Business Policy Chapter 9

question

Disney’s acquisitions of Pixar, Marvel, and Lucasfilm
answer

Pixar entered a strategic alliance with Disney for financial and distribution purposes. This helped Disney rejuvenate its product lineup by obtaining rights to newly created pixar characters Later, Disney acquired Marvel, and later the creators of StarWars, Lucasfilm.
question

Firms have 2 critical strategic options to pursue common interests, enhance competitiveness, and increase revenues. What are they?
answer

acquisitions and alliances
question

merger
answer

the joining of two independent companies to form a combined entity. typically are friendly, the target firm WANTS to be acquired.
question

acquisition
answer

the purchase or takeover of one company by another. can be friendly or unfriendly.
question

hostile takeover
answer

when a target firm does not want to be acquired
question

horizontal integration
answer

the process of merging with competitors, leading to industry consolidation a type of corporate strategy that can improve a firm’s strategic position in a single industry
question

3 main benefits to a horizontal integration strategy
answer

-Reduction in competitive intensity -Lower costs -Increased Differentiation
question

Horizontal integration can favorably affect several of Porter’s five forces for the surviving firms:
answer

strengthening bargaining power, reducing the threat of entry, and reducing rivalry among existing firms
question

How horizontal integration through M creates value
answer

reduces competitive intensity lowers costs increases differentiation
question

Costs of horizontal integration through M
answer

potential integration failure reduced flexibility increased potential for legal repercussions
question

How does horizontal integration help firms lower costs?
answer

economies of scale
question

3 main reasons firms make acquisitions
answer

to gain access to new markets and distribution channels to gain access to a new capability or competency to preempt rivals
question

Kraft’s hostile takeover of Cadbury
answer

Kraft was interested in Cabury’s position internationally. the acquisition allowed Kraft greater access to convenience stores, gives it a new distribution channel, and opens up a new market.
question

Mergers and acquisitions typically destroy rather than create shareholder value, so why do we see so many mergers?
answer

Reasons include: 1. Principal-agent problems 2. the desire to overcome competitive disadvantage 3. Superior acquisition and integration capability
question

principal-agent problems
answer

managers are supposed to act in the best interest of the shareholders but sometimes they choose acquisitions bc of a desire for prestige, power, and pay.
question

managerial hubris
answer

a form of self-delusion in which managers convince themselves of their superior skills in the face of clear evidence to the contrary.
question

desire to overcome competitive disadvantage
answer

this can allow companies to gain a competitive advantage
question

Superior acquisition and integration capability
answer

sometimes acquisitions can lead to a competitive advantage.
question

strategic alliances
answer

voluntary arrangements between firms that involve the sharing of knowledge, resources, and capabilities with the intent of developing processes, products, or services. contracts can be small with no bearing on competitiveness to billion dollar joint ventures. only considered STRATEGIC if it has the potential to affect a firm’s competitive advantage
question

rational view of competitive advantage
answer

strategic management framework that proposes that critical resources and capabilities frequently are embedded in strategic alliances that span firm boundaries
question

5 common reasons firms enter strategic alliances
answer

to strengthen competitive position, enter new markets, hedge against uncertainty, access critical complementary assets, learn new capabilities
question

real options perspective
answer

approach to strategic decision making that breaks down a larger investment decision into a set of smaller decisions that are staged sequentially over time. This approach allows the firm to obtain additional information in pre-determined stages
question

co-opetition
answer

cooperation by competitors to achieve a strategic objective
question

learning races
answer

situations in which both partners in a strategic alliance are motivated to form an alliance for learning but the rate at which the firms learn may vary; the firm that accomplishes its goal more quickly has an incentive to exit the alliance or reduce its knowledge sharing
question

alliances can be governed by the following mechanisms – contractual agreements for:
answer

non-equity alliances equity alliances joint ventures
question

non-equity alliance
answer

most common type of alliance Partnership based on contracts between firms. The most frequent forms are supply agreements, distribution agreements, and licensing agreements firms share explicit knowledge these are flexible and easy to initiate and terminate. also can be temporary in nature and sometimes produce weak ties between partners which can result in a lack of trust and commitment
question

explicit knowledge
answer

knowledge that can be codified (info, facts, instructions, recipies); concerns knowing about a process or product
question

equity alliances
answer

at least one partner takes over partial ownership in the other partner. less common than non-equity bc they often require larger investments. allow for the share of tacit knowledge tend to produce stronger ties and greater trust between partners than non equity alliances frequently are stepping stones to full integration through a merger or acquisition “try before you buy”
question

tacit knowledge
answer

cannot be codified; concerns knowing how to do a certain task and can be acquired only through active participation in that task
question

corporate venture capital (CVC)
answer

equity investments by established firms in entrepreneurial ventures. falls under the broader rubric of equity alliances
question

joint venture
answer

a standalone organization created and jointly owned by two or more parent companies. ex. Hulu exchange of both tacit and explicit knowledge is typical lest common
question

advantages/disadvantages of joint ventures
answer

advantages: strong ties, trust, commitment disadvantages: long negotiations, significant investments, undoing a JV can take time and involve high costs, shared knowledge could be misappropriated, rewards must be shared between partners
question

alliance management capability
answer

a firm’s ability to effectively manage 3 alliance related tasks concurrently, often across a portfolio of many different alliances these 3 are: -partner selection and alliance formation -alliance design and governance -post formation alliance management
question

Partner selection and alliance formation
answer

question

Disney became the world’s leading media company to a large extent by pursuing a corporate strategy of
answer

related-linked diversification
question

how does horizontal integration within an industry affect the surviving firms?
answer

by strengthening the bargaining power of the surviving firm vis-a-vis suppliers and buyers
question

which of the following is a result of horizontal integration in terms of porters 5 forces model?
answer

there is a reduction of excess capacity in the market
question

how did the recent horizontal integration in the US airline industry provide benefits to the surviving carriers?
answer

by lowering competitive intensity in the industry overall
question

which of the following is a disadvantage of horizontal integration corporate strategy
answer

increases the potential for legal repercussions
question

google engaged in a number of smaller acquisitions of tech ventures. It did this in order to
answer

fill gaps in its competency lineup
question

While Cisco Systems has been successful in selecting and buying both big and small technology ventures, HP had to write off some of its recent technology acquisitions. Which of the following statements best explains this scenario?
answer

Acquisition and integration capabilities were not equally distributed across firms.
question

The _____ is a strategic management framework that proposes that critical resources and capabilities frequently are embedded in strategic alliances that span firm boundaries.
answer

relational view of competitive advantage
question

What does the relational view of competitive advantage propose?
answer

The locus of competitive advantage is often not found within the individual firm but within a strategic partnership.
question

How did the strategic alliance between HP and DreamWorks Animation SKG affect HP?
answer

It enabled HP to compete head on with Cisco’s videoconferencing solution.
question

How did Apple’s e-book business model affect Amazon?
answer

The bargaining power of suppliers, the content providers, increased from Amazon’s perspective.
question

A drawback involved in using cross-border strategic alliances to enter new foreign markets is that:
answer

some of the firm’s proprietary know-how may be appropriated by the foreign partner.
question

A _____ is best described as an approach to strategic decision making that breaks down a larger investment decision into a set of smaller decisions that are staged sequentially over time.
answer

real-options perspective
question

In 1990, Roche, a Swiss pharmaceutical company, initially invested $2.1 billion to purchase a controlling interest in the biotech startup Genentech. In 2009, after witnessing the success of Genentech’s drug discovery and development projects, Roche spent $47 billion to purchase the remaining minority interest in Genentech, making it a wholly owned subsidiary. In terms of strategic alliances, this scenario best indicates _____.
answer

real options perspective
question

How does taking a real-options perspective by entering strategic alliances help incumbent firms?
answer

It allows the incumbent firms to buy time and wait for the uncertainty surrounding the market and technology to fade.
question

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

building downstream complementary assets can be expensive and time-consuming.
question

In a strategic alliance, the firm that learns faster:
answer

has the incentive to reduce its knowledge sharing
question

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.
answer

non-equity alliance
question

Which of the following best illustrates a non-equity alliance?
answer

A contractual agreement that provides Motor Source Inc. non-exclusive rights to supply component parts to Pristine Autos Inc
question

A drawback of joint ventures is that they are characterized by:
answer

double reporting lines.
question

Which of the following types of strategic alliances is the least common in terms of frequency?
answer

joint ventures
question

The process of alliance management begins with _____.
answer

selecting the best possible partner
question

In Eli Lilly’s Office of Alliance Management, the _____ is a senior, corporate-level executive responsible for high-level support and oversight.
answer

alliance champion
question

In Eli Lilly’s Office of Alliance Management, who is responsible for providing alliance training and development?
answer

alliance manager
question

In Eli Lilly’s Office of Alliance Management, who is responsible for providing the technical expertise and knowledge needed for the specific technical area and the day-to-day management of the alliance?
answer

alliance leader
question

Which of the following is an ineffective practice in alliance management?
answer

focusing on developing an alliance management capability in isolation
question

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?
answer

the VRIO framework
question

When a firm does not have the resource required for pursuing a growth strategy, and if the resource in question is not easily tradable, the implication for the strategist is most likely to:
answer

consider an outright acquisition
question

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

When extreme closeness to the resource partner is necessary to understand and obtain its underlying knowledge
question

Under CEO Robert Iger, Disney has followed an acquisition-led growth strategy. Which of the following was a result of this corporate strategy?
answer

Disney compensated more easily for losses from flops.

Get instant access to
all materials

Become a Member