Question 1

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 D

Question 2

Marcel, the CEO of an automobile company, considers extending his research and development facility by collaborating with a multinational company.He believes that a contractual alliance will be ideal for this collaboration, but other senior members of the management oppose a contractual alliance.Which of the following statements is likely to strengthen Marcel's argument?

Accepted Answer

A)   The relationship between the two firms is likely to be supported by equity investments.
B)   The two firms are likely to seek a joint venture through the collaboration.
C)   Cooperation between the two firms is not likely to depend on cross-equity holdings.
D)   Interdependence between the two firms is not likely to be low. C

Question 3

What are the ways in which strategic partners can build trust in alliance relationships?

Accepted Answer

There are four primary ways that partners build trust in alliance relationships:(1) personal trust, (2) legal contracts, (3) shared equity/financial collateral bonds, or (4) reputation.

Question 4

Which of the following statements is true about how an arm's-length relationship is used in strategic alliance?

Accepted Answer

A)   Firms cannot buy inputs from multiple sources using the arm's-length relationship.
B)   Firms typically use the arm's-length relationship between internal departments.
C)   Firms that use the arm's-length relationship acquire the production facilities of other firms.
D)   Firms use the arm's-length relationship to purchase inputs at the lowest price.

Question 5

Explain the different ways through which a firm can create value in an alliance.Support your answer with suitable examples.

Accepted Answer

The answer of Explain the different ways through which a...

Question 6

_____ occurs when one partner in an alliance creates false expectations about the resources it brings to the relationship or fails to deliver what it originally promised.

Accepted Answer

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

Question 7

Two firms that produce industrial machinery decide to form a strategic alliance.The objective of this collaboration is to combine their manufacturing facilities to achieve economies of scale during production.Which of the following is the primary value they aim to create through this alliance?

Accepted Answer

A)   Combining unique skills
B)   Pooling similar resources
C)   Lowering distribution costs
D)   Creating product differentiation

Question 8

_____ are governance clauses in which joint ventures must specify what percentage of equity is owned by each of the partners.

Accepted Answer

A)   Residual rights clauses
B)   Voting rights clauses
C)   Equity clauses
D)   Dispute clauses

Question 9

An air conditioner manufacturer, Hues Corp., decides to form a strategic alliance with a firm to source components that make up the highest percentage of total costs.Which of the following suppliers is it most likely to choose as a partner?

Accepted Answer

A)   Jades Inc., which manufactures the packages required for finished products of Hues
B)   Black Corp., which prints Hues logo on the air conditioners
C)   Fin Inc., which produces the compressors used in Hues air conditioners
D)   Den Corp., which produces the designer vents for Hues that come in different colors

Question 10

What are the three types of strategic alliances based on governance arrangement? Also, briefly explain how alliances can also be categorized based on the stages of the value chain.

Accepted Answer

The answer of What are the three types of strategic...

Question 11

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 12

Which of the following statements is true about strategic alliances?

Accepted Answer

A)   Strategic alliances exclude functions that are bought through bidding.
B)   In strategic alliances, the power to make decisions is always evenly distributed amidst the firms.
C)   In strategic alliances, companies may choose to cooperate at any stage along the value chain.
D)   Strategic alliances usually lead to one of the firms losing their relational advantage.

Question 13

_____ are governance clauses in which parties often specify how profits or assets created from alliances are to be split among partners.

Accepted Answer

A)   Residual rights clauses
B)   Voting rights clauses
C)   Dispute resolution clauses
D)   Noncompete clauses

Question 14

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 15

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 16

An organization enters into an alliance with a firm that is positioned at a different stage along the value chain.The alliance is formed to combine unique resources and lower transaction costs.In this case, which of the following alliances has been adopted by the organization?

Accepted Answer

A)   A profit alliance
B)   A selling alliance
C)   A vertical alliance
D)   A horizontal alliance

Question 17

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 18

_____ occurs when one partner tries to exploit the alliance-specific investments made by another partner.

Accepted Answer

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

Question 19

Which of the following statements is true about firms in a joint venture?

Accepted Answer

A)   The firms contribute knowledge but each performs its roles separately.
B)   The contributions made by individual firms are easy to measure.
C)   The parent firms share revenues and expenses in a particular ratio.
D)   The dependency level between partners is low.

Question 20

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

Exam 8: Strategic Alliances

What are the ways in which strategic partners can build trust in alliance relationships?

Which of the following statements is true about how an arm's-length relationship is used in strategic alliance?

Explain the different ways through which a firm can create value in an alliance.Support your answer with suitable examples.

_____ occurs when one partner in an alliance creates false expectations about the resources it brings to the relationship or fails to deliver what it originally promised.

Two firms that produce industrial machinery decide to form a strategic alliance.The objective of this collaboration is to combine their manufacturing facilities to achieve economies of scale during production.Which of the following is the primary value they aim to create through this alliance?

_____ are governance clauses in which joint ventures must specify what percentage of equity is owned by each of the partners.

An air conditioner manufacturer, Hues Corp., decides to form a strategic alliance with a firm to source components that make up the highest percentage of total costs.Which of the following suppliers is it most likely to choose as a partner?

What are the three types of strategic alliances based on governance arrangement? Also, briefly explain how alliances can also be categorized based on the stages of the value chain.

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?

Which of the following statements is true about strategic alliances?

_____ are governance clauses in which parties often specify how profits or assets created from alliances are to be split among partners.

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?

An organization enters into an alliance with a firm that is positioned at a different stage along the value chain.The alliance is formed to combine unique resources and lower transaction costs.In this case, which of the following alliances has been adopted by the organization?

_____ occurs when one partner tries to exploit the alliance-specific investments made by another partner.

Which of the following statements is true about firms in a joint venture?

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?