Question 1

For strategic alliances to be effective,reliance on written contracts to delimit responsibilities and enforce compliance is vital.

Accepted Answer

Strategic alliances often rely on trust, mutual benefits, and shared goals rather than strictly on written contracts, as flexibility and adaptability are crucial for their success.

Question 2

Explain how transaction cost analysis can provide insights into vertical integration decisions.

Accepted Answer

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Question 3

Through joint ventures,firms can directly acquire the assets and competencies of other firms.

Accepted Answer

Joint ventures represent a special case of alliances, wherein two (or more) firms contribute equity to form a new legal entity.

Question 4

Upon the acquisition of Microcell,Rogers was able to immediately obtain savings.

Accepted Answer

The acquisition allowed for cost savings by combining resources and eliminating redundant expenses.

Question 5

Discuss how the potential benefits of diversification may be adversely affected by conflicts between managers' interests and shareholders' interests.

Accepted Answer

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Question 6

Risk reduction in and of itself is rarely a viable way to create shareholder value.

Accepted Answer

While risk management is important, it is not typically a way to directly increase shareholder value. Instead, shareholder value is often created through growth, innovation, and successful execution of business strategies.

Question 7

Explain the limitations of portfolio management matrices such as the growth-share matrix developed by the Boston Consulting Group (BCG).

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Question 8

What are the primary benefits associated with related diversification?

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Question 9

The potential advantages of strategic alliances and joint ventures include entering new markets as well as developing and diffusing new technologies.

Accepted Answer

Strategic alliances and joint ventures can provide access to new markets and allow companies to pool resources and knowledge to develop and diffuse new technologies.

Question 10

What are the primary benefits associated with unrelated diversification?

Accepted Answer

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Question 11

An advantage of internal development is that firms do not have to combine activities across the value chains of many companies and merge company cultures.

Accepted Answer

Internal development allows firms to focus solely on their own value chain and company culture, without having to integrate and align these aspects with other companies through mergers or acquisitions. This can simplify the process and potentially lead to a more cohesive and efficient organization.

Question 12

Strategic alliances are arrangements in which two firms join forces and form a cooperative partnership.Discuss the potential advantages of strategic alliances.

Accepted Answer

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Question 13

Real options analysis helps managers make investment decisions involving large irreversible commitments of financial resources.

Accepted Answer

ROA is appropriate to use when investments can be staged whereby a smaller investment up front can be followed by subsequent investments. Real options can be applied to an investment decision that gives the company the right, but not the obligation, to make follow-on investments.

Question 14

An advantage of mergers and acquisitions is that they can enable a firm to rapidly enter new product markets.

Accepted Answer

Through mergers and acquisitions, a company can gain access to new products or services, allowing it to diversify its offerings and expand its market reach. This can be done much more quickly than through internal research and development efforts.

Question 15

A golden parachute is a prearranged contract with managers specifying that in the event of a hostile takeover,the target firm's managers will be paid a significant severance package.

Accepted Answer

This is the correct definition of a golden parachute. It is a measure taken to protect the top management of a company in the event of a hostile takeover. They are guaranteed a large severance package if their employment is terminated due to a takeover.

Question 16

What is Real Options Analysis (ROA)and how can it be used by strategic decision makers?

Accepted Answer

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Question 17

What are some of the key issues to take into account when considering whether or not to vertically integrate?

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Question 18

Briefly explain the advantages of vertical integration.

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Question 19

Summarize the disadvantages of mergers and acquisitions as a means of diversification.

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Question 20

Greenmail is an offer by a company,threatened by takeover,to offer its stock at a reduced price to a third party.

Accepted Answer

Greenmail is an effort by the target firm to prevent an impending takeover. When a hostile firm buys a large block of outstanding target company stock and the target company management feels that a tender offer is impending, they offer to buy the stock back from the hostile company at a higher price than the unfriendly company paid for it.

Quiz 6: Corporate-Level Strategy: Creating Value Through Diversification