session 9 - ash Flashcards
(29 cards)
Which type of strategic alliance involves the creation of a new, jointly owned independent entity?
A. Non-equity alliance
B. Equity alliance
C. Joint venture
D. Licensing agreement
C
Strategic commitments typically involve:
A. Short-term decisions with flexible outcomes
B. Minimal investment to test markets
C. Substantial resources and long-term consequences
D. Temporary partnership
C
What does the ‘borrow’ option in the Build-Borrow-Buy framework refer to?
A. Hiring external consultants
B. Forming strategic alliances to access needed resources
C. Outsourcing non-core functions
D. Applying for business loans
B
What is a common risk of mergers and acquisitions (M&As)?
A. Too little brand recognition
B. Failing to achieve expected synergies
C. Loss of low-skilled labor
D. Excessive decentralization
B
The principal-agent problem arises due to:
A. Managers pursuing shareholder value above all
B. Alignment of incentives between shareholders and employees
C. Diverging interests between managers and shareholders
D. Too much shareholder control
C
Which phase of the alliance lifecycle involves choosing the governance structure?
A. Post-formation management
B. Design and governance
C. Trust-building
D. Strategic alignment
B
What is a key success factor in managing a strategic alliance?
A. Frequent contract renegotiations
B. Government regulation
C. Trust and compatibility between partners
D. Competing in the same market
C
Which is a managerial motive for engaging in M&A that may not benefit shareholders?
A. Synergy creation
B. Empire-building by the CEO
C. Access to new markets
D. Gaining unique capabilities
B
What is adverse selection in the context of corporate governance?
A. Hiring managers without a performance record
B. Managers misusing shareholder funds
C. Choosing managers based on inaccurate or incomplete information
D. Employees leaking sensitive data
C
Which of the following is an external governance mechanism?
A. Board of directors
B. Strategic control systems
C. Financial analysts and auditors
D. Employee surveys
C
What are the benefits and risks of mergers and acquisitions (M&As)?
Benefits:
access to new markets, economies of scale, and knowledge transfer.
Risks:
overpayment, integration issues, culture clashes, and unmet synergy expectations.
How do strategic alliances differ in structure, and what makes them successful?
Types: non-equity alliances, equity alliances, and joint ventures.
Success factors include trust, compatibility, clear governance, and learning orientation.
What is the Build-Borrow-Buy framework in corporate growth strategy?
A decision model: Build (internal development), Borrow (alliances), or Buy (acquisition) depending on resource relevance, tradability, and need for integration.
What is the principal-agent problem in corporate governance?
A conflict where managers (agents) pursue their own interests over those of the shareholders (principals), due to misaligned incentives.
How do internal governance mechanisms help reduce agency problems?
Through input controls (e.g. budgets, policies) and output controls (e.g. performance-based rewards) that align managers’ behavior with firm goals.
What is the role of external governance mechanisms?
To provide oversight through means such as market monitoring (e.g. analysts, institutional investors), takeovers, and third-party audits.
What are managerial motives in M&A that might not benefit shareholders?
Empire-building, increasing personal prestige, or securing job security rather than creating shareholder value.
What are the stages of the alliance lifecycle?
Formation → Design & governance → Post-formation management (with trust and learning emphasised in the final phase).
What does CSR refer to?
Corporate social responsibility
it is about a company doing good and this is usually through donations, volunteering or compliance based sustainability efforts
What does CSV refer to?
Creating shared value
It’s about a company doing well by doing good. It integrates solving social/environmental problems into the core business strategy, so the company benefits economically and creates societal value.
What is the triple bottom line?
- Profits : economic dimensions
- People : social dimensions
- Planet : ecological dimension
What is the agency theory?
A theory that views the firm as a nexus of legal contracts
- Conflicts that arise should be resolved legally
- The firm needs to design work tasks, incentives and employment contracts
- To minimise opportunism by agents
What causes adverse selection and moral hazards?
This is both caused by information asymmetry
- Adverse selection: an increased likelihood of selecting inferior alternatives
- Moral hazard: when one party is incentivised to take undue risks or shirk responsibilities, the costs are incurred by the other party
What other governance mechanisms are used to align incentives between principals and agents?
- Executive compensation
- the market for corporate control
- auditors, regulators and industry analysts
