Question 1

It is necessary for government authorities such as the Federal Trade Commission (FTC)and/or the European Commission to approve any large horizontal integration activity because

Accepted Answer

A)  the horizontal integration activity changes the industry structure from oligopolistic to monopolistically competitive. 
B)  the surviving firms will need to be protected against the increasing bargaining power of the suppliers. 
C)  the horizontal integration activity has the potential to reduce competitive intensity in an industry. 
D)  the surviving firms will need protection against the relaxed entry barriers. C

Question 2

The managers at Movo Automobile Inc.want to diversify their business by acquiring a consumer electronics company.This acquisition would mean increased job security,higher compensation,and greater decision-making authority for the managers.The managers correlate this acquisition to greater power for them rather than to the appreciation in shareholder value.In this scenario,this acquisition by Movo Automobile is most likely a result of

Accepted Answer

A)  time compression diseconomies. 
B)  experience-curve effects. 
C)  principal-agent problems. 
D)  resource ambiguity. C

Question 3

Which of the following best explains why Disney showed superior post-merger integration capabilities?

Accepted Answer

A)  Disney pursued a combination of horizontal and vertical integration through its acquisitions. 
B)  Disney did a thorough job in eliminating principal-agent problems in the firms it acquired. 
C)  Disney managed its new subsidiaries more like alliances rather than attempting full integration. 
D)  Disney used a corporate strategy based on a build-borrow-or-buy framework for its acquisitions. C

Question 4

A(n)_____ occurs when firms enter into a partnership based on contractual agreements,which results in vertical strategic alliances that connect different parts of the industry value chain.

Accepted Answer

A)  equity alliance 
B)  joint venture 
C)  non-equity alliance 
D)  greenfield venture

Question 5

When does a merger between companies typically occur?

Accepted Answer

A)  when two firms of comparable size join to form a combined entity 
B)  when large, incumbent firms buy start-up companies 
C)  when a target firm does not want to be acquired 
D)  when two or more firms enter a temporary vertical strategic alliance

Question 6

Which of the following best illustrates an equity alliance?

Accepted Answer

A)  a contractual agreement that provides Ocia Pharma Inc. the exclusive rights to distribute the drugs of Marvel Pharma Inc. in the Asian market 
B)  an alliance between GoldWing Systems Inc. and GM Computers Inc. that results in GM Wing Inc., an independent third company 
C)  a collusion between two competitors, Torque Steels Inc. and Vizor Metals Inc., to fix prices 
D)  a partnership in which RedGate Insurance Inc. has a 40 percent ownership claim in TwinTrust Finance Inc.

Question 7

FR Pharmaceuticals Inc.,BioCure Pharma Inc.,and Regime Pharma Inc.are three rival firms who have set up an alliance to conduct research and find a cure for cancer.They have made almost equal contributions to the research,and they also share their expertise with each other.However,the three firms will continue to behave as competitors in markets for other drugs and vaccines.What is this arrangement best referred to as?

Accepted Answer

A)  takeover 
B)  buyout 
C)  co-opetition 
D)  acquisition

Question 8

Olympia Autos Inc.merged with its competitor Vaca Autos Inc.This allowed Olympia Autos to use its technological competencies along with Vaca Autos' marketing capabilities to capture a larger market share than what the two entities individually held.What does this scenario best illustrate?

Accepted Answer

A)  backward integration 
B)  forward integration 
C)  horizontal integration 
D)  vertical integration

Question 9

Comfort Shoes Inc.and InStep Shoes Inc.,two competing shoe brands,entered into a strategic alliance to study and acquire each other competencies.Comfort Shoes entered the strategic alliance to acquire the production system pioneered by InStep Shoes.Similarly,InStep Shoes agreed to the strategic alliance to study the designing process of Comfort Shoes.However,Comfort Shoes was more successful and faster than InStep Shoes in accomplishing its alliance goal.What does this scenario best illustrate?

Accepted Answer

A)  network effects 
B)  economies of scope 
C)  learning races 
D)  time compression diseconomies

Question 10

When entering a foreign market,it is advisable for a new venture that has a core competency only in R&D to form a strategic alliance with a local partner because

Accepted Answer

A)  the local partner can better protect its proprietary know-how. 
B)  building downstream complementary assets can be expensive and time-consuming. 
C)  the strategic alliance will reduce the differentiation of its product and service offerings. 
D)  the value gap created by the firm can be easily lowered in an alliance.

Question 11

Equity alliances are less common than non-equity alliances because they

Accepted Answer

A)  depend on contractual agreements. 
B)  produce weaker ties between partners. 
C)  fail to facilitate the transfer of tacit knowledge. 
D)  often require larger investments.

Question 12

A consumer electronics company is in the process of evaluating whether it should pursue an internal development strategy or an external growth strategy.To make this decision,the management needs to assess whether the company's internal resources are superior to those of competitors in the targeted area.Which of the following strategic management models would be most useful in this assessment?

Accepted Answer

A)  the core competence matrix 
B)  the Boston Consulting Group (BCG) matrix 
C)  the transaction-cost economics model 
D)  the VRIO framework

Question 13

A drawback of joint ventures is that they are characterized by

Accepted Answer

A)  involuntary mergers. 
B)  double reporting lines. 
C)  contractual agreements rather than ownership. 
D)  weak ties between alliance partners.

Question 14

In a non-equity alliance,which of the following types of information would firms most likely share?

Accepted Answer

A)  a manager's knowledge related to solving non-routine problems 
B)  a top-level manager's experience related to making strategic decisions 
C)  the documented information about the material composition of a product 
D)  the employees' entrepreneurial skills

Question 15

The downside of equity alliances is

Accepted Answer

A)  the weaker ties and reduced trust between partners. 
B)  the amount of investment that can be involved. 
C)  that the alliances cannot be abandoned if not promising. 
D)  that they are not useful stepping-stones toward full integration of the partner firms.

Question 16

Which of the following is a disadvantage of equity alliances?

Accepted Answer

A)  They are reflective of weaker ties between firms. 
B)  They do not permit the exchange of explicit knowledge. 
C)  They can bring about a lack of commitment. 
D)  They can entail significant investments.

Question 17

In 1984,GM and Toyota formed a joint venture called New United Motor Manufacturing Inc.Each partner was motivated to learn new capabilities.This joint venture is an example of

Accepted Answer

A)  creating a real-options perspective. 
B)  accessing complimentary assets. 
C)  using co-opetition. 
D)  forming a conglomerate.

Question 18

Which of the following statements is true about managing alliances-related tasks?

Accepted Answer

A)  Forming an alliance with another firm prohibits that firm from forming other alliances. 
B)  Alliance management capability is based on three alliance-related tasks. 
C)  A merger is one of the three options for alliance design and governance. 
D)  In post-formation alliance management, none of the firms in an alliance is permitted to gain a competitive advantage.

Question 19

Horizontal integration through mergers and acquisitions can help firms strengthen their competitive positions by increasing

Accepted Answer

A)  competitive intensity. 
B)  differentiation. 
C)  costs. 
D)  managerial efficiency.

Question 20

When should mergers and acquisitions (M&A)be considered the "buy" option for a strategist trying to determine which corporate strategy to implement?

Accepted Answer

A)  when the resource in question is highly tradable 
B)  before the strategist has considered borrowing the necessary resources through integrated strategic alliances 
C)  after it has been established that the firm's internal resources are sufficient to build 
D)  when extreme closeness to the resource partner is necessary to understand and obtain its underlying knowledge

Exam 9: Corporate Strategy: Strategic Alliances, Mergers and Acquisitions

It is necessary for government authorities such as the Federal Trade Commission (FTC) and/or the European Commission to approve any large horizontal integration activity because