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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.

E) All of the above
F) C) and D)

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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.

E) C) and D)
F) A) and B)

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What is the main reason that most mergers and acquisitions negatively effect shareholder value?


A) The entire market becomes an oligopoly or a monopoly.
B) Promised synergies never take place.
C) Market conditions change too quickly.
D) Companies that resist acquisitions are subject to the "winner's curse."

E) A) and B)
F) A) and C)

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What is horizontal integration?


A) the process of merging with a competitor at a different stage of the value chain
B) the process of merging with a competitor at the same stage of the value chain
C) the process of acquiring a competitor at a higher stage of the value chain
D) the process of acquiring a competitor at a lower stage of the value chain

E) All of the above
F) A) and C)

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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 start-up companies
C) when a target firm does not want to be acquired
D) when two or more firms enter a temporary vertical strategic alliance

E) A) and D)
F) None of the above

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How do strategic alliances help firms gain access to complementary assets?

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The successful commercialization of a ne...

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Nirvana Shoes Inc. and StepOut Shoes Inc., two competing shoe brands, entered into a strategic alliance to study and acquire each other's competencies. Nirvana Shoes entered the strategic alliance to acquire the production system pioneered by StepOut Shoes. Similarly, StepOut Shoes agreed to the strategic alliance to study the design process of Nirvana Shoes. However, Nirvana Shoes was more successful and faster than StepOut 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

E) All of the above
F) None of the above

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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

E) C) and D)
F) None of the above

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A microchip company wants a computer company to produce more powerful tablets and therefore use more of its chips. That same computer company wants the microchip maker to create chips with faster processing power. What approach could these companies take so that both can serve stockholders well?


A) Both companies should reduce prices to force out competitors and make entering the market less appealing to potential rivals
B) Whichever company is larger should acquire the smaller one and impose its management system on the acquired company.
C) The two companies should enter a strategic alliance to bring about a win-win situation for them and to limit their rivals' power.
D) For data security reasons, both companies should remain separate and refrain from sharing information.

E) B) and D)
F) None of the above

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Anthonia is a senior manager at Buxley Corp., a motorcycle manufacturer. Buxley has entered an equity alliance with Supremo, a moped manufacturer. "Don't worry, Anthonia," her counterpart at Supremo tells her. "I'm going to send you all our guidelines and documentation for manufacturing catalytic converters, and then you'll be all set." What else should Anthonia request from Supremo?


A) personnel exchanges to share tacit knowledge
B) a gradual change from an equity alliance to a non-equity alliance to show greater commitment
C) nothing, because the information transfer described is complete and appropriate
D) a licensing agreement so that Buxley can exchange codified knowledge with Supremo

E) All of the above
F) A) and D)

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Which of the following summarizes the benefit of the strategic alliance between HP and DreamWorks?


A) HP and DreamWorks each strengthened their separate markets without impinging on each other's markets.
B) Both HP and DreamWorks were able to enter a new market that they would not have been able to pursue alone.
C) HP was able to enter a new market, and DreamWorks was able to strengthen its old market.
D) DreamWorks was able to enter a new market, and HP was able to strengthen its old market.

E) B) and C)
F) A) and D)

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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

E) A) and C)
F) C) and D)

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Even if a merger may not increase shareholder value as planned, it is often a wise idea to champion it so that managers will have the greater opportunities of working at an expanding company.

A) True
B) False

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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.

E) C) and D)
F) B) and C)

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Elaborate on the real-options perspective.

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A real-options perspective to strategic ...

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Mediflow, a medium-sized medical technology company, has been successful in its research and development but needs improvement in its European sales. Which of these actions would most likely lead to long-term success for Mediflow's European sales?


A) Alert the European Union that conditions in the European medical technology market are approaching oligopoly.
B) Initiate a hostile takeover of a European rival.
C) Acquire a company that has a successful medical technology sales force in Europe so that Mediflow can gain access to new distribution channels.
D) Contact its congressional representative to request higher tariffs on European technology products.

E) B) and D)
F) A) and D)

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Why did incumbent pharmaceutical firms enter into hundreds of strategic alliances with biotech start-ups?


A) to pursue an unrelated-options perspective without disrupting existing market economics
B) to make small-scale investments in ventures poised to disrupt existing market economics
C) to invest their excess cash flow in the superior technology of the biotech start-ups
D) to share their continuously updated research technology with the biotech start-ups

E) C) and D)
F) A) and D)

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Solaris Autos Inc., a large automobile company, made an initial small investment in a start-up company that was developing a solar-powered car. This gave Solaris Autos controlling interests in the start-up company. However, Solaris Autos had no obligations to make continued investments in the experiments of the start-up company. It could invest small amounts depending on the new product's success at each stage of its development. If the product proved to be successful, Solaris Autos would have the right to buy out the start-up 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.

E) A) and B)
F) A) and C)

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A candy company called Hearts Aflame Inc. forms an agreement with another candy company called Dreamcatcher Inc. Through this agreement, Hearts Aflame owns 30 percent of Dreamcatcher. However, Dreamcatcher does not own any part of Hearts Aflame. This type of agreement is called a(n)


A) non-equity alliance.
B) equity alliance.
C) joint venture.
D) capital venture.

E) B) and C)
F) A) and B)

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Which of the following reasons motivated Facebook to acquire Instagram, a photo and video-sharing social media site, for $1 billion?


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

E) None of the above
F) A) and D)

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