Question 1

Contractual safeguards cannot be written into an alliance agreement to guard against the risk of opportunism by a partner.

Accepted Answer

Contractual safeguards can be written into an alliance agreement to guard against the risk of opportunism by a partner.

Question 2

To maximize the learning benefits of an alliance,a firm must try to learn from its partner and then apply the knowledge within its own organization.

Accepted Answer

To maximize the learning benefits of an alliance, a firm must try to learn from its partner and then apply the knowledge within its own organization.

Question 3

Greenfield ventures are less risky than acquisitions in the sense that there is less potential for unpleasant surprises.

Accepted Answer

Greenfield ventures are less risky than acquisitions in the sense that there is less potential for unpleasant surprises.

Question 4

A joint venture is often politically more acceptable than a wholly owned subsidiary and brings a degree of local knowledge to the subsidiary.

Accepted Answer

The subsidiaries may be wholly owned or joint ventures, but most service firms have found that joint ventures with local partners work best for the controlling subsidiaries. A joint venture is often politically more acceptable and brings a degree of local knowledge to the subsidiary.

Question 5

A wholly owned subsidiary limits a firm's control over operations in different countries.

Accepted Answer

A wholly owned subsidiary gives a firm tight control over operations in different countries.

Question 6

If a firm is trying to enter a market where there are already well-established companies,and where global competitors are also interested in establishing a presence,the firm should choose a greenfield investment.

Accepted Answer

If the firm is seeking to enter a market where there are already well-established incumbent enterprises, and where global competitors are also interested in establishing a presence, it may pay the firm to enter via an acquisition.

Question 7

Acquisitions are quick to execute.

Accepted Answer

By acquiring an established enterprise, a firm can rapidly build its presence in the target foreign market.

Question 8

A good ally will expropriate the firm's technological know-how while giving away little in return.

Accepted Answer

A good partner is unlikely to try to opportunistically exploit the alliance for its own ends, that is, to expropriate the firm's technological know-how while giving away little in return.

Question 9

Acquisitions rarely produce disappointing results.

Accepted Answer

Acquisitions often produce disappointing results.

Question 10

The most typical joint venture is a 25/75 venture.

Accepted Answer

The most typical joint venture is a 50/50 venture, in which there are two parties, each of which holds a 50 percent ownership stake and contributes a team of managers to share operating control.

Question 11

Relational capital refers to the building of interpersonal relationships between the firms' managers in a strategic alliance.

Accepted Answer

Managing an alliance successfully requires building interpersonal relationships between the firms' managers, or what is sometimes referred to as relational capital.

Question 12

An advantage of joint ventures with a local partner is the knowledge of the local environment that the local partner contributes to the venture.

Accepted Answer

A firm benefits from a local partner's knowledge of the host country's competitive conditions, culture, language, political systems, and business systems.

Question 13

Firms entering a market via a wholly owned subsidiary must bear all the costs and risks associated with the venture.

Accepted Answer

Establishing a wholly owned subsidiary is generally the most costly method of serving a foreign market from a capital investment standpoint. Firms doing this must bear the full capital costs and risks of setting up overseas operations.

Question 14

An alliance is a way to bring together complementary skills and assets that neither company could easily develop on its own.

Accepted Answer

An alliance is a way to bring together complementary skills and assets that neither company could easily develop on its own.

Question 15

Overpayment for assets of an acquired firm is one reason acquisitions fail.

Accepted Answer

Acquisitions fail for several reasons. The acquiring firms often overpay for the assets of the acquired firm.

Question 16

Firms pursuing global standardization or transnational strategies tend to prefer joint-venture arrangements over wholly owned subsidiaries.

Accepted Answer

Firms pursuing global standardization or transnational strategies tend to prefer establishing wholly owned subsidiaries.

Question 17

Cross-licensing agreements can be used to formalize arrangements to swap skills and technology in a strategic alliance.

Accepted Answer

Both parties to an alliance can agree in advance to swap skills and technologies that the other covets, thereby ensuring a chance for equitable gain. Cross-licensing agreements are one way to achieve this goal.

Question 18

Unlike joint ventures,strategic alliances require the firm to bear all the costs and risks of foreign expansion.

Accepted Answer

Strategic alliances allow firms to share the fixed costs (and associated risks) of developing new products or processes.

Question 19

Brand names are generally well-protected by international laws pertaining to trademarks.

Accepted Answer

Brand names are generally well-protected by international laws pertaining to trademarks.

Question 20

The main advantage of greenfield investment is that it gives the firm a much greater ability to build the kind of subsidiary company that it wants.

Accepted Answer

The big advantage of establishing a greenfield venture in a foreign country is that it gives the firm a much greater ability to build the kind of subsidiary company that it wants.

Quiz 15: Entry Strategy and Strategic Alliances

Contractual safeguards cannot be written into an alliance agreement to guard against the risk of opportunism by a partner.

To maximize the learning benefits of an alliance,a firm must try to learn from its partner and then apply the knowledge within its own organization.

Greenfield ventures are less risky than acquisitions in the sense that there is less potential for unpleasant surprises.

A joint venture is often politically more acceptable than a wholly owned subsidiary and brings a degree of local knowledge to the subsidiary.

A wholly owned subsidiary limits a firm's control over operations in different countries.

If a firm is trying to enter a market where there are already well-established companies,and where global competitors are also interested in establishing a presence,the firm should choose a greenfield investment.

Acquisitions are quick to execute.

A good ally will expropriate the firm's technological know-how while giving away little in return.

Acquisitions rarely produce disappointing results.

The most typical joint venture is a 25/75 venture.

Relational capital refers to the building of interpersonal relationships between the firms' managers in a strategic alliance.

An advantage of joint ventures with a local partner is the knowledge of the local environment that the local partner contributes to the venture.

Firms entering a market via a wholly owned subsidiary must bear all the costs and risks associated with the venture.

An alliance is a way to bring together complementary skills and assets that neither company could easily develop on its own.

Overpayment for assets of an acquired firm is one reason acquisitions fail.

Firms pursuing global standardization or transnational strategies tend to prefer joint-venture arrangements over wholly owned subsidiaries.

Cross-licensing agreements can be used to formalize arrangements to swap skills and technology in a strategic alliance.

Unlike joint ventures,strategic alliances require the firm to bear all the costs and risks of foreign expansion.

Brand names are generally well-protected by international laws pertaining to trademarks.

The main advantage of greenfield investment is that it gives the firm a much greater ability to build the kind of subsidiary company that it wants.