Deck 10: Cooperative Strategy Emea Edition

Question 1

Firms in slow-cycle markets can use alliances to enter restricted markets or to establish franchises in new markets.

Answer 1

True

Question 2

Synergistic strategic alliances focus on economies of scope rather than economies of scale.

Answer 2

True

Question 3

Using business-level strategic alliances to hedge against risk and uncertainty is most common in the slow-cycle markets.

Answer 3

False

Question 4

The advantages of alliances designed to respond to competition and to reduce uncertainty are more temporary than those developed through complementary alliances, such as vertical and horizontal strategic alliances.

Question 5

Research in the airline industry suggests that tacit collusion reduces service quality and on-time performance.

Question 6

Nonequity strategic alliances exist when two or more firms join together to create an independent firm.

Question 7

According to the chapter Opening Case, IBM has specific performance-related objectives (such as developing leading-edge chip technology) that it wants to accomplish as it engages in an array of cooperative arrangements.

Question 8

Mutual forbearance is a form of explicit collusion between firms in which competitors avoid attacking rivals they meet in multiple markets.

Question 9

In a vertical complementary alliance, firms share some of their resources and capabilities from the same stage of the value chain to create a competitive advantage.

Question 10

Firms in standard-cycle markets seek to gain economies of scale through cooperative alliances.

Question 11

The primary responsibility of the franchiser is to transfer capital to the franchisee.

Question 12

Tacit collusion tends to be least used as a business-level, competition-reducing strategy in highly concentrated industries such as airlines and breakfast cereals even though it results in higher prices for consumers.

Question 13

Of the four business-level cooperative strategies, the competition-reducing strategy has the lowest probability of creating a sustainable advantage.

Question 14

A firm creates a competitive advantage when it develops and manages corporate-level cooperative strategies in a way that is valuable, rare, imperfectly imitable and nonsubstitutable.

Question 15

Franchising is most attractive in concentrated industries.

Question 16

Cooperative strategies may involve firms who are competitors.

Question 17

Strategic alliances are cooperative strategies between firms that combine their resources and capabilities to create a competitive advantage.

Question 18

The probability of alliance success is increased when partnering firms internalize successful alliance experiences.

Question 19

Although growing in popularity with small and medium-sized firms because they can gain economies of scale, large companies tend to avoid strategic alliances.

Question 20

Acquisitions are the most common cooperative strategy used in standard-cycle markets.

Question 21

A network strategy involves a series of horizontal acquisitions by firms that are committed to dominating a particular industry.

Question 22

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.

Question 23

In a(an) ____, 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

Question 24

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

Question 25

Some cooperative strategies fail when it is discovered that a firm has misrepresented the competencies it can bring to the partnership.

Question 26

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.

Question 27

Firms consider entering international alliances because multinational firms outperform firms operating only in their home markets.

Question 28

The cost minimization approach of managing alliances is more expensive to put into place and to use than is the opportunity maximization management approach.

Question 29

Firms participate in strategic alliances for all the following reasons EXCEPT to

A) reduce competition.
B) enhance their competitive capabilities.
C) gain access to resources.
D) retain tight control over intangible core competencies.

Question 30

A strategic alliance in which the partners own different percentages of the new company they have formed is called a(an)

A) equity strategic alliance.
B) joint venture.
C) nonequity strategic alliance.
D) cooperative arrangement.

Question 31

When a firm is in the early stages of geographic diversification, cross-border alliances may be a good learning step before other forms of international expansion.

Question 32

Close monitoring, formal contracts, and constant vigilance against opportunism increase the probability of alliance success.

Question 33

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.

Question 34

A stable alliance network is used in industries characterized by frequent product innovations and short product life cycles.

Question 35

The chapter Strategic Focus about the TNK-BP joint venture between three Russian oil tycoons and British Petroleum illustrates the risk of opportunistic behavior in alliances, especially in emerging markets.

Question 36

A cooperative strategy

A) is an integrated and coordinated set of commitments and actions designed to exploit core competencies and gain a competitive advantage.
B) is a strategy in which firms work together to achieve a shared objective.
C) is an integrated and coordinated set of commitments and actions the firm uses to gain a competitive advantage by exploiting core competencies in specific product markets.
D) specifies actions a firm takes to gain a competitive advantage by selecting and managing a group of different businesses competing in different product markets.

Question 37

Network cooperative strategies among Silicon Valley firms have been successful, in part, because they are geographically close together.

Question 38

International strategic alliances are less risky than domestic strategic alliances because of diversification across countries.

Question 39

When using cooperative strategies, a firms most frequently develop strategic alliances that

A) enhance the firm's reputation in the marketplace.
B) are long-lived.
C) will reduce the firm's political risk.
D) create a competitive advantage.

Question 40

According to the Opening Case, IBM once teamed with longtime rival Sun Microsystems to produce software in competition with Hewlett-Packard. This is an example of a(an)

A) equity-based vertical complementary alliance.
B) equity-based horizontal complementary alliance
C) nonequity-based vertical complementary alliance.
D) nonequity-based horizontal complementary alliance.

Question 41

One disadvantage of developing effective monitoring systems to manage a strategic alliance is that

A) firms will have to accept greater risks.
B) trust will be eroded.
C) spontaneous opportunities are minimized.
D) power coalitions will still develop.

Question 42

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.

Question 43

The 20-year sporting event partnership between IMG Worldwide and China Central Television which serves to broaden IMGs international reach would be characterized as a(an)

A) collusive tactic.
B) merger.
C) cross-border strategic alliance.
D) international acquisition.

Question 44

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% 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.

Question 45

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.

Question 46

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.

Question 47

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.

Question 48

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)

Question 49

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 .

Question 50

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.

Question 51

Cisco developed partnership agreements with Accenture Ltd., and India-based Tata Consulting Services Ltd. to help market Cisco's products to businesses around the world. This is an example of a

A) joint venture.
B) synergistic alliance.
C) horizontal complementary alliance.
D) dynamic alliance network.

Question 52

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.

Question 53

Firms entering into synergistic strategic alliances expect to attain

A) technological complexity.
B) economies of scope.
C) monopolistic market power.
D) learning curve efficiencies.

Question 54

Mutual forbearance is

A) illegal in the U.S.
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.

Question 55

Stable alliance networks will most often

A) be used to enhance a firm's internal operations.
B) appear in mature industries where demand is relatively constant and predictable.
C) emerge in industries with short product life cycles.
D) emerge in declining industries as a way to increase process innovations.

Question 56

Reduction of competition can be accomplished through all of the following EXCEPT

A) predatory alliances.
B) explicit collusion.
C) tacit collusion.
D) mutual forbearance.

Question 57

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.

Question 58

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

Question 59

The two types of complementary strategic alliances are

A) vertical and horizontal.
B) macro and micro.
C) outsourcing and insourcing.
D) network and complementary.

Question 60

The chapter Strategic Focus about the TNK-BP joint venture between three Russian oil tycoons and British Petroleum illustrated which of the following risks of cooperative strategies?

A) Having a true perception of the partner's trustworthiness.
B) Failing to make available to its partners the resources and capabilities that it committed to the cooperative strategy.
C) The partner misrepresenting competencies it can bring to the partnership.
D) Opportunistic behavior and failure to make investments that are specific to the alliance.

Question 61

Identify the four types of business-level cooperative strategies and the advantages and disadvantages of each.

Question 62

Identify and define the two different types of network strategies.

Question 63

Why are cooperative strategies often used when firms pursue international strategies? What are the advantages and disadvantages of international cooperative strategies?

Question 64

Identify the three types of corporate-level cooperative strategies.

Question 65

Identify and define the different types of strategic alliances.