Question 1

Zeal Inc., a software firm, decides to enter the publishing industry. While it has the financial resources required to enter the new market, it lacks the expertise and technical knowledge required to establish itself in the new industry. So, Zeal Inc. enters into strategic alliance with Chrome Corp., a leading e-publisher. Which of the following is likely to be true in this case?

Accepted Answer

A) Chrome is likely to lose its relational advantage through this alliance. 
B) Zeal and Chrome are likely to cooperate even at the stage of research and development. 
C) Zeal's vision is likely to contradict that of Chrome. 
D) Chrome is likely to provide its expertise only at the marketing stage.

Question 2

A contractual alliance is preferred when:

Accepted Answer

A) firms bring knowledge but each can perform their roles separately. 
B) firms bring difficult-to-measure contributions that must be combined. 
C) interdependence between partners is low. 
D) the contribution of each partner is difficult to measure.

Question 3

When do firms tend to opt for equity alliances?

Accepted Answer

A) When it is easy to specify what each party is supposed to do in the relationship 
B) When it is easy to specify the rewards that should come from meeting one's obligations in the alliance 
C) When an alliance requires less interdependence among the firms involved 
D) When an alliance requires the joint creation of new resources and capabilities by the partners

Question 4

J.L. Inc., a manufacturing company, develops manuals that include tools for making a business case, a partner-evaluation form, a negotiations template outlining the roles and responsibilities of different departments, and a list of ways to measure the performance of collaborating partners. Through this measure, J.L. primarily seeks to achieve _________.

Accepted Answer

A) organized alliance-management knowledge 
B) increased external visibility 
C) low transaction costs 
D) increased profits

Question 5

Which of the following is a key function of an effective dedicated alliance function?

Accepted Answer

A) Becoming more independent 
B) Increasing external visibility 
C) Refusing internal support to a firm 
D) Eliminating management accountability

Question 6

Identify a true statement about a nonequity alliance.

Accepted Answer

A) It is an alliance in which two or more firms write a contract to govern their relationship. 
B) It is an alliance in which the collaborating firms supplement contracts with equity holdings in their alliance partners. 
C) It is an alliance in which collaborating firms create and jointly own a legally independent company. 
D) It is an alliance in which one of the collaborating firms invests in product development and the other focuses on sales.

Question 7

Velara Inc., a healthcare company, owns 35% stake in the firm that supplies most of its raw materials. This encourages the supplier to align its incentives with Velara's needs. Which of the following is being exemplified in this case?

Accepted Answer

A) A licensing agreement 
B) An equity alliance 
C) A distribution agreement 
D) A contractual alliance

Question 8

John requires 500 shirts of a particular fabric and quality. He partners with Loumang Inc., a fabric manufacturing company, to develop certain customized inputs. Which of the following is being exemplified in this scenario?

Accepted Answer

A) A licensing agreement 
B) A supply agreement 
C) A distribution agreement 
D) A profit agreement

Question 9

Which of the following statements best describes a strategic alliance?

Accepted Answer

A) It is a cooperative arrangement in which two or more firms combine their resources and capabilities to create new value. 
B) It is an arrangement where a firm purchases an input from another firm with no obligation to have a long-term relationship with the other firm. 
C) It is an unofficial arrangement in which two large firms cooperate unofficially to control production and prices within a certain market segment. 
D) It is a cooperative arrangement where a firm which is on the verge of shutting down sells all of its assets to another firm.

Question 10

Drew's Cafe Inc. and Cuppa Corp., two local coffee chains, combine resources to enter the global market. They retain their individual ownership; however, they agree to share production facilities and manpower, and they also decide to market their products through combined promotional tools. The arrangement made by the two retail chains to combine resources and collaborate for a common objective refers to a _________.

Accepted Answer

A) strategic alliance 
B) mass-customization strategy 
C) standardization venture 
D) product-differentiation strategy

Question 11

Sepia Inc., a fertilizer company, needs permission to test its new products on plantations owned by an agro-based industry. In return, the company is willing to pay a percentage of revenue to the agro-based industry. In this case, which of the following contractual alliances should be adopted by Sepia?

Accepted Answer

A) A licensing agreement 
B) A supply agreement 
C) A distribution agreement 
D) An input agreement

Question 12

Identify a way firms create value through alliance.

Accepted Answer

A) By pooling trade secrets 
B) By combining unique resources 
C) By increasing the transaction costs 
D) By creating new industry-specific resources

Question 13

In the context of the alliance lifecycle, which of the following tools are used in alliance management?

Accepted Answer

A) Relationship evaluation form, yearly status report, termination checklist, termination planning worksheet 
B) Decision making template, trust-building worksheet, work planning worksheet, alliance communication infrastructure 
C) Partner screening form, technology and patent domain maps, cultural fit evaluation form, due diligence team 
D) Needs analysis checklist, make vs. buy vs. ally analysis, list of possible alliance partners with resources to meet needs

Question 14

Spade Investments Corp. owns a financial stake in Loisa Inc., a manufacturing company. Spade's resources help the organization increase productivity, which results in increased sales and profits. These profits are shared among the partners in a particular ratio. In this case, the relationship between the two firms is based primarily on _________.

Accepted Answer

A) personal trust 
B) legal contracts 
C) shared equity 
D) reputation

Question 15

Stylink Inc. and Plateus Inc. formed an alliance to create and own a legally independent company. However, Stylink tried to exploit the alliance-specific investments made by Plateus. Which of the following is being exemplified in this case?

Accepted Answer

A) Hold-up 
B) Misrepresentation 
C) Bondage 
D) Battery

Question 16

An organization wants to form a strategic alliance with another firm. The second firm is at the same level along the value chain. It cannot contribute the same level of financial resources, although it can contribute an extensive level of knowledge. In order to accommodate these factors, they decide to start a legally independent firm. Which of the following alliances will be best suited for the organization?

Accepted Answer

A) A contractual alliance 
B) An equity alliance 
C) A distribution agreement 
D) A joint venture

Question 17

How can firms protect themselves against misrepresentation?

Accepted Answer

A) By partnering only with start-ups 
B) By partnering only with trustworthy individuals and firms 
C) By desisting from forming any kind of alliance with other firms 
D) By creating an equity alliance with the partnering company

Question 18

The research and development department of a pharmaceutical company is in the process of developing a new drug to cure Parkinson's disease. It requires additional resources to complete the process. To convince another pharmaceutical company to provide the necessary resources, it gives false information about how long the drug has been in the developmental pipeline and the guidelines followed in the production process. Which of the following is being exemplified in this case?

Accepted Answer

A) Hold-up 
B) Misrepresentation 
C) Bondage 
D) Profit stealing

Question 19

Redwood Inc. has an arm's-length relationship with Blue Ink Corp. Which of the following is likely to be true in this case?

Accepted Answer

A) Redwood is likely to conduct all functions within the firm. 
B) Redwood is likely to choose another firm over Blue Ink for lower costs. 
C) Blue Ink is unlikely to have made the deal through a bid. 
D) Blue Ink's manufacturing units are likely to have been acquired by Redwood.

Question 20

Identify a true statement about a horizontal alliance.

Accepted Answer

A) It occurs between firms that have a supplier-buyer relationship. 
B) It occurs when the output of one of the firms in the relationship is the input of the other. 
C) It occurs only between firms that are positioned at different stages along the value chain. 
D) It can occur between companies who do not do the same activities but do complementary ones.

Exam 8: Strategic Alliances