Question 1

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

Accepted Answer

There is no typical joint venture percentage split. The split can vary depending on the agreement between the parties involved.

Question 2

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 local partner can provide valuable insights into the local market, culture, laws, and regulations that can help the joint venture navigate successfully and avoid costly mistakes.

Question 3

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 wholly owned subsidiaries over joint-venture arrangements as they provide greater control and allow for easier implementation of standardized practices across multiple locations.

Question 4

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, it is important for a firm to learn from its partner and then apply that knowledge within its own organization. This will help the firm to improve its own capabilities and competitiveness, while also strengthening the relationship with its partner.

Question 5

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 involves two or more companies coming together to leverage their unique strengths and resources to achieve a common goal. By working together, they can gain access to resources that they wouldn't have otherwise had and create a more competitive position in the market.

Question 6

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

Accepted Answer

Overpayment for assets of an acquired firm can lead to various financial problems for the acquiring company such as cash flow issues, difficulty in meeting debt obligations, and lower profitability, ultimately leading to a failed acquisition.

Question 7

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

Accepted Answer

Relational capital is a key factor in the success of strategic alliances as it helps to establish trust, communication, and collaboration between the parties involved. It involves the development of strong interpersonal relationships between the managers of the partnering firms.

Question 8

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

This statement is true. Joint ventures are often viewed more favorably by governments and local communities as they involve local partners and help to transfer expertise and knowledge to the subsidiary.

Question 9

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

Greenfield investment allows the firm to start from scratch and build a subsidiary according to their specific needs and goals, rather than having to work with an existing company or adapt to an established culture or infrastructure. This gives the firm more control and flexibility in shaping the subsidiary to its liking.

Question 10

Acquisitions rarely produce disappointing results.

Accepted Answer

Acquisitions can often fail to meet expectations due to various factors such as cultural differences, integration challenges, overpayment for the acquired company, etc. Therefore, it is not rare for acquisitions to produce disappointing results.

Question 11

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

In this scenario, a greenfield investment may not be the best option as it involves establishing a completely new operation from scratch, which can be costly and time-consuming. The firm may be better off pursuing a joint venture or acquisition to gain access to established infrastructure and resources in the market.

Question 12

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

Accepted Answer

Wholly owned subsidiaries are fully owned by the parent company, which means they assume all responsibility, risks, and costs associated with their operation in a foreign market.

Question 13

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

Accepted Answer

A wholly owned subsidiary is a company that is completely owned and controlled by another company. This means that the parent company has full control over the operations of the subsidiary, including operations in different countries. Therefore, a wholly owned subsidiary actually increases a firm's control over operations in different countries, rather than limiting it.

Question 14

Acquisitions are quick to execute.

Accepted Answer

The answer of Acquisitions are quick to execute....

Question 15

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

Accepted Answer

This statement suggests unethical behavior and goes against the principles of fair and equal partnership. A good ally should collaborate and share resources and knowledge for mutual benefit, rather than solely benefiting one party.

Question 16

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

Accepted Answer

This statement is true. Trademark laws protect brand names from being used without permission or authorization from the owner of the trademark.

Question 17

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. These safeguards can include stipulations such as the use of specific performance indicators, regular reporting requirements, and financial penalties for non-compliance.

Question 18

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

Accepted Answer

Strategic alliances involve shared costs and risks between partnering firms.

Question 19

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

Accepted Answer

Cross-licensing agreements are often used as a way for two companies to exchange intellectual property rights and share their skills and technology in a strategic alliance. This can help them both to gain access to new markets or enhance their products or services.

Question 20

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

Accepted Answer

Greenfield ventures are started from scratch in a new market, while acquisitions involve taking over an existing company. This means that in acquisitions, there can be hidden liabilities, cultural clashes, or incompatible systems that may not be immediately apparent. In contrast, greenfield ventures allow the company more control over the entire process and reduce the potential for unpleasant surprises. However, greenfield ventures may also carry their own risks, such as uncertainty about the market demand, regulatory challenges, and resource constraints.

Quiz 15: Entry Strategy and Strategic Alliances