Deck 11: Managing Global Competitive Dynamics

Question 1

Overall, alliances have emerged as great instruments of real options because of their flexibility to sequentially scale up or scale down the investment.

Answer 1

True

Question 2

It is important for managers to have collaborative relationship skills since alliances are more about collaboration than pure competition.

Answer 2

True

Question 3

One strategy for successful managers is to value relational capabilities as much as equity and asset-heavy capabilities.

Answer 3

True

Question 4

Around 70% of acquisitions reportedly fail.

Question 5

Engaging in thorough due diligence concerning both strategic and organizational fit is a wise strategy during the post-acquisition phase.

Question 6

Since integration within alliances is usually not as tight as acquisitions, antitrust authorities have a higher likelihood of approving alliances.

Question 7

A joint venture (JV) is a form of equity-based alliance.

Question 8

Equity alliance relationships tend to have less direct control over joint activities on a continual basis than the contractual relationships.

Question 9

Acquisitions are more common than mergers.

Question 10

The main decision made during the first stage of alliance formation is whether growth can be achieved strictly through market transactions, acquisitions, or cooperative alliances.

Question 11

Regarding motives for acquisitions, synergistic motives add value while hubris and managerial motives reduce value.

Question 12

Strategic investments in an equity-based alliance involve one partner investing in another, while cross-shareholding involves both partners investing in each other.

Question 13

Limitability between alliance partners has much more to do with integration, and limitability between acquisition members has to do with trust.

Question 14

The limitability of an alliance is based on the trust and understanding between the partners.

Question 15

Many firms establish alliances with competitors.

Question 16

The more tacit and hard to describe a firm s capabilities, the greater the preference for equity involvement.

Question 17

Formal government policies regarding entry mode requirements for new firms are generally becoming more conservative.

Question 18

Equity-based alliances include co-marketing, research and development, contracts, turnkey products, strategic suppliers, strategic distributors, and licensing/franchising.

Question 19

Equity, learning and experience, relational capabilities, and organization are the four factors that may influence alliance performance.

Question 20

Inadequate screening is a problem which occurs during the pre-acquisition phase of the M A process.

Question 21

Lehman Brothers s most valuable assets were its talents.

Question 22

Why are M As and alliances often undertaken in isolation?

A) Firms combined mergers, acquisitions, and alliance departments are often poorly managed
B) M As let a firm stay focused on its own needs while alliances require a great deal of investment in the other company.
C) In many firms, an M A group reports to CFO while a separate unit deals with alliances.
D) An alliance usually satisfies shareholders of both organizations, precluding an acquisition

Question 23

Which relationship involves two parties both investing in each other in an equity-based alliance?

A) Strategic alliance
B) Contractual alliance
C) Strategic investment
D) Cross-shareholding

Question 24

A(n) ____ is the transfer of the control of operations and management from one firm to another with the former becoming a unit of the latter, while a(n) ____ is the combination of operations and management of two firms to establish a new legal entity.

A) Equity-based alliance, contractual alliance
B) Merger, acquisition
C) Acquisition, merger
D) Contractual alliance, equity-based alliance

Question 25

Which of the following is NOT one of the stages in the formation of alliances?

A) The decision to cooperate or not to cooperate
B) Deciding between contract or equity
C) Learning by doing
D) Specifying the relationship

Question 26

A(n) ____ is a voluntary agreement of cooperation between firms.

A) Equity-based alliance
B) Strategic alliance
C) Merger
D) Acquisition

Question 27

Organizational fit is slightly less important than strategic fit.

Question 28

What is the main reason why formal institutions limit alliances and acquisitions in the areas of formal market entry modes?

A) Many governments discourage acquisitions in order to establish local-only subsidiaries.
B) The liability of foreignness is guaranteed to make the alliances or acquisitions fail.
C) The governments are unable to tax acquisitions by foreign firms.
D) The institutions do not limit the firms in regards to entry modes.

Question 29

Which of the following best describes a core idea behind the informal institution-based view regarding alliances and acquisitions?

A) It is best not to jump on the alliance and acquisition bandwagon.
B) Alliances should be made with caution so that firms do not share important secrets.
C) Firms often follow one another, so if competitors begin aggressively seeking targets for alliances and acquisitions, then it is best to follow suit.
D) Firms copy one another naturally as a strategy to enhance their legitimacy, so alliances and acquisitions are a low-cost way of gaining this.

Question 30

____ refers to a manager s overconfidence in his or her abilities.

A) Hubris
B) Relational capability
C) Strategic fit
D) Learning by doing

Question 31

Which of the following is NOT one of the three drivers behind acquisitions?

A) Synergistic
B) Strategic fit
C) Managerial motives
D) Hubristic

Question 32

What is the best strategy for finding success with mergers and alliances, using an institution-based view?

A) Managers need to understand the rules of the game, including both legal regulation and the market environment.
B) Managers need to pay attention to firms relational capabilities that often make or break relationships.
C) Managers need to maintain a strong organizational structure.
D) Managers should see the target in terms of value and not pay too high a premium.

Question 33

Which is NOT one of the four phases in alliance dissolution?

A) Initiation
B) Going public
C) Splitting
D) Aftermath

Question 34

As a result of liberal policies, JVs have ____ and acquisitions have ____ in emerging economies.

A) Declined, declined
B) Increased, increased
C) Declined, increased
D) Increased, declined

Question 35

Who usually has the advantage in the going public phase of alliance dissolution?

A) The initiator
B) The partner
C) Neither are at an advantage
D) Both have the same advantage

Question 36

A(n) ____ is an investment in real operations as opposed to financial capital.

A) Acquisition
B) Merger
C) Real option
D) Foreign direct investment

Question 37

Which of the following is NOT one of the three broad categories in value creation in an alliance?

A) Possibilities to use alliances as real options
B) Controlling the direction of the firm s investments
C) Reducing costs, risks, and uncertainties
D) Accessing complementary assets and learning opportunities

Question 38

Which of the following is a drawback of an alliance?

A) Getting stuck with the wrong partner
B) Potential for partner opportunism
C) Partners engaging in learning race
D) All of these answers

Question 39

Keeping critical skills and technologies not meant to be shared a secret in an alliance is a method of preventing:

A) Collusion
B) Illegal trust
C) Opportunism
D) Hostile takeover

Question 40

Who benefits the most from the acquisition premium valued during an acquisition?

A) The shareholders of the acquiring firm
B) The shareholders of the target firm
C) Neither benefit much
D) Both benefit the same

Question 41

Discuss the performance of acquisitions and if shareholders benefit.

Question 42

Explain the importance of organization in an acquisition.

Question 43

Explain how institutions affect alliances and acquisitions.

Question 44

IBM persuaded Lenovo to give up the idea of having dual headquarters in China and the United States and to set up its world headquarters in the United States. What was the significance of this action?

A) It demonstrated understanding and mastery of the rules of the game.
B) It made it easier to win approval from the United States government
C) It highlighted the importance of politics in such high-stakes strategic moves
D) All of the above

Question 45

Explain the ambiguity behind alliance performance evaluation and how it is overcome.

Question 46

Pay level is a common challenge in acquisitions. On average, Nomura employees received ____ their Lehman counterparts.

A) Half the pay of
B) Double the pay of
C) The same pay as
D) None of the above

Question 47

Identify the stages in the formations of alliances. Briefly explain the challenges in each.