Question 1

Explain why GE might have been willing to accept subordinated debt and preferred stock for such a large part of the purchase price? Why might Comcast want to use debt and preferred equity as part of the purchase price?

Accepted Answer

GE was in a hurry to exit NBCU entirely due to a desire to focus on its core industrial businesses and due to cultural differences. Also, GE's expectations for growth in the value of media companies may differ significantly from Comcast's. GE may also have wanted to defer the payment of taxes on a portion of the gain they may have realized on the sale of their minority position. Comcast was eager to use debt and preferred stock due to current low interest rates and dividend yields. Also, the use of debt and preferred stock lowered the present value of the purchase of GE's minority interest to Comcast.

Question 2

Strategic alliances generally create separate legal entities in order to achieve their business objectives.

Accepted Answer

Strategic alliances often involve collaboration between companies without creating a separate legal entity, focusing instead on agreements or partnerships to achieve their objectives.

Question 3

A joint venture is rarely an independent legal entity such as a corporation or partnership.

Accepted Answer

A joint venture often results in the creation of an independent legal entity, such as a corporation or partnership, depending on the agreement between the parties involved.

Question 4

Through its alliance with Best Buy, Microsoft is selling its products-including Microsoft Network (MSN) Internet access services and hand-held devices such as digital telephones, hand-held organizers, and WebTV that connect to the Web-through kiosks in Best Buy's 354 stores nationwide. In exchange, Microsoft has invested $200 million in Best Buy. What were the motivations for this strategic alliance?

Accepted Answer

The answer of  Through its alliance with Best Buy,...

Question 5

Why is defining the scope of a business alliance important?

Accepted Answer

The answer of Why is defining the scope of a...

Question 6

In 2005, Google invested $1 billion for a 5 percent stake in Time Warner's America Online unit as part of a partnership that expands their existing search engine deal to include collaboration on advertising, instant messaging, and video. Under the deal, Google will have the usual customary rights afforded a minority investor. What rights or terms do you believe Google would have negotiated in this transaction? What rights or terms do you believe Time Warner might want? Be specific.

Accepted Answer

The answer of In 2005, Google invested $1 billion for...

Question 7

Business alliances may represent attractive alternatives to mergers and acquisitions.

Accepted Answer

Business alliances, such as partnerships and joint ventures, allow companies to share resources and expertise without fully combining their operations like in a merger or acquisition. This can be a more flexible and less expensive option for achieving strategic goals.

Question 8

Major motivations for business alliances include risk sharing as well as gaining access to new markets and skills.

Accepted Answer

This statement is true. Businesses often form alliances with other companies to share the risk of new ventures, gain access to new markets, and acquire new skills or resources.

Question 9

Obtaining additional investment funds from others is the primary motivation for creating various types of alliances.

Accepted Answer

The primary motivations for creating various types of alliances often include accessing new markets, sharing resources and risks, enhancing capabilities through shared knowledge, and achieving competitive advantage, rather than solely obtaining additional investment funds.

Question 10

What are the critical assumptions underlying Comcast's decision to exercise its option to acquire the remainder of NBCU that it did not own at an earlier date than anticipated? What are GE's?

Accepted Answer

The answer of What are the critical assumptions underlying Comcast's...

Question 11

What is a limited liability company? What are its advantages and disadvantages?

Accepted Answer

The answer of What is a limited liability company? What...

Question 12

In what way can the Comcast/GE JV created in 2011 be viewed as a phased entry strategy into owning content for Comcast and as a phased exit strategy for GE?

Accepted Answer

The answer of In what way can the Comcast/GE JV...

Question 13

In late 2004, Conoco Phillips (Conoco) announced the purchase of 7.6 percent of Lukoil's (a largely government owned Russian oil and gas company) stock for $2.36 billion during a government auction of Lukoil's stock. Conoco will have one seat on Lukoil's board. As a minority investor, how could Conoco protect its interests?

Accepted Answer

The answer of In late 2004, Conoco Phillips (Conoco) announced...

Question 14

In 1999, Johnson & Johnson (J&J) sued Amgen over their 14-year alliance to sell a blood-enhancing treatment called erythropoietin. The relationship had begun in the mid-1980s with J&J helping to commercialize Amgen's blood-enhancing treatment, but the partners ended up squabbling over sales rights and a spin-off drug. The companies could not agree on future products for the JV. Amgen won the right in arbitration to sell a chemically similar medicine that can be taken weekly rather than daily. Arbitrators ruled that the new formulation was different enough to fall outside the licensing pact between Amgen and J&J. What could these companies have done before forming the alliance to have mitigated the problems that arose after the alliance was formed? Why do you believe they may have avoided addressing these issues at the outset?

Accepted Answer

The answer of  In 1999, Johnson & Johnson (J&J)...

Question 15

What is the form of payment and acquisition? What portion of the purchase price might be immediately taxable to GE and on what portion might taxes be deferred and why?

Accepted Answer

The answer of What is the form of payment and...

Question 16

What are the common reasons for the termination of a business alliance?

Accepted Answer

The answer of  What are the common reasons for...

Question 17

What are the advantages and disadvantages of the various organizational structures that could be employed to manage a business alliance?

Accepted Answer

The answer of  What are the advantages and disadvantages...

Question 18

Discuss ways of valuing tangible and intangible contributions to a JV.

Accepted Answer

The answer of Discuss ways of valuing tangible and intangible...

Question 19

Speculate as to why GE may have found it difficult to manage NBC Universal. Be specific.

Accepted Answer

The answer of Speculate as to why GE may have...

Question 20

In late 1999, General Motors (GM), the world's largest auto manufacturer, agreed to purchase 20% of Japan's Fuji Heavy Industries, Ltd., the manufacturer of Subaru vehicles, for $1.4 billion. Why do you believe that General Motors may have wanted to limit initially its investment to 20%?

Accepted Answer

The answer of  In late 1999, General Motors (GM),...

Quiz 15: Business Alliances: Joint Ventures, Partnerships, Strategic Alliances, and Licensing