Chapter 7 Flashcards
(18 cards)
What is a joint venture (JV)?
A separate entity created by two or more firms that combine resources for a joint project.
Name three characteristics of JVs.
Limited scope and duration, shared ownership, created for specific goals like R&D.
Why are joint ventures often pursued internationally?
Some countries require local partners; helps mitigate risk and local barriers.
What are common reasons JVs fail?
Lack of planning, tech failure, disagreement on goals, refusal to share knowledge.
What are key success factors for JVs?
Clear objectives, flexibility, key executive involvement, and defined exit clauses.
What does event study evidence say about JVs?
Positive abnormal returns (e.g., 0.59% and 1.12%) suggest value creation.
What is a strategic alliance?
Formal or informal cooperation between firms without forming a new entity.
How do strategic alliances differ from JVs?
JVs form new entities; strategic alliances do not and are more flexible/ambiguous.
Give an example of a successful strategic alliance.
Uber–Spotify: enhanced user experience, expanded brand recognition.
What are success conditions for strategic alliances?
Strategic alignment, communication, flexibility, top management commitment.
What is a minority equity investment?
An equity stake between 1–49% in another firm without full control.
Why might a firm prefer a minority stake over full acquisition?
It allows influence and insight while avoiding full risk or integration costs.
What is licensing?
Granting rights to use brand or technology in exchange for fees or royalties.
What is the risk to the licensor in a licensing deal?
The licensee may become a competitor after gaining market access.
Which company is the largest global licensor?
The Walt Disney Company, with estimated $62 billion in licensed revenue.
What is co-branding?
Pairing two brands on one product to leverage each brand’s market strength.
How does franchising reduce monitoring costs?
Franchisee’s income depends on their performance, aligning incentives.
What are common issues in franchising relationships?
Disputes over standards, supplier choices, and exclusive territory boundaries.
