Question 1

A horizontal strategic alliance is a cooperative partnership between firms
A) outside the value chain.
B) across the value chain.
C) at the same stage of the value chain.
D) at any point within the value chain.

Accepted Answer

A horizontal strategic alliance is a partnership between firms at the same stage of the value chain, such as two manufacturers collaborating to share production facilities or a retailer partnering with another retailer to expand market reach.

Question 2

The first step in managing alliances is
A) selecting a compatible alliance partner.
B) establishing trust with the alliance partner.
C) establishing performance criteria and process.
D) prioritizing resource allocation.

Accepted Answer

Selecting a compatible alliance partner is the first step in managing alliances, as it lays the foundation for a successful partnership that can be sustained over time. Choosing a partner that shares your company's values, culture, and strategic objectives is crucial to build a strong and collaborative relationship. Without a compatible partner, it is difficult to establish trust, performance criteria, or allocate resources effectively.

Question 3

The likelihood of a strategic alliance producing synergy and innovation is increased by
A) the emergence of path dependence between the alliance partners.
B) the equality of the resources that the two organizations contribute.
C) the similarity of the corporate and national cultures of the organization.
D) the extent to which the knowledge stocks of each organization are integrated.

Accepted Answer

The extent to which the knowledge stocks of each organization are integrated is most likely to produce synergy and innovation in a strategic alliance. This is because successful innovation and synergy are dependent on the exchange of knowledge and expertise between partners. Therefore, a close integration of the knowledge stocks of both organizations can facilitate the exchange of ideas and insights, leading to innovation and synergy. Option A is incorrect because path dependence can lead to a lack of innovation and potential conflict between the partners. Option B is incorrect because equal resource contribution does not necessarily imply knowledge and expertise sharing. Option C is incorrect because too much corporate and national cultural similarity may limit diversity in thinking and exchange of ideas.

Question 4

Franchise relationships are characterized by
A) franchisee independence to adapt the business to the local market.
B) the ability to spin off the local franchises into independent businesses.
C) the tradeoff of first-mover advantage for lower financial risk for the franchiser.
D) tight control of the franchisee's actions by the franchiser.

Accepted Answer

Franchise relationships are characterized by tight control of the franchisee's actions by the franchiser. This is because the franchiser has established a business model that they want to be replicated across all franchises in order to maintain consistency and brand image. Franchisees are required to adhere to specific operating procedures and follow established branding and marketing strategies.

Question 5

When an organization forms a strategic alliance with another organization, the alliance should be managed by
A) a third party who will be unbiased toward either organization.
B) a pair of alliance sponsors, one from each organization.
C) the CEO of the organization holding the largest equity stake.
D) an alliance committee formed from the board of directors of each organization.

Accepted Answer

The alliance sponsors should be one from each organization to ensure that both parties' interests are taken into account and to avoid bias towards one organization.

Question 6

High uncertainty in competitive markets
A) increases the number of alliances because uncertainty leads to synergy.
B) erodes alliances because uncertainty motivates opportunistic behaviors by alliance partners.
C) encourages firms to form alliances to share risks.
D) makes alliances among firms less attractive because the markets' profits are meager.

Accepted Answer

In highly uncertain markets, firms are more likely to form alliances to share risks. This is because uncertainty makes it difficult for firms to predict future market conditions and potential outcomes, and sharing risks through alliances can help mitigate the negative impact of potential losses.

Question 7

Discuss the similarities and differences of vertical and horizontal alliances. Which is most vulnerable to problems, what are these problems, and what are their causes?

Accepted Answer

The answer of Discuss the similarities and differences of vertical...

Question 8

____ can enable a firm to have a first-mover advantage in a new international market without some of the risks involved in being a first mover.
A) A greenfield venture
B) Franchising
C) An equity alliance
D) An acquisition

Accepted Answer

Franchising allows a firm to expand into a new international market with an established brand and business model. The franchisor provides support and guidance to the franchisee, reducing some of the risks involved in being a first mover. Additionally, the franchisee assumes most of the financial risk associated with the new venture, freeing the franchisor from investing significant capital upfront. This can allow a firm to have a first-mover advantage without some of the risks and costs involved in other entry modes.

Question 9

The main problem with relying on contracts to reduce opportunistic behavior by alliance partners is that
A) in cross-border alliances, the contracts are often not enforceable due to differences in legal systems.
B) contracts create motivations for rule-evading behavior.
C) contracts are ignored by opportunistic firms because the cost of enforcing the contract is too great for the other partner.
D) it is impossible to specify all opportunistic actions by an alliance partner.

Accepted Answer

It is impossible to specify all opportunistic actions by an alliance partner, making it difficult to cover every potential issue in a contract.

Question 10

Alliances for the purpose of diversification are especially valuable if
A) joint ventures can be spun off to allow the firm to concentrate on its core business.
B) the new products created by the alliance are related to the firm's current products.
C) the alliance results in synergy that creates products entirely new to the alliance partners.
D) the alliance creates path dependence in the partners.

Accepted Answer

Alliances for the purpose of diversification are most valuable when the new products created by the alliance are related to the firm's current products. This allows the company to leverage its existing resources and expertise and minimize the risk involved in developing entirely new products.

Question 11

The key factor in the success of a vertical strategic alliance is
A) trust between partners.
B) sufficient cash flow.
C) a well-written contract.
D) effective exchange of core competencies.

Accepted Answer

The answer of The key factor in the success of...

Question 12

Why do organizations enter into strategic alliances?

Accepted Answer

The answer of Why do organizations enter into strategic alliances?...

Question 13

The main attraction for foreign firms in developing countries to join strategic alliances with U.S. firms is
A) the access to U.S. financial markets.
B) the knowledge resources of the U.S. firm.
C) the ability to market its products in the U.S.
D) the U.S. firm's understanding of U.S. governmental regulations.

Accepted Answer

The knowledge resources of U.S. firms are the main attraction for foreign firms in developing countries to join strategic alliances because U.S. firms are often leaders in technology, research and development, and marketing strategies. These resources can help foreign firms gain a competitive advantage and improve their products and services. Access to U.S. financial markets and marketing in the U.S. may also be beneficial, but they are not the primary reason for joining strategic alliances with U.S. firms. The U.S. firm's understanding of U.S. governmental regulations may be helpful, but it is not typically a primary factor for foreign firms in choosing a strategic partner.

Question 14

The most common reason for outsourcing is to reduce costs. Another major reason for outsourcing is to
A) gradually exit the U.S. product market.
B) share significant R&D investments.
C) develop new goods and services.
D) gain access to special skills for higher quality output.

Accepted Answer

Outsourcing can provide access to special skills and expertise that may not be available in-house, resulting in higher quality output. While cost reduction is a common reason for outsourcing, it is not the only reason. The other options, such as gradually exiting the U.S. product market and sharing R&D investments may be valid reasons for some companies, but are not as commonly cited as reasons for outsourcing. Developing new goods and services could be a potential benefit of outsourcing, but it is not necessarily the main reason companies turn to outsourcing.

Question 15

Tacit collusion is more likely to be a concern with
A) horizontal alliances.
B) vertical alliances.
C) international alliances of any kind compared with domestic alliances.
D) U.S. alliances with companies in less- developed countries.

Accepted Answer

Tacit collusion is more likely to occur in horizontal alliances where firms are in the same market and compete directly with each other. In contrast, vertical alliances involve firms at different stages of the supply chain and may have less direct competition. International versus domestic alliances or alliances with companies in less-developed countries versus developed countries may have various implications, but do not necessarily increase the likelihood of tacit collusion.

Question 16

Along with differences in cultures, the major impediment to the transfer of knowledge or sharing of other resources between companies in an international strategic alliance is
A) language differences.
B) legal restrictions.
C) lack of trust.
D) racial and ethnic prejudices.

Accepted Answer

Lack of trust is a major impediment to the transfer of knowledge or sharing of other resources between companies in an international strategic alliance, as companies may be hesitant to share their valuable knowledge or resources out of fear of losing their competitive advantage or having their intellectual property stolen. Other factors such as language differences, legal restrictions, and racial/ethnic prejudices can also pose challenges, but lack of trust is generally considered the biggest impediment.

Question 17

To compete more fully and offer better value to their customers, Dow and Monsanto are working together to develop and produce new corn seed. Each partner will contribute four genetic traits for each new seed that will overcome some problems with pests and ward off weeds. This is an example of a ____ alliance
A) horizontal
B) vertical
C) network
D) symbiotic

Accepted Answer

This is an example of a horizontal alliance because it involves companies at the same level of the supply chain (in this case, two companies in the agricultural sector) working together to develop a new product.

Question 18

The C.E.O. of Stability, Inc., a U.S. company, is considering the wisdom of an alliance with a Malaysian company. She is concerned about the fact that the Malaysian company wants to own a large percentage of the venture. The CEO
A) is correct to be concerned because this indicates a lack of trust by the Malaysian company.
B) should be concerned because the Malaysian company will be less inclined to share its expertise with the U.S. firm if it owns a dominant interest in the venture.
C) the CEO should realize that if the Malaysian company owns a large equity stake in the venture it will have more incentive to make the venture a success.
D) the CEO's concern probably arises from unconscious prejudice, and this indicates that she will be unable to form a trusting relationship with her Malaysian counterparts.

Accepted Answer

The CEO should realize that if the Malaysian company owns a large equity stake in the venture it will have more incentive to make the venture a success. This is because the Malaysian company will have a vested interest in ensuring the success of the venture as it stands to gain a significant portion of the profits. This can lead to a more committed and motivated partner, resulting in a stronger alliance.

Question 19

Many companies have discovered that outsourcing lowers costs and
A) improves morale.
B) improves quality.
C) increases customer responsiveness.
D) decreases turnover.

Accepted Answer

Outsourcing can lead to improved quality because outsourcing companies often specialize in specific tasks and have expertise that the original company may not have. They may also have more advanced technology and systems in place. This specialization and expertise can lead to higher quality output. The other choices (improving morale, increasing customer responsiveness, decreasing turnover) are not necessarily guaranteed outcomes of outsourcing and can depend on various factors.

Question 20

Firms often form alliances with partners from previous alliances because
A) of the previous investment in due diligence.
B) organizational structures are already in place.
C) contracts are easily renewed.
D) social capital already exists between them.

Accepted Answer

Social capital refers to the network of relationships, trust, and goodwill that exists between individuals or organizations. When firms form alliances with partners from previous alliances, they can leverage the social capital that already exists between them, which can help to reduce transaction costs, facilitate communication, and increase the chances of a successful partnership. Additionally, firms may have already established a track record of success with their previous partner, which can provide a basis for building a new alliance.

Quiz 9: Creating and Maintaining Alliances

A horizontal strategic alliance is a cooperative partnership between firms

The first step in managing alliances is

The likelihood of a strategic alliance producing synergy and innovation is increased by

Franchise relationships are characterized by

When an organization forms a strategic alliance with another organization, the alliance should be managed by

High uncertainty in competitive markets

Discuss the similarities and differences of vertical and horizontal alliances. Which is most vulnerable to problems, what are these problems, and what are their causes?

____ can enable a firm to have a first-mover advantage in a new international market without some of the risks involved in being a first mover.

The main problem with relying on contracts to reduce opportunistic behavior by alliance partners is that

Alliances for the purpose of diversification are especially valuable if

The key factor in the success of a vertical strategic alliance is

Why do organizations enter into strategic alliances?

The main attraction for foreign firms in developing countries to join strategic alliances with U.S. firms is

The most common reason for outsourcing is to reduce costs. Another major reason for outsourcing is to

Tacit collusion is more likely to be a concern with

Along with differences in cultures, the major impediment to the transfer of knowledge or sharing of other resources between companies in an international strategic alliance is

The C.E.O. of Stability, Inc., a U.S. company, is considering the wisdom of an alliance with a Malaysian company. She is concerned about the fact that the Malaysian company wants to own a large percentage of the venture. The CEO

Many companies have discovered that outsourcing lowers costs and

Firms often form alliances with partners from previous alliances because