Question 1

Advanced Audio and EQ Electronics recently established a joint venture for the purpose of cooperating in the design, production, and sale of a line of audio equipment. Executives at the two firms must now decide the best way to manage the joint venture. Which of the following is the LEAST likely option?

Accepted Answer

Continuing completely separate management activities is the least likely option because a joint venture requires some level of collaboration and integration between the firms to achieve the shared objectives.

Question 2

How was General Mills able to gain 25% of the European cereal market?

Accepted Answer

General Mills was able to gain 25% of the European cereal market by forming a joint venture with Nestle in 1990. The two companies combined their strengths to create Cereal Partners Worldwide, which produced and sold cereal across Europe. By partnering with Nestle, General Mills was able to gain access to a wider market and distribute its products more effectively.

Question 3

What is the primary difference between a joint venture and a non-joint venture strategic alliance?

Accepted Answer

The primary difference between a joint venture and a non-joint venture strategic alliance is the formation of a third, legally separate business entity. In a joint venture, the parties involved create a new business entity together, sharing ownership, risks, and rewards. In contrast, a non-joint venture strategic alliance does not involve creating a new entity; instead, the firms collaborate while remaining legally independent.

Question 4

PepsiCo and Thomas J. Lipton Co. established a joint venture. PepsiCo supplied an extensive distribution network, and Lipton provided manufacturing expertise and brand recognition in teas. What benefit of strategic alliances were they most likely seeking?

Accepted Answer

The joint venture between PepsiCo and Thomas J. Lipton Co. was most likely seeking the benefit of synergy, where the combination of their resources (distribution network and manufacturing expertise/brand recognition in teas) would create a result that is greater than the sum of their individual efforts.

Question 5

A ________ is a special type of strategic alliance in which two or more firms join together to create a new business entity that is legally separate and distinct from its parents.

Accepted Answer

A joint venture is a type of strategic alliance where two or more firms come together to create a new business entity that is legally separate and distinct from its parents. In a joint venture, each partner contributes assets, resources, and expertise to the new venture, which then shares in the risks and rewards of the venture. This allows firms to combine their strengths and mitigate their weaknesses, while also sharing the costs and risks of entering a new market or developing a new product.

Question 6

Which of the following is not a hurdle firms can overcome by participating in a strategic alliance?

Accepted Answer

Minimizing import tariffs is not a hurdle that firms can overcome by participating in a strategic alliance.

Question 7

Executives at Bantam Bicycles realize that the firm lacks the necessary internal resources to compete internationally. Which of the following would most likely enable Bantam to compete in the global market?

Accepted Answer

Forming a strategic alliance would enable Bantam Bicycles to leverage the resources and capabilities of another company in order to compete internationally. This would allow Bantam to access new markets, expertise, and technology that would otherwise be unavailable to the firm. Exporting to emerging economies and opening a retail store may also be useful strategies, but they are not as effective as forming a strategic alliance. Investing in a financial portfolio is not a relevant option for competing internationally.

Question 8

IMAX, the entertainment firm, recently entered into a joint venture with Wanda Cinema Line, a Chinese theater chain. What was IMAX primarily seeking by forming this arrangement?

Accepted Answer

By forming a joint venture with Wanda Cinema Line, IMAX was primarily seeking to ease its entry into the Chinese market. This was a strategic move as China is a huge market for the entertainment industry, and partnering with a local player would give IMAX an edge in this market.

Question 9

Boeing collaborated in a strategic alliance with Fuji, Mitsubishi, and Kawasaki in the development and production of the Boeing 777 to minimize Boeing's financial exposure. What benefit of strategic alliances was Boeing seeking?

Accepted Answer

By forming a strategic alliance with Fuji, Mitsubishi, and Kawasaki, Boeing was seeking to share the financial risk of developing and producing the Boeing 777. This can help reduce Boeing's financial exposure and potentially increase profitability.

Question 10

Nestle and General Mills created Cereal Partners Worldwide to compete effectively in the European market. Cereal Partners Worldwide is owned equally by the two firms, so CPW is an example of a(n) ________.

Accepted Answer

Cereal Partners Worldwide is a joint venture between Nestle and General Mills, meaning both companies share ownership and control.

Question 11

Toyota and GM created a joint venture called NUMMI because Toyota wanted to learn about how to deal with labor and parts suppliers in the U.S. market while GM wanted to observe Japanese management practices. What benefit of strategic alliances were Toyota and GM primarily seeking?

Accepted Answer

Toyota and GM's primary goal was to share knowledge through the joint venture, as Toyota wanted to learn about the US market and GM wanted to learn about Japanese management practices. While ease of market entry and shared risk may be potential benefits of strategic alliances, they were not the primary goals in this case. Synergy was not mentioned as a specific goal in the given information.

Question 12

Which of the following is not a benefit of strategic alliances?

Accepted Answer

Strategic alliances typically focus on shared resources, knowledge, and market entry, but sharing customers is not a direct benefit.

Question 13

The degree of collaboration in a strategic alliance primarily depends on the ________ of each partner firm.

Accepted Answer

The degree of collaboration in a strategic alliance primarily depends on the basic goals of each partner firm. The goals of each partner firm determine how much they are willing to collaborate and work together towards achieving mutual objectives. If the basic goals align, then the degree of collaboration may be high. However, if they differ greatly, then the collaboration may be limited. History, available resources, and leadership may also influence collaboration to some extent, but they are not the primary determinants.

Question 14

What strategy is frequently used by Otis Elevator when it enters a new foreign market?

Accepted Answer

Otis Elevator frequently uses the strategy of seeking local partners to minimize risks when entering a new foreign market. This allows them to better understand the local culture, market, and regulations, while also reducing the financial and legal risks associated with entering a new market alone. By partnering with a local company, they can also benefit from their established networks and distribution channels.

Question 15

Feldman Insurance wants to enter the Brazilian market but is concerned about hostile government regulations in Brazil. Which of the following would most likely help Feldman overcome this problem?

Accepted Answer

Forming a joint venture with a local firm would help Feldman Insurance overcome the problem of hostile government regulations in Brazil. By partnering with a local firm, Feldman can leverage the local firm's knowledge of the regulatory environment in Brazil and potentially navigate any regulatory obstacles more easily. Additionally, forming a joint venture can help Feldman establish relationships and credibility with local government officials and other key stakeholders. Identifying the potential market share, hiring only local employees, or appealing to the WTO may not address the specific problem of hostile government regulations in Brazil.

Question 16

Company X and Company Z have established a business arrangement whereby the two firms will cooperate for their mutual benefit. Which of the following has most likely been established?

Accepted Answer

The establishment of a business arrangement where two firms cooperate for their mutual benefit is known as a strategic alliance. A licensing agreement involves one company granting permission to another company to use its intellectual property for a fee. A franchising arrangement involves a company granting the right to use their business model and trademark for a fee. Competitive advantage refers to a company having an advantage over its competitors in terms of its products, services, or strategies.

Question 17

________ refers to value achieved through the combination of market entry, risk sharing, and learning potential that is greater than what the firm could have done alone.

Accepted Answer

Synergy refers to the creation of value that is greater than the sum of the individual parts. In the context of partnerships, it refers to the combination of market entry, risk sharing, and learning potential that is greater than what the firm could have achieved alone. Shared risk and knowledge are important elements of achieving synergy, but synergy itself is the overarching concept that encompasses these elements. Scale economy refers to the cost advantages that firms enjoy as they increase their scale of operation. While it can be a benefit of partnerships, it is not the same as the concept of synergy.

Question 18

Furman Furnishings wants to expand its international operations in cooperation with another firm. Which of the following methods would be most appropriate for Furman?

Accepted Answer

Joint venture would be the most appropriate method for Furman Furnishings to expand its international operations in cooperation with another firm. This would allow Furman to share the risks and costs of entering a foreign market with another company, while also gaining access to their local expertise and knowledge. Additionally, a joint venture would provide Furman with a greater degree of control than licensing or exporting, but would be less expensive and risky than foreign direct investment.

Question 19

The strategic alliance between Kodak, Fuji, and three Japanese camera firms was primarily developed to ________.

Accepted Answer

The strategic alliance between Kodak, Fuji, and three Japanese camera firms was primarily developed to reduce Kodak's risks. By partnering with other companies, Kodak was able to share the risks and costs associated with research, development, and production of new technologies and products. This also allowed for more efficient use of resources and minimized the impact of competition within the industry.

Question 20

Winston Foods and O'Toole's Soda have agreed to perform together multiple stages of the process by which products are brought to the market. The two firms have most likely formed a ________.

Accepted Answer

The answer of Winston Foods and O'Toole's Soda have agreed...

Quiz 13: International Strategic Alliances