Question 1

Horizontal business-level strategic alliances have greater probability of creating sustainable competitive advantage than do vertical business-level strategic alliances.

Accepted Answer

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Question 2

Because of U.S. legal restrictions concerning large foreign acquisitions, American firms can only enter into diversifying alliances with other U.S. firms.

Accepted Answer

While there are legal restrictions on large foreign acquisitions, American firms are not limited to diversifying alliances only with other U.S. firms. They can enter into alliances and partnerships with foreign companies as well.

Question 3

Tacit collusion tends to be least used as a business-level, competition-reducing strategy in highly concentrated industries such as airlines and breakfast cereals even though it results in higher prices for consumers.

Accepted Answer

Tacit collusion is more likely to be used in highly concentrated industries where there are a small number of dominant firms. This is because it is easier for these firms to coordinate their behavior without explicit communication. Competition-reducing strategies such as tacit collusion often lead to higher prices for consumers, regardless of the industry.

Question 4

Franchising is an alternative to pursuing growth through mergers and acquisitions.

Accepted Answer

Franchising allows a company to expand by granting the right to use its business model and intellectual property to independent operators, while mergers and acquisitions involve buying or merging with other companies to achieve growth.

Question 5

Synergistic strategic alliances such as the Renault-Nissan alliance discussed in the Opening Case focus on economies of scope by sharing their resources and capabilities to develop manufacturing platforms that can be used to Renault or Nissan cars.

Accepted Answer

Synergistic strategic alliances aim to achieve economies of scope by sharing resources and capabilities, and the Renault-Nissan alliance is an example of such an alliance that creates manufacturing platforms that benefit both companies.

Question 6

An alliance can be used to test whether the partners would benefit from a future merger.

Accepted Answer

An alliance allows partners to test the waters and evaluate the benefits of a potential merger before committing to it.

Question 7

Although governments in free-market economies allow rivals to collaborate to improve competitiveness, the challenge is to make sure the alliance does not lead to price fixing.

Accepted Answer

In free-market economies, collaboration between rivals is allowed, but governments must ensure that it does not lead to anti-competitive behavior such as price fixing.

Question 8

Research in the airline industry suggests that tacit collusion reduces service quality and on-time performance.

Accepted Answer

Research studies have shown that tacit collusion among airlines can lead to reduced service quality and on-time performance. This is because airlines may prioritize maintaining high fares and limiting seat availability over providing good customer service or on-time flights, as they know that their competitors are also following similar strategies. As a result, passengers may experience more delays or inconvenience in their travel.

Question 9

A firm creates a competitive advantage when it develops and manages corporate-level cooperative strategies in a way that is valuable, rare, imperfectly imitable and nonsubstitutable.

Accepted Answer

This statement is true. A firm can create a competitive advantage by developing and managing corporate-level cooperative strategies that meet the criteria of being valuable, rare, imperfectly imitable, and nonsubstitutable.

Question 10

The probability of alliance success is increased when partnering firms internalize successful alliance experiences.

Accepted Answer

When partnering firms internalize successful alliance experiences, they gain knowledge and skills that increase their ability to select appropriate partners, negotiate terms and conditions, and manage the alliance over time, leading to an increased probability of success.

Question 11

Franchising is most attractive in concentrated industries.

Accepted Answer

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Question 12

Mutual forbearance is a form of explicit collusion between firms in which competitors avoid attacking rivals they meet in multiple markets.

Accepted Answer

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Question 13

Firms consider entering international alliances because multinational firms outperform firms operating only in their home markets.

Accepted Answer

Multinational firms have access to greater resources, larger customer bases, and diverse markets, which can lead to higher revenues and profits compared to firms operating only in their home markets. International alliances can provide opportunities for firms to access these benefits and compete on a global level.

Question 14

The primary responsibility of the franchiser is to transfer capital to the franchisee.

Accepted Answer

The primary responsibility of the franchiser is to provide the franchisee with a proven business model, training, and ongoing support. While there may be some financial assistance or investment required from the franchiser, it is not their primary responsibility to transfer capital to the franchisee.

Question 15

The advantages of alliances designed to respond to competition and to reduce uncertainty are more temporary than those developed through complementary alliances, such as vertical and horizontal strategic alliances.

Accepted Answer

Alliances developed to respond to competition and reduce uncertainty typically have a shorter-term focus and may dissolve once the threat has passed, while complementary alliances are often more strategic and can lead to long-term benefits such as cost savings, increased efficiency, and access to new markets or technologies.

Question 16

Collusion is a form of cooperative strategy.

Accepted Answer

Collusion involves two or more entities working together towards a common goal, which is a form of cooperative strategy.

Question 17

When a firm is in the early stages of geographic diversification, cross-border alliances may be a good learning step before other forms of international expansion.

Accepted Answer

Cross-border alliances can provide a low-risk opportunity for firms to gain knowledge about foreign markets and build relationships with local partners before committing to a more permanent form of international expansion, such as setting up a subsidiary or acquiring another firm.

Question 18

Tacit collusion is not explicitly illegal in the United States even though it results in higher prices for consumers.

Accepted Answer

Tacit collusion refers to a situation where firms in a market indirectly coordinate their behavior to restrict output and increase prices without overtly agreeing to do so. While this behavior is not explicitly illegal in the United States, it is generally seen as anti-competitive and can lead to higher prices for consumers. However, if there is evidence of explicit collusion, such as an agreement between firms to fix prices, this would be illegal under antitrust laws.

Question 19

International strategic alliances are less risky than domestic strategic alliances because of diversification across countries.

Accepted Answer

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Question 20

Of the four business-level cooperative strategies, the competition-reducing strategy has the lowest probability of creating a sustainable advantage.

Accepted Answer

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Quiz 9: Cooperative Implications for Strategy