Deck 9: Cooperative Implications for Strategy

Question 1

The equity strategic alliance between GE's NBC Universal, News Corporation, and Walt Disney (Hulu.com) was formed to develop new sources of competitive advantages in the fast-cycle entertainment business.

Answer 1

True

Question 2

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

Answer 2

True

Question 3

Renault has a cooperative relationship with Bajaj Auto Ltd. of India for the purposes of producing a minicar to compete against Tata Motors' Nano (currently the world's cheapest car). This alliance is an example of a horizontal complementary strategic alliance. (Chapter 9 Strategic Focus)

Answer 3

True

Question 4

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

Question 5

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 6

Cooperation in slow-cycle markets is extremely rare because these industries are declining.

Question 7

If a large Asian cosmetics firm was to engage in a 50-50 partnership with a large American chemical company to form a new company focused on creating advanced skin care products, this would be considered a joint venture.

Question 8

Strategic alliances have become the cornerstone of many firms' competitive strategy, particularly large global competitors such as BMW.

Question 9

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 10

Horizontal complementary strategic alliances are designed so that each partner realizes equal benefits from equal investments in the alliance.

Question 11

Announced in February 2011, 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 standard-cycle market to speed up the development of new products and services. (Chapter 9 Strategic Focus)

Question 12

A cooperative strategy is a means by which firms work together to achieve a shared objective.

Question 13

According to the Chapter 9 Opening Case, in addition to their corporate-level alliance, Renault and Nissan have each formed vertical complementary strategic alliances with other companies.

Question 14

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

Question 15

One area in which joint ventures are effective is the transfer of tacit knowledge as illustrated in the Fujitsu Siemens joint venture (Chapter 9 Strategic Focus).

Question 16

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

Question 17

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

Question 18

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

Question 19

A cooperative agreement between a hotel chain and a casino operator would be viewed as a horizontal complementary strategic alliance because as separate entities, the two firms would compete for the same customer.

Question 20

Nonequity strategic alliances are formed when one partner owns a much larger (or inequitable) share of the joint venture than do the remaining partner(s).

Question 21

Horizontal business-level strategic alliances have greater probability of creating sustainable competitive advantage than do vertical business-level strategic alliances.

Question 22

Because of U.S. legal restrictions concerning large foreign acquisitions, American firms can only enter into diversifying alliances with other U.S. firms.

Question 23

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 24

Franchising is an alternative to pursuing growth through mergers and acquisitions.

Question 25

Synergistic strategic alliances such as the Renault-Nissan alliance discussed in the Opening Case focus on economies of scope by sharing their resources and capabilities to develop manufacturing platforms that can be used to Renault or Nissan cars.

Question 26

An alliance can be used to test whether the partners would benefit from a future merger.

Question 27

Although governments in free-market economies allow rivals to collaborate to improve competitiveness, the challenge is to make sure the alliance does not lead to price fixing.

Question 28

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

Question 29

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 30

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

Question 31

Franchising is most attractive in concentrated industries.

Question 32

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

Question 33

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

Question 34

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

Question 35

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 36

Collusion is a form of cooperative strategy.

Question 37

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 38

Tacit collusion is not explicitly illegal in the United States even though it results in higher prices for consumers.

Question 39

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

Question 40

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

Question 41

A strategy in which firms work together to achieve a shared objective is a

A) functional-level strategy.
B) business-level strategy.
C) corporate-level strategy.
D) cooperative strategy.

Question 42

International strategic alliances have played an important role in helping manufacturers of jet aircraft engines respond to increasing fuel prices and tougher environmental regulations.

Question 43

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

Question 44

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

Question 45

In the Microsoft/Nokia alliance discussed in the earlier Strategic Focus, the hundreds of pages that were developed to specify the responsibilities of each partner suggests a cost-minimization approach to managing cooperative strategies.

Question 46

Failure of a partner to contribute needed resources and capabilities to a cooperative venture is a particular risk in international ventures especially in emerging economies.

Question 47

A major risk of a network cooperative strategy is that firms gain access to their partner's partners thus exposing their proprietary processes to loss or theft.

Question 48

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 49

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

Question 50

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 51

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

Question 52

In the cost minimization approach to managing competitive strategies, the relationship between the firms is based on trust of the other partner.

Question 53

High levels of trust allow less formal contracts to govern the relationship between alliance partners and increases the likelihood of alliance success.

Question 54

The Renault Nissan alliance (Chapter 9 Opening 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

Question 55

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 56

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

Question 57

Within the Renault Nissan alliance (Chapter 9 Opening 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

Question 58

The alliance between BP Plc and OAO Rosneft to extract oil from Russia's Arctic Ocean was managed using contracts, i.e., the cost minimization approach.

Question 59

The Renault Nissan approach to managing its collaboration involves less reliance on contracts and more reliance on trust, respect, and transparency (i.e., the opportunity-maximization approach to managing cooperative strategies).

Question 60

Only about 50% of cooperative strategies succeed.

Question 61

The alliance between Nokia and Microsoft (Chapter 9 Strategic Focus) calls for Nokia to transition its smartphone portfolio to Microsoft's Windows phone platform. This is an example of using an alliance in a ____________ to speed up development of new products and services.

A) slow-cycle market
B) medium-cycle market
C) standard-cycle market
D) fast-cycle market

Question 62

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

Question 63

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.

Question 64

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.

Question 65

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.

Question 66

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 67

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 68

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.

Question 69

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 70

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% of this collaboration with DoCoMo holding the remaining 20%. This collaborative arrangement is an example of a(n)

A) joint venture.
B) network strategy.
C) equity strategic alliance.
D) nonequity strategic alliance.

Question 71

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.

Question 72

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 73

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

Question 74

A competitive advantage that is developed through a cooperative strategy is called a collaborative or a ____ advantage.

A) economic
B) collusive
C) alliance
D) relational

Question 75

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 which would be marketed both in Asia and in the U.S. Beyond being a cross-border alliance, this partnership can be called a(an)

A) nonequity strategic alliance.
B) joint venture.
C) horizontal complementary alliance.
D) equity strategic alliance.

Question 76

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.

Question 77

Fujitsu Siemens Computers is a legally independent company of which Fujitsu and Siemens each own 50%. (Chapter 9 Strategic Focus). 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

Question 78

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 79

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

Question 80

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.