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c.
will reduce the firm’s political risk.
d.
create a competitive advantage.
75. 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.
76. 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.
77. 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)
78. 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.
79. 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
80. Greentech, Inc., is a bioengineering firm specializing in food crops. It is considering a cooperative alliance with an
Asian agribusiness firm, AsiaFoods, to jointly produce improved crops for the Asian market. The risks that Greentech
should consider before entering this alliance include all of the following EXCEPT:
a.
Has AsiaFoods accurately represented its competencies?
b.
Will AsiaFoods make alliance-specific investments?
c.
Can Greentech expect opportunistic behavior from AsiaFoods?
d.
Will Greentech be able to use a cost-minimization management strategy in the AsiaFoods alliance?
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81. A nonequity strategic alliance exists when:
a.
two firms join together to create a new company.
b.
two or more firms have a contractual relationship to share resources and capabilities.
c.
two partners in an alliance own unequal shares in the combined entity.
d.
the partners agree to sell bonds instead of stock in order to finance a new venture.
82. In the Chapter 9 Mini Case, the cooperation between Fiat and Chrysler to produce a Fiat-designed car in Chrysler’s
Illinois factory is a(n) _________ alliance because it allows the firms to share resources and capabilities across multiple
functions.
a.
synergistic
b.
opportunistic
c.
horizontal
d.
diversifying
83. The Microsoft/Nokia alliance that had hundreds of pages to specify each partner’s responsibilities would be closest to
the _______ approach to managing cooperative ventures. In contrast, the Renault/Nissan alliance (Chapter 9 Mini Case)
was based on trust, respect, and transparency and is an example of the ________ approach to managing cooperative
ventures.
a.
cost minimization; opportunity maximization
b.
opportunity maximization; cost minimization
c.
cost maximization; opportunity minimization
d.
bureaucratic; organic
84. Fujitsu Siemens Computers is a legally independent company of which Fujitsu and Siemens each own 50 percent.
This collaboration is an example of a ________, which is effective at transferring ________.
a.
nonequity strategic alliance; explicit knowledge
b.
joint venture; tacit knowledge
c.
joint venture; explicit knowledge
d.
equity strategic alliance; tacit knowledge
85. U.S. Steel and Nucor (the two remaining major players in the U.S. steel industry) have been forming alliances as a
means to enter markets in Europe and Asia. The steel industry is an example of a ________ market in which firms
typically use alliances to gain market access.
a.
fast-cycle
b.
standard-cycle
c.
slow-cycle
d.
intermediate-cycle
86. Mutual forbearance is:
a.
illegal in the United States.
b.
a type of competition-reducing strategy.
c.
a variety of risk-sharing by firms in highly fragmented industries.
d.
exercised when alliance partners refrain from opportunistic behaviors.
87. A competitive advantage that is developed through a cooperative strategy is called a collaborative or a(n) ____
advantage.
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a.
economic
b.
collusive
c.
alliance
d.
relational
88. The opportunity maximization approach is more difficult to establish in international relationships than in domestic
relationships because of differences in all EXCEPT:
a.
laws.
b.
culture.
c.
trade policies.
d.
technology.
89. In managing cooperative strategies, research indicates that ____ can be a capability that is valuable, rare, imperfectly
imitable, and often nonsubstitutable giving these firms a competitive advantage.
a.
extensive capitalization
b.
stability
c.
trustworthiness
d.
Internet competency
90. The two types of complementary strategic alliances are:
a.
vertical and horizontal.
b.
macro and micro.
c.
outsourcing and insourcing.
d.
network and complementary.
91. The Renault Nissan alliance discussed in the Mini Case is an example of a ________ in that the firms seek to create
economies of scope by sharing their resources and capabilities to develop manufacturing platforms that can be used to
produce cars that will be either a Renault or a Nissan.
a.
joint venture
b.
synergistic alliance
c.
horizontal complementary alliance
d.
dynamic alliance network
92. In a(n) ____, two or more firms create a legally independent company to share some of their resources and capabilities
to develop a competitive advantage.
a.
equality-based strategic alliance
b.
non-equity strategic alliance
c.
joint venture
d.
equity strategic alliance
93. Which type of strategic alliance is best at passing tacit knowledge between firms?
a.
primary cooperative strategic alliances
b.
Joint ventures
c.
Equity strategic alliances
d.
Nonequity strategic alliances
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94. Which of the following is NOT a risk for firms engaged in cooperative strategies?
a.
Misrepresentation of a partner’s competencies
b.
Partner acts opportunistically
c.
Insufficient variation in firms’ core competencies
d.
Failure of partners to make complementary resources available to the partnership
95. DDD Partners, a U.S. business consulting firm is considering a cooperative alliance with an Indian business consulting
firm that has a wide practice in the Middle East and Asia. DDD has some European clients, but it sees the Middle East and
Asia as growth opportunities. It hopes to learn how to navigate the different cultures and business practices in this part of
the world from its alliance with the Indian firm. DDD’s greatest risk here is that the Indian firm will:
a.
insist on excessively close monitoring of DDD’s actions.
b.
gain access to DDD’s core competencies and use them to become a future competitor.
c.
not fully share its intangible resources.
d.
not make equivalent investments to the alliance as does DDD.
96. A businessperson in Atlanta who wishes to develop a luxury pet kennel approaches the owner of the highly successful
Pet Resort and Day Spa in Houston to see if the owner is interesting in franchising the Pet Resort brand. The Atlanta
businessperson’s goal is to:
a.
get venture capital from Pet Resort.
b.
gain access to Pet Resort’s tacit knowledge.
c.
collude with Pet Resort to diminish competition in the kennel industry in Atlanta.
d.
join in a vertical complementary alliance with Pet Resort.
97. Moon Flower cosmetics company executives are aware that their Asian customer base is interested in advanced skin
care treatments beyond Moon Flower’s traditional herbal and organic compounds. Moon Flower and a large American
chemical company are in discussions to create a 50–50 partnership in a new firm, which would create skin care treatments
based on innovative chemical formulations that would be marketed both in Asia and in the United States. Beyond being a
cross-border alliance, this partnership can be called a(n):
a.
nonequity strategic alliance.
b.
joint venture.
c.
horizontal complementary alliance.
d.
equity strategic alliance.
98. For the purpose of diversification, a corporate-level cooperative strategy may be preferable to a merger or acquisition
for all the following reasons EXCEPT:
a.
a host nation may forbid a merger or acquisition.
b.
opportunistic behaviors are less likely.
c.
cooperative strategies require fewer resources.
d.
cooperative strategies allow greater flexibility in diversifying the firm’s portfolio.
99. In some countries, the only legal way for foreign firms to invest in the country is through:
a.
acquisitions.
b.
mergers.
c.
greenfield ventures.
d.
strategic alliance with a local firm.
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100. The three main luxury hotels in a major tourist destination keep very close track of their competitors’ room pricing,
restaurant offerings, tour packages, and special services, such as airport transportation and spa privileges. When one hotel
makes adjustments in prices or offerings, the other hotels follow suit. It is possible that these hotels are:
a.
engaging in tacit collusion.
b.
following uncertainty reducing strategies.
c.
monitoring business competitors for opportunistic behaviors.
d.
following a competitive response strategy.
101. Firms entering into synergistic strategic alliances expect to attain:
a.
technological complexity.
b.
economies of scope.
c.
monopolistic market power.
d.
learning curve efficiencies.
102. A state-wide alliance of independent hospitals has formed in order to do group purchasing of medical supplies.
Group purchasing allows the hospital alliance to negotiate lower prices with suppliers because of the large quantity of
materials ordered. This is an example of the advantage of ____ resulting from an alliance.
a.
explicit collusion
b.
economies of scale
c.
opportunistic behavior
d.
distribution opportunities
103. Reduction of competition can be accomplished through all of the following EXCEPT:
a.
predatory alliances.
b.
explicit collusion.
c.
tacit collusion.
d.
mutual forbearance.
104. A relatively young firm has developed a method of transferring photographic images of surface textures onto any
type of hard surface. This potentially has a huge market in the home-decorating field as well as any hard surface that is
typically painted, such as car bodies. The type of alliance partner this firm would be searching for would be one with:
a.
low-cost labor production facilities in another country.
b.
similar products who could help the firm establish economies of scale.
c.
access to franchises in new markets.
d.
excess resources for investing.
105. Which of the following statements is TRUE?
a.
Most cooperative strategies are successful if the basic agreements are well written and include appropriate
monitoring strategies.
b.
As many as 50 percent of cooperative strategies fail.
c.
Opportunistic behaviors are usually focused on gaining the use of the partner’s manufacturing and financial
resources.
d.
Problems with international cooperative strategies usually concern financial-system differences between the
partners.
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106. A strategic alliance in which the partners own different percentages of the new company they have formed is called
a(n):
a.
equity strategic alliance.
b.
joint venture.
c.
nonequity strategic alliance.
d.
cooperative arrangement.
107. Burgess Corp. manufactures a line of heavy construction equipment. The company has announced a contractual
relationship with FS Electronics whereby FS will supply Burgess with advanced GPS navigation and guidance systems.
These systems will be an option on all bulldozers, dump trucks, and road graders Burgess produces. What type of alliance
is this?
a.
Joint venture
b.
Equity strategic alliance
c.
Nonequity strategic alliance
d.
Competition reduction alliance
108. The risks of being accused of collusion are MOST likely under what type of alliance?
a.
Equity-based vertical complementary alliance
b.
Equity-based horizontal complementary alliance
c.
Nonequity-based vertical complementary alliance
d.
Nonequity-based horizontal complementary alliance
109. In the franchising strategy, the most important competitive advantage for the franchisee is the franchisor’s:
a.
brand name.
b.
capital resources.
c.
access to a consolidated market.
d.
geographic locations.
110. McDonald’s, Hilton International, and Subway all heavily rely on the ____ strategy.
a.
transnational
b.
network cooperative
c.
cross-border alliances
d.
franchising cooperative
111. To increase the likelihood of success between partners assuming that trust exists, ____ approach(es) should be used
to manage cooperative strategies.
a.
the cost minimization
b.
the opportunity maximization
c.
both the cost minimization and opportunity maximization
d.
None of the these options are correct.
112. Why are alliances in the airline industry unstable?
a.
Unstable industries make for unstable alliances.
b.
The potential for firms to take opportunistic actions is too widespread.
c.
The industry is declining and profits are not sufficient to divide among alliance partners.
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d.
The alliances require cooperation among firms that must also compete with one another.
113. The Renault Nissan alliance (Chapter 9 Mini Case) is an example of a _______ created to gain economies of scope
by sharing resources and capabilities.
a.
diversifying strategic alliance
b.
vertical complementary alliance
c.
synergistic strategic alliance
d.
nonequity-based horizontal complementary alliance
114. Within the Renault Nissan alliance (Chapter 9 Mini Case), both Renault and Nissan have each formed ____________
strategic alliances at the business-unit level with other companies.
a.
vertical complementary
b.
horizontal complementary
c.
synergistic
d.
diversifying
115. BPM Corp. is a manufacturer of radar systems for regional-sized jet aircraft. The company has announced plans to
enter into a joint venture with J3 Composites, a producer of advanced composite materials. The announced venture will
produce a new, combined product consisting of the radar unit and protective composite cover. Which of the following
ownership arrangements would be most typical for a joint venture?
a.
BPM will own more than 50 percent of the venture and a new company will be formed.
b.
J3 will own more than 50 percent of the venture and a new company will be formed.
c.
BPM and J3 will both own 50 percent of the venture and a new company will be formed.
d.
BPM and J3 will both own 50 percent of the venture but no new company will be formed.
116. Identify and define the different types of strategic alliances.
117. Identify the three types of corporate-level cooperative strategies.
118. Identify the four types of business-level cooperative strategies and the advantages and disadvantages of each.
119. Identify and define the two different types of network strategies.
120. Describe the two strategic management approaches to managing alliances.
121. Identify the competitive risks associated with cooperative strategies.
122. Why are cooperative strategies often used when firms pursue international strategies? What are the advantages and
disadvantages of international cooperative strategies?
123. Explain the rationales for a cooperative strategy under each of the three types of basic market situations (i.e., slow,
standard, and fast cycles).
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Answer Key
1. True
2. False
3. True
4. False
5. True
6. False
7. True
8. False
9. True
10. True
11. True
12. False
13. True
14. True
15. False
16. True
17. True
18. True
19. True
20. False
21. True
22. False
23. False
24. False
25. False
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26. False
27. True
28. False
29. False
30. True
31. False
32. True
33. True
34. True
35. True
36. True
37. True
38. False
39. False
40. False
41. False
42. True
43. True
44. False
45. False
46. True
47. False
48. d
49. d
51. b
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52. a
53. d
55. b
56. c
58. a
59. b
61. c
62. a
64. d
65. c
68. d
71. a
72. c
74. d
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77. d
78. d
79. a
80. d
81. b
82. a
83. a
84. b
85. c
86. b
87. d
88. d
89. c
90. a
91. b
92. c
93. b
94. c
95. c
96. b
97. b
98. b
99. d
100. a
102. b
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103. a
104. d
105. b
106. a
107. c
108. d
109. a
110. d
111. b
112. d
113. c
114. b
115. c
116. Strategic alliances are cooperative strategies between firms whereby resources and capabilities are combined to
create a competitive advantage. All strategic alliances require firms to exchange and share resources and capabilities to
co-develop or distribute goods or services. The three basic types of strategic alliances are: (1) joint ventures, where a
legally independent company is created by at least two other firms, with each firm usually owning an equal percentage of
the new company; 2) equity strategic alliances, whereby partners own different percentages of equity in the new company
they have formed; and (3) nonequity strategic alliances, which are contractual relationships between firms to share some
of their resources and capabilities. The firms do not establish a separate organization, nor do they take an equity position.
Because of this, nonequity strategic alliances are less formal and demand fewer partner commitments than joint ventures
and equity strategic alliances. Typical forms are licensing agreements, distribution agreements, and supply contracts.
117. A diversifying strategic alliance allows firms to share some of their resources and capabilities to diversify into new
product or market areas. A synergistic strategic alliance allows firms to share some of their resources and capabilities to
create economies of scope. These alliances create synergy across multiple functions or multiple businesses between
partner firms. Franchising is a strategy in which the franchisor uses a contractual relationship to describe and control the
sharing of its resources and capabilities with franchisees. A franchise is a contract between two independent organizations
whereby the franchisor grants the right to the franchisee to sell the franchisor’s product or do business under its trademarks
in a given location for a specified period of time.
118. Through vertical and horizontal complementary alliances, companies combine their resources and capabilities in
ways that create value. Vertical complementary strategic alliances result when firms creating value in different parts of
the value chain combine their assets to create a competitive advantage. Vertical complementary strategies have the
greatest probability of being successful compared with other types of cooperative strategies. But firms using this type of
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markets or to establish franchises in new markets. Slow-cycle markets are rare and diminishing. Cooperative strategies
can help firms in (presently) slow-cycle markets make the transition from this relatively sheltered existence to a more
competitive environment. In standard-cycle markets (which are often large and oriented toward economies of scale), firms
try to gain access to partners with complementary resources and capabilities. Through the alliance, the firms try to
increase economies of scale and market power. In fast-cycle markets (characterized by instability, unpredictability, and
complexity), sustained competitive advantages are rare, so firms must constantly seek new sources of competitive
advantage. In fast-cycle markets, alliances between firms with excess resources and capabilities and firms with promising
capabilities who lack resources help both firms to rapidly enter new markets.