63. Hewlett-Packard licenses some of its intellectual property through strategic alliances. Which of the following is
correct about this relationship?
a. This is a joint venture because in licensing arrangements, a new company is created.
b. This is an equity strategic alliance because licensing does not involve the creation of a new company, but
does involve an equity commitment.
c. The firms risk charges of collusion because most licensing relationships between competitors involve explicit
collusion.
d. This is a nonequity strategic alliance with Hewlett-Packard leveraging its unique capabilities.
64. 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.
65. 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.
66. Meredith Inc. is a manufacturer of art supplies. The company has announced plans to enter into an equity strategic
alliance with JaZz Paper to develop a line of specialty papers for use with a line of specialty paints Meredith
manufactures. Which of the following would be the accurate interpretation of this announcement?
a. Meredith will own a majority equity stake in the new venture.
b. JaZz will own a majority equity stake in the new venture.
c. Meredith or JaZz will own an equal equity stake in the new venture.
d. Either Meredith or JaZz will own a majority equity stake, but we do not know which one based on the
announcement.
67. 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.
68. 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.
69. 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
70. Firms participate in strategic alliances for all the following reasons EXCEPT to
a. create value that they could not develop by acting independently.
b. enter competitive markets more quickly.
c. gain access to resources.
d. retain tight control over intangible core competencies.
71. The global airline industry is one in which
a. national political interests prevent airlines from making international alliances.
b. the fast-cycle nature of the industry mandates heavy use of alliances.
c. most alliances tend to be vertical complementary.
d. alliance versus alliance competition dominates firm versus firm competition.
72. 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
typically use alliances to gain market access.
a. fast-cycle
b. standard-cycle
c. slow-cycle
d. intermediate-cycle
market in which firms
73. 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.
74. The alliance between Nokia and Microsoft calls for Nokia to transition its smartphone portfolio to Microsoft‘s
Windows phone platform. This is an example of using an alliance in a
new products and services.
a. slow-cycle market
b. medium–cycle market
c. standard-cycle market
d. fast-cycle market
to speed up development of
75. 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
76. Firms in a standard-cycle market may form alliances in order to
a. take advantage of opportunities in emerging market countries.
b. more quickly distribute new products.
c. capture economies of scale.
d. share risky R&D investments.
77. Firms in markets cooperate to pool resources and gain market power.
a. slow-cycle
b. standard-cycle
c. fast-cycle
d. hyper-cycle
78. The two types of complementary strategic alliances are
a. vertical and horizontal.
b. macro and micro.
c. outsourcing and insourcing.
d. network and complementary.
79. All of the following are business-level cooperative strategic alliances EXCEPT
a. synergistic strategic alliances.
b. uncertainty reduction strategic alliances.
c. complementary strategic alliances.
d. competition response strategic alliances.
80. A manufacturer of specialty jams and jellies has decided to ally itself with an orchard and vineyard growing rare
strains of fruit. This is a(n) strategy.
a. vertical complementary
b. horizontal complementary
c. uncertainty reduction
d. network
81. are LEAST likely to involve potential or current competitors.
a. Mutual forbearance strategies
b. Tacit collusion strategies
c. Horizontal complementary strategic alliances
d. Vertical complementary strategic alliances
82. Smith Commercial Lighting, Inc., which sells lighting for factories and businesses, has entered into an alliance with
Revelation Lighting, Inc., a retailer of home decor lighting, in order to expand into the trend of using industrial-type
lighting in non–traditional style homes. Smith has invested 40 percent and Revelation has invested 60 percent into
the new operation. This is an example of a(n)
a. joint venture.
b. nonequity alliance.
c. horizontal complementary strategic alliance.
d. vertical complementary strategic alliance.
83. Reduction of competition can be accomplished through all of the following EXCEPT
a. predatory alliances.
b. explicit collusion.
c. tacit collusion.
d. mutual forbearance.
84. 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.
85. 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.
86. The fact that the prices consumers pay for branded breakfast cereals are above the prices that would exist if there
were true competition suggests that the cereal manufacturers are engaging in
a. excessive cooperation.
b. joint ventures.
c. tacit collusion.
d. horizontal strategic alliances.
87. In the United States, cooperative strategies to reduce competition may result in if they are explicit.
a. increased tax liabilities
b. litigation
c. government takeover of the firms
d. dissolution of the firm
88. In free-market economies,
established regulations.
a. the invisible hand
b. the government
c. consumers
d. the business community
must decide how rivals can collaborate with their competitors without violating
89. 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
90. 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.
d. The alliances require cooperation among firms that must also compete with one another.
91. A cooperative strategy helps the firm diversify in terms of products offered, markets served, or both.
a. corporate-level
b. business-level
c. national–level
d. industry-level
92. Of the various business-level strategic alliances, alliances have the most probability of creating sustainable
competitive advantage, and have the lowest.
a. horizontal complementary; vertical complementary
b. vertical complementary; competition reducing
c. competition reducing; horizontal complementary
d. uncertainty reducing; competition reducing
93. strategic alliances have stronger focus on value creation than do alliances.
a. competition reducing; complementary
b. complementary; competition reducing
c. uncertainty reducing; complementary
d. collusive; uncertainty reducing
94. 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.
95. 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
96. Firms entering into synergistic strategic alliances expect to attain
a. technological complexity.
b. economies of scope.
c. monopolistic market power.
d. learning curve efficiencies.
97. The Renault Nissan alliance discussed in the Opening 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
98. A is a strategy in which firms share some of their resources and capabilities to create economies
of scope and is similar to the business-level horizontal complementary alliance.
a. joint venture
b. synergistic strategic alliance
c. diversifying strategic alliance
d. dynamic alliance network
99. The primary responsibility of the franchisor, such as McDonald’s or Hilton International is to
a. learn about the brand and technology from the franchisee.
b. test the franchisee for potential future acquisition.
c. transfer to the franchisee knowledge and skills needed to compete at the local level.
d. provide feedback to the franchisee regarding how the franchisor could become more effective and efficient.
100. Which of the following statements is FALSE?
a. Franchising is most appropriate in fragmented industries.
b. Franchising provides corporate growth with less risk than do mergers and acquisitions.
c. Successful franchising allows transfer of knowledge and skills from the franchisor to the franchisee.
d. Franchising agreements require more trust between firms than do other cooperative strategies.
101. 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.
102. 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.
103. McDonald’s, Hilton International, and Subway all heavily rely on the strategy.
a. transnational
b. network cooperative c.
cross-border alliances d.
franchising cooperative
104. FrameCo, a maker of commercial greenhouses, has just extricated itself from a failing cooperative alliance with
another firm. The expected synergies never were achieved, and FrameCo lost most of its investment. The top
management of FrameCo should
a. avoid future cooperative alliances because they lack the skills needed to manage them successfully.
b. enter into future cooperative alliances only if the alliance is closely monitored by a third party to prevent
opportunistic behavior by the alliance partner.
c. realize that most cooperative alliances fail and that it should ally itself only with an experienced alliance
partner in the future.
d. internalize the knowledge about the successes and failures of this alliance so FrameCo can learn from the
experience.
105. The collaboration between Volvo Aero (a subsidiary of Sweden‘s AB Volvo) and U.S.-based Pratt & Whitney to
produce a new jet engine would be characterized as a(n)
a. collusive tactic.
b. merger.
c. cross-border strategic alliance.
d. international acquisition.
106. Legitimately, a firm may pursue an international strategic alliance for all of the following reasons EXCEPT
a. to enhance the compensation packages of top managers.
b. to leverage core competencies in new markets.
c. to operate within government restrictions in the local country.
d. to escape limited domestic growth opportunities.
107. 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.
108. In a cross-border alliance, the local partner is often a useful source of information about
a. sources of capital.
b. the strengths of the foreign firm’s technology.
c. market synergies.
d. long–term planning.
109. In general, cross-border alliances are more
markets.
a. uncertainty reducing; diversifying
b. complex; risky
c. highly leveraged; tightly monitored
d. flexible; trust-based
and than domestic alliances, especially in emerging