Question 1

An important lesson from the troubled development of Boeing's 787 Dreamliner is that,for developing complex,technically-advanced products,the hub firm needs to have the capability to manage networks of strategic alliances.

Accepted Answer

The statement is true. The development of the 787 Dreamliner involved a large network of strategic alliances, and Boeing struggled with managing these partnerships. This highlights the importance of a company having the capability to effectively manage and coordinate such networks in the development of complex, technically-advanced products.

Question 2

The key difference between a merger and an acquisition is that,in the case of a merger,the participating companies combine to create a new company.

Accepted Answer

In a merger, the participating companies combine to create a new company, whereas in an acquisition, one company buys another company and the acquired company may or may not continue to exist.

Question 3

In the case of cross-border amalgamations of companies,concerns of national domination often mean that mergers are preferred to acquisitions.

Accepted Answer

Cross-border mergers are typically viewed as more equal, collaborative partnerships between companies from different countries, whereas acquisitions may be seen as one company taking over another and potentially gaining dominance or control. Due to concerns about national interests and competition, cross-border mergers may be preferred over acquisitions in some cases.

Question 4

Internal business venture rather than external mergers,acquisitions and alliances is the preferred means by which most established ﬁrms achieve major extensions in the scope of their activities.

Accepted Answer

Most established firms often prefer external mergers, acquisitions, and alliances to achieve major extensions in their activities due to the speed, access to new markets, and resources these strategies provide compared to internal ventures.

Question 5

Identifying the strategic rationale and likely benefits of mergers and acquisitions is easier in the case of diversifying mergers and acquisitions than for horizontal mergers and acquisitions.

Accepted Answer

Identifying the strategic rationale and likely benefits of horizontal mergers and acquisitions is usually easier as they involve companies in the same industry or market, leading to more obvious synergies and potential cost savings compared to diversifying mergers and acquisitions, which involve companies in different industries and markets.

Question 6

The concentration of Hollywood ﬁlm industry in Los Angeles and electronics and IT companies in Silicon Valley is for different reasons than those which created the industrial districts of Italy.

Accepted Answer

The answer of The concentration of Hollywood ﬁlm industry in...

Question 7

Mergers and acquisitions go in waves.Because acquirers prefer to pay low prices for acquired companies,these M&A waves tend to be inversely correlated with stock market fluctuations.

Accepted Answer

M&A waves often coincide with periods of economic optimism and rising stock markets, as acquirers are more willing to pay higher prices due to the availability of cheap financing and the expectation of future growth.

Question 8

The key lesson to be drawn from the failures that Hewlett-Packard has experienced in acquiring software and services companies EDS and Autonomy is that acquisitions that aim to change a company's business model are more risky than acquisitions that seek to leverage the existing business model.

Accepted Answer

Acquisitions that aim to change a company's business model often involve greater uncertainty and integration challenges, as seen in HP's difficulties with EDS and Autonomy, compared to those that enhance or expand the existing model.

Question 9

Issues of pre-acquisition planning and post-acquisition management should be viewed as separate: activities best led by separate teams.

Accepted Answer

Pre-acquisition planning and post-acquisition management are interconnected processes that should be viewed as part of a continuum, often requiring collaboration and continuity between teams to ensure the success of the acquisition.

Question 10

In most cases,the primary goal of a strategic alliance is to acquire that than simply to access the partner's organizational capabilities.

Accepted Answer

The primary goal of a strategic alliance is typically to access the partner's organizational capabilities, such as technology, resources, or expertise, rather than acquiring the partner itself. Acquiring the partner would involve a merger or acquisition, which is a different type of business arrangement.

Question 11

The speed at which many decisions over corporate acquisitions are made as contributed to the disappointing outcomes of most mergers and acquisitions.

Accepted Answer

The rapid pace of decision-making in corporate acquisitions can lead to insufficient due diligence, poor strategic alignment, and inadequate integration planning, which often result in disappointing outcomes.

Question 12

Mergers,acquisitions,and alliances may be viewed not just as instruments of corporate strategy but as strategies in themselves.

Accepted Answer

The answer of Mergers,acquisitions,and alliances may be viewed not just...

Question 13

Most of the biggest mergers and acquisitions since 2000 have been horizontal-i.e.between companies in the same industry.This reflects the fact that:

Accepted Answer

Horizontal mergers and acquisitions offer the greatest potential for value creation through cost reduction and moderating competition. This is because these types of mergers allow companies to achieve economies of scale, reduce duplicate operations and overhead costs, and gain market power by eliminating competition. Additionally, antitrust authorities are generally more concerned with vertical mergers, where a company is acquiring a supplier or a customer, as this can lead to reduced competition and higher prices for consumers. Therefore, the trend towards horizontal mergers in recent years reflects both market opportunities and regulatory considerations.

Question 14

In order to gain a new organizational capability,it is usually cheaper and less risky to acquire a company that already possesses that capability than to develop that capability internally.

Accepted Answer

Acquiring a company can be more expensive and riskier due to the high costs of acquisition, integration challenges, cultural mismatches, and potential for not realizing the expected synergies or value from the acquisition. Developing a capability internally allows for more control and alignment with the company's existing culture and processes, though it may require time and investment in training and development.

Question 15

In the automobile and beer industries,acquisitions have been motivated primarily by the goal of international expansion.

Accepted Answer

Acquisitions in these industries often aim to access new markets, increase global presence, and leverage synergies across different regions.

Question 16

Mergers and acquisitions represent paradoxes in the sense that:

Accepted Answer

The answer of Mergers and acquisitions represent paradoxes in the...

Question 17

The only clear ﬁnding from several decades of empirical research into the outcomes of mergers and acquisitions is that the shareholders of the acquiring firms lose money.

Accepted Answer

Empirical research shows mixed results; while some acquiring firms' shareholders may experience losses, others may gain or see no significant change. The outcomes depend on various factors such as the specifics of the deal and market conditions.

Question 18

Cross-border acquisitions tend to have the strongest strategic logic,but give rise to the greatest challenges of post-merger integration.

Accepted Answer

Cross-border acquisitions often involve expansion into new markets or access to new technologies, providing strong strategic benefits. However, cultural differences, regulatory issues, and communication barriers can make post-merger integration more difficult than with domestic acquisitions.

Question 19

In Capron and Mitchell's decision framework for selecting the right growth path,if a firm finds that its resources and capabilities do not fit with its current strategy,then acquisition should be first option considered and internal development the last option.

Accepted Answer

Capron and Mitchell's decision framework suggests that firms should first consider internal development if their resources and capabilities are strong, and look towards acquisitions or alliances if internal resources are lacking or if a faster market entry is needed. The decision is based on the fit between the firm's resources and the growth path, not a predetermined order of options.

Question 20

The "lemons problem" in the market for companies refers to the fact that the sellers of companies have better information about the company than do would-be buyers.

Accepted Answer

This is a well-known problem in economics known as the "asymmetric information problem." The sellers of companies, or those looking to sell their ownership in a company, typically have more information about the company's financials, assets, and potential risks than do potential buyers. This information asymmetry can lead to problems in negotiations and can limit the market for companies.

Quiz 15: External Growth Strategies: Mergers,acquisitions,and Alliances