MGMT 466 Exam 3 - FLASHCARDS - Chapter 9 Flashcards by Stu Diaz

What are the three major types of strategic alliances that firms use?

Joint ventures
Equity strategic alliances
Nonequity strategic alliances

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What is a cooperative strategy in which firms combine some of their resources to create a competitive advantage?

Strategic alliance

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What involves firms with some degree of exchange and sharing of resources to jointly develop, sell, and service goods or services?

Strategic alliances

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True or false: strategic alliances are used by firms to leverage their existing resources while working with partners to develop additional resources as the foundation for new competitive advantages?

true

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What is a strategic alliance in which two or more firms create a legally independent company to share some of their resources to create a competitive advantage?

Joint venture

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True or false: joint ventures have partners who typically, but not always, own equal percentages and contribute equally to the venture’s operations?

true

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Can joint ventures be effective in building long term relationships?

Yes

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Can joint ventures be effective in transferring tacit knowledge between partners?

Yes

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What is tacit knowledge learned through?

Learned through working closely

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What is an advantage of joint ventures?

strong ties, trust and commitment can develop between partners

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If an alliance doesn’t work out, is undoing a joint venture expensive?

Yes and it can take time

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What is a risk of a joint venture?

knowledge shared with the new partner could be misappropriated by opportunistic behavior

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Must any rewards from the collaboration in a joint venture be shared among the partners?

Yes

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What is an example of a joint venture?

the partnership between Starbucks and PepsiCo, where they created the “North American Coffee Partnership” to produce and distribute ready-to-drink coffee beverages like Starbucks Frappuccino, allowing both companies to expand their market reach and brand awareness; essentially combining their strengths to create a new product line

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What is an alliance in which a firm purchases equity in another firm, (Becomes a partial owner), and sharing of new resources?

Equity strategic alliance

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What strategic alliance helps when there are opportunities that are too expensive, complex, or risky to be pursued by one firm on its own?

Equity strategic alliance

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Why do companies form equity strategic alliances?

Companies commonly form equity alliances because they want to ensure that they have control over assets that they commit to the alliance

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True or false: equity strategic alliances offer a window into new technology?

true

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True or false: equity alliances tend to produce strong ties and greater trust between partners?

true

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True or false: with equity alliances, the amount of investment can be high?

true

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What is an alliance in which two or more firms develop a contractual relationship to share some of their resources to create a competitive advantage?

Non equity strategic alliance

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Are non equity alliances less formal than equity alliances?

Yes

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True or false: non equity strategic alliances demand fewer partner commitments than do joint ventures and equity strategic alliances?

true

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Are non equity alliances easy to initiate and terminate?

Yes

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True or false: non equity strategic alliances generally do not foster an intimate relationship between partners?

true

True or false: The informality and lower commitment levels make nonequity strategic alliances unsuitable for complex projects where success depends on the transfer of tacit knowledge between partners?

true

What are types of non equity strategic alliances?

• supply agreements • distribution agreements • licensing agreements

Does outsourcing commonly occur through non equity strategic alliances?

Yes

What are the two main reasons firms form strategic alliances?

−To create value they couldn’t generate by acting independently and entering markets more rapidly. −Because most companies lack the full set of resources needed to pursue all identified opportunities and reach their objectives on their own.

Why does a firm form a strategic alliance in a slow cycle market?

• To gain access to a restricted market • Establish a franchise in a new market • Maintain market stability

Why does a firm form a strategic alliance in a fast cycle market?

1. Speed up development of new good or services 2. Maintain market leadership 3. Share risky R&D expenses 4. overcome uncerainty 5. Maintain market leadership 6. Form an industry technology standard

Why does a firm form a strategic alliance in a standard cycle market?

1. Gain market power 2. Gain access to complementary resources 3. Establish better economies of scale 4. Overcome trade barriers 5. Meet competitive challenges from competitors 6. Learn new business techniques

Are fast cycle markets hypercompetitive?

yes

True or false: with standard cycle markets, alliances are more likely to be made by partners that have complementary resources?

true

What is a strategy through which firms combine some of their resources to create a competitive advantage by competing in one or more product markets?

Business level cooperative strategy

What are the four business level cooperative strategies?

1. Complementary strategic alliances 2. Competition response strategy 3. Uncertainty-reducing strategy 4. Competition-reducing strategy

What are business-level alliances in which firms share some of their resources in complementary ways to create a competitive advantage?

Complementary strategic alliances

What are the two dominant types of complementary strategic alliances?

Vertical and horizontal complementary strategic alliances

What type of strategic alliance is where firms share some of their resources from different stages of the value chain to create a competitive advantage?

Vertical complementary strategic alliance

What type of strategic alliance is where firms share some of their resources from the same stage (or stages) of the value chain for creating a competitive advantage?

Horizontal complementary strategic alliance

What are formed to respond to competitors’ actions, especially strategic actions?

Competition response strategies

True or false: Because they are difficult to reverse and expensive to operate, strategic alliances are formed to take strategic rather than tactical actions?

true

What are used to hedge against the risks created by the conditions of uncertain competitive environments (such as new product markets)?

Uncertainty-reducing strategies

What are used to avoid excessive competition while the firm marshals its resources to improve its strategic competitiveness?

Competition-reducing strategies

What is collusion used for?

to reduce competition

How do collusive strategies differ from strategic alliances?

Collusive strategies differ from strategic alliances in that collusive strategies are often an illegal cooperative strategy

True or false: collusion is often illegal?

true

What are the two types of collusive strategies?

1. Explicit collusion 2. Tacit collusion

What exists when two or more firms negotiate directly to jointly agree about the amount to produce as well as the prices for what is produced?

Explicit collusion

What exists when several firms in an industry indirectly coordinate their production and pricing decisions by observing each other’s competitive actions and responses?

Tacit collusion

True or false: Tacit collusion tends to take place in industries dominated by a few large firms?

true

True or false: Tacit collusion can lead to less competition in markets in which both firms operate?

true

What is a form of tacit collusion in which firms do not take competitive actions against rivals they meet in multiple markets?

Mutual forbearance

What is a strategy through which a firm collaborates with one or more companies to expand its operations?

Corporate level cooperative strategy

When are corporate level cooperative strategic alliances attractive?

When a firm seeks to diversify into markets in which the host nation’s government prevents mergers and acquisitions

True or false: compared to mergers and aquisitions, corporate level strategic alliances require fewer resource commitments?

true

True or false: compared to mergers and aquisitions, corporate level strategic alliances permit greater flexibility in terms of efforts to diversify partners’ operations?

true

What are commonly used corporate level cooperative strategies?

– Diversifying alliances – Synergistic alliances – Franchising

What is a strategy in which firms share some of their resources to engage in product and/or geographic diversification?

diversifying strategic alliance

How do companies using a diversifying strategic alliance seek to enter new markets?

with existing products or with newly developed products

What is a strategy in which firms share some of their resources to create economies of scope?

Synergistic strategic alliance

True or false: synergistic strategic alliances create synergy across multiple functions or multiple businesses between partner firms?

true

What is a strategy in which a firm (the franchisor) uses a franchise as a contractual relationship to describe and control the sharing of its resources with its partners (the franchisees)?

Franchising

What is a business arrangement where an individual or group is granted the right to market a company's products or services in a specific area?

Franchise

What is the difference between a franchisor and franchisee?

The franchisor licenses the use of the trade-mark and business model to the franchisee

How is the effetiveness of franchising measured?

Franchising’s effectiveness is a product of how well the franchisor can replicate its success across multiple partners in a cost-effective way

True or false: compared to business- level cooperative strategies, corporate-level cooperative strategies commonly are broader in scope?

true

True or false: compared to business- level cooperative strategies, corporate-level cooperative strategies commonly are less complex?

false

True or false: compared to business- level cooperative strategies, corporate-level cooperative strategies commonly are less challenging?

false

True or false: compared to business- level cooperative strategies, corporate-level cooperative strategies commonly are more costly to use?

true

What is a strategy in which firms with headquarters in different countries decide to combine some of their resources to create a competitive advantage?

Cross border strategic alliance

Are cross border strategic alliances increasing in number?

Yes

Are cross border strategic alliances as risky as mergers or acquisitions?

Can cross border strategic alliances be complex?

Yes

Can cross border strategic alliances be difficult to manage?

Yes

What is a strategy by which several firms agree to form multiple partnerships to achieve shared objectives?

Network cooperative strategy

What is the set of strategic alliance partnerships that firms develop when using a network cooperative strategy called?

alliance network

True or false: Alliance networks can be stable or dynamic?

true

True or false: Alliance networks vary by industry characteristics?

true

True or false: In mature industries, what are stable alliance networks used for?

Used to extend competitive advantages into new areas

Evidence shows that how much of cooperative strategies have serious problems in their first two years, and as many as _____ of them fail?

Two thirds; 50%

What are two risks with cooperative strategy?

– A firm may act in a way that its partner thinks is opportunistic – A firm misrepresents the resources it can bring to the partnership

True or false: In general, opportunistic behaviors surface either when formal contracts fail to prevent them and when an alliance is based on a false perception of partner trustworthiness?

true

Is a risk of cooperative strategy that a firm may fail to make available to its partners the resources that it committed to the cooperative strategy?

Yes

Is a risk of cooperative strategy that one firm may make investments that are specific to the alliance while its partner does not?

Yes

True or false: Assigning managerial responsibility for a firm’s cooperative strategies to a high- level executive or to a team improves the likelihood that the strategies will be well managed?

true

What actions should the person responsible for managing the firm’s cooperative strategies take?

− Coordinate activities. − Categorize knowledge learned from previous experiences. − Make certain that what the firm knows about how to effectively form and use cooperative strategies is in the hands of the right people at the right time. − Learn how to manage both tangible and intangible assets

What are the two approaches a firm uses to manage cooperative strategies?

– Cost minimization approach – Opportunity maximization approach

What happens in the cost minimization approach?

Firm develops agreements with partners that specify how the cooperative strategy is to be monitored and how partner behavior is to be controlled?

What happens in the opportunity maximization approach?

the firm develops less formal contracts, with fewer constraints on partners’ behaviors, which makes it possible for partners to explore how their resources can be shared in multiple value-creating ways

True or false: trust is an important part of cooperative strategies?

true

What is the belief that a firm will not do anything to exploit its partner’s vulnerabilities, even if it has an opportunity to do so?

Trust

True or false: Trust between partners increases the likelihood of success when using alliances?

true

True or false: when partners trust each other, there is less need to write detailed formal contracts to specify each firm’s behaviors?

true