy. A) licensing B) joint venture C) strategic alliance D) new product development E) exporting Answer: A 56) According to the textbook, the key to effective merchandise and character licensing is ________. A) get licensing income monthly rather than yearly B) resist the temptation to license a trademark too widely C) licensing a trademark very widely D) restrict licensing agreements to one year E) restrict licensing to product categories that have no relevance and appeal to a firm's core customers Answer: B 57) A ________ is a partnership between two or more firms that is developed to achieve a specific goal and has no joint ownership involved. A) joint alliance B) joint venture C) licensing agreement D) merger E) strategic alliance Answer: E 58) Which of the following was identified in the textbook as an advantage of participating in strategic alliances and joint ventures? A) Management complexities B) Loss of organizational flexibility C) Partners' cultures may clash. D) Risk becoming dependent on a partner E) Learning Answer: E 59) Which of the following was identified in the textbook as a disadvantage of participating in strategic alliances and joint ventures? A) Risk and cost sharing B) Economies of scale C) Partial loss of decision autonomy D) Gain access to a foreign market E) Neutralizing or blocking competitors Answer: C 60) In the context of strategic alliances, ________ alliances feature cooperation in research and development, engineering, and manufacturing. A) administrative B) directorial C) marketing D) organizational E) technological Answer: E 61) In the context of strategic alliances, ________ alliances typically match a company with a distribution system with a company that has a product to sell to increase sales of a product or service. A) promotion B) marketing C) organizational D) directional E) technological Answer: B 62) The Partnering for Success feature in Chapter 14 is titled "Three Steps to Alliance Success." The three steps to alliance success identified in the feature are ________. A) drafting a licensing agreement, setting up a governance structure, and making it work B) selecting a partner, cutting the deal, and making it work C) interviewing potential partners, cutting the deal, and supervising the implementation of the agreement D) drafting a licensing agreement, cutting the deal, and setting up a governance structure E) selecting an alliance "manager," setting up a governance structure, and making it work Answer: B 63) External growth strategies rely on establishing relationships with third parties, such as mergers, acquisitions, strategic alliances, joint ventures, licensing, and franchising. Answer: TRUE 64) An acquisition is the pooling of interests to combine two or more firms into one. A merger is the outright purchase of one firm by another. Answer: FALSE 65) In an acquisition, the surviving firm is called the acquirer, and the firm that is acquired is called the target. Answer: TRUE 66) In regard to acquisitions, many firms have found that the process of assimilating another company into their current operations is relatively easy and is not disruptive to the current operations of their firm. Answer: FALSE 67) Licensing is the granting of permission by one company to another company to use a specific form of its intellectual property under clearly-defined conditions. Answer: TRUE 68) Technology licensing is the licensing of proprietary technology that the licensor typically controls by virtue of a utility patent. Answer: TRUE 69) Loss of proprietary information is a disadvantage of participating in strategic alliances and joint ventures. Answer: TRUE 70) A joint venture is a partnership between two or more firms that is developed to achieve a specific goal and has no joint ownership involved. Answer: FALSE 71) In a link joint venture, the partners collaborate at a single point in the value chain to gain economies of scale in production or distribution. Answer: FALSE 72) In a scale joint venture, the position of the parties is not symmetrical, and the objectives of the partners may diverge. Answer: FALSE 73) A spin-out occurs when a large company divests itself of one of its smaller divisions and the division becomes an independent company. Answer: TRUE 74) Describe what licensing is. What type of intellectual property can be licensed? Identify the two types of licensing pursued by entrepreneurial firms. Answer: Licensing is the granting of permission by one company to another company to use a specific form of its intellectual property under clearly defined conditions. Virtually any intellectual property a company owns that is protected by a patent, trademark or copyright can be licensed to a third party. There are two principle types of licensing. Technology licensing is the licensing of proprietary technology that the licensor typically controls by virtue of a utility patent. Merchandise and character licensing is the licensing of a recognized trademark or brand that the licensor typically controls through a registered trademark or copyright. 75) Describe what a joint venture is. Identify the two types of joint ventures. Answer: A joint venture is an entity created when two or more firms pool a portion of their resources to create a separate, jointly owned organization. The two types of joint ventures are scale joint ventures and link joint ventures. In a scale joint venture, the partners collaborate at a single point in the value chain to gain economies of scale in production and distribution. In a link joint venture, the position of the parties is not symmetrical, and the objectives of the parties may diverge. For example, many of the joint ventures between American and Canadian food companies provide the American partner with access to Canadian markets and distribution channels and the Canadian partner with the opportunity to add to its product line.