Strat 9

Question 1

Strategic alliance

Answer 1

Cooperative strategy in which firms combine some of their resources to create a competitive advantage.

Question 2

Joint ventures

Answer 2

Strategic alliance in which two or more firms create a legally independent company to share some of their resources to create a competitive advantage.

Question 3

Benefits of joint venture

Answer 3

Improve a firm’s ability to compete in uncertain competitive environments, joint ventures can be effective in establishing long-term relationships and in transferring knowledge between partners.

Question 4

Equity strategic alliance

Answer 4

Alliance in which two or more firms own different percentages of a company that they have formed by combining some of their resources to create a competitive advantage.

Question 5

Nonequity strategic alliance

Answer 5

Alliance in which two or more firms develop a contractual relationship to share some of their resources to create a competitive advantage.

Question 6

In nonequity strategic alliances is there the creation of a new independent compay?

Answer 6

No, they do not take equity positions.

Question 7

Examples of non equity strategic alliances

Answer 7

Licensing agreements, distribution agreements, and supply contracts are examples of nonequity strategic alliances.

Question 8

What are the 2 main reasons that firms participate in strategic alliances?

Answer 8

Creating value they couldn’t generate by acting independently and entering markets more rapidly combine to form the first important reason.
A second major reason firms form strategic alliances is that most companies lack the full set of resources needed to pursue all identified opportunities

Question 9

What are the reasons for using a strategic alliance in a slow cycle market?

Answer 9

Gain access to a restricted market, establish a franchise in a new market and maintain market stability.

Question 10

Reasons for using strategic alliance in a fast cycle market?

Answer 10

Speed up the development of new products and services, speed up new market entry, overcome uncertainty and share risky R&D expenses.

Question 11

Reasons for using strategic alliances in a standard cycle market?

Answer 11

Gain market power, gain access to complementary resources, establish better economies of scale and learn new business techniques.

Question 12

Business-level cooperative strategy

Answer 12

Strategy through which firms combine some of their resources to create a competitive advantage by competing in one or more product markets.

Question 13

There are 4 business-level cooperative strategies

Answer 13

Complementary strategic alliance, competition response strategy, uncertainty reducing strategy and competition reducing strategy.

Question 14

Complementary strategic alliance

Answer 14

Business-level alliances in which firms share some of their resources in complementary ways to create a competitive advantage.

Question 15

Vertical Complementary Strategic Alliance

Answer 15

In a vertical complementary strategic alliance, firms share some of their resources from different stages of the value chain for the purpose of creating a competitive advantage. Oftentimes, vertical complementary alliances are formed to adapt to environmental changes.

Question 16

Horizontal Complementary Strategic Alliance

Answer 16

A horizontal complementary strategic alliance, is an alliance in which firms share some of their resources from the same stage (or stages) of the value chain for the purpose of creating a competitive advantage.

Question 17

Competition Response Strategy

Answer 17

Strategic alliances can be used at the business level to respond to competitors’ attacks

Question 18

Uncertainty-Reducing Strategy

Answer 18

Firms sometimes use business-level strategic alliances to hedge against risk and uncertainty, especially in fast-cycle markets. These strategies are also used where uncertainty exists, such as in entering new product markets, especially those within emerging economies.

Question 19

Competition-Reducing Strategy

Answer 19

Used to reduce competition, collusive strategies differ from strategic alliances in that collusive strategies are often an illegal cooperative strategy. Explicit collusion and tacit collusion are the two types of collusive strategies.

Question 20

Explicit collusion

Answer 20

Exists when two or more firms negotiate directly to jointly agree about the amount to produce as well as the prices for what is produced.

Question 21

Tacit collusion

Answer 21

Exists when several firms in an industry indirectly coordinate their production and pricing decisions by observing each other’s competitive actions and responses. Tacit collusion tends to take place in industries dominated by a few large firms. Tacit collusion results in production output that is below fully competitive levels and above fully competitive prices.

Question 22

Which strategy has the highest probability of working?

Answer 22

Complementary business-level strategic alliances, especially vertical ones, have the greatest probability of creating a competitive advantage and possibly even a sustainable one.

Question 23

Corporate-level cooperative strategy

Answer 23

is a strategy through which a firm collaborates with one or more companies to expand its operations.

Question 24

Examples of corporate level cooperative strategy

Answer 24

Diversifying alliances, synergistic alliances, and franchising are the most commonly used corporate-level cooperative strategies.

Question 25

Diversifying Strategic Alliance

Answer 25

Strategy in which firms share some of their resources to engage in product and/or geographic diversification. Companies using this strategy typically seek to enter new markets (either domestic or outside of their home setting) with existing products or with newly developed products.

Question 26

Synergistic Strategic Alliance

Answer 26

Strategy in which firms share some of their resources to create economies of scope. Similar to the business-level horizontal complementary strategic alliance, synergistic strategic alliances create synergy across multiple functions or multiple businesses between partner firms.

Question 27

Franchising

Answer 27

Franchising is a strategy in which a firm (the franchisor) uses a franchise as a contractual relationship to describe and control the sharing of its resources with its partners (the franchisees).

Question 28

Cross-border strategic alliance

Answer 28

Strategy in which firms with headquarters in different countries decide to combine some of their resources to create a competitive advantage.

Question 29

Reasons for cross border alliance

Answer 29

Limited domestic growth opportunities and foreign government economic policies are key reasons firms use cross-border alliances.

Question 30

Network cooperative strategy

Answer 30

strategy where several firms agree to form multiple partnerships to achieve shared objectives.

Question 31

Disadvantages of network cooperative strategy?

Answer 31

A firm can be locked into its partnerships, precluding the development of alliances with others. In certain network configurations, firms in a network are expected to help other firms in that network whenever support is required. Such expectations can become a burden and negatively affect the focal firm’s performance over time

Question 32

Advantage of network cooperative strategy

Answer 32

Firms gain access to their partners’ other partners. Having access to multiple collaborations increases the likelihood that additional competitive advantages will be formed as the set of shared resources expands.

Question 33

stable alliance network

Answer 33

Formed in mature industries where demand is relatively constant and predictable. Through a stable alliance network, firms try to extend their competitive advantages to other settings while continuing to profit from operations in their core, relatively mature industry

Question 34

Dynamic alliance network

Answer 34

Used in industries characterized by frequent product innovations and short product life cycles. explore new ideas and possibilities with the potential to lead to product innovations, entries to new markets, and the development of new markets.

Question 35

Competitive risks with cooperative strategies

Answer 35

Inadequate contracts misrepresentation of competencies Partners fail to use their complementary resources Holding alliance's partner specific investments hostage

Question 36

What are the two primary approaches firms use to manage cooperative strategies.

Answer 36

Cost minimization and opportunity maximization

Question 37

cost-minimization approach

Answer 37

minimize the cooperative strategy’s cost and to prevent opportunistic behavior by a partner

Question 38

opportunity maximization approach

Answer 38

Maximizing a partnership’s value-creating opportunities is the focus of the opportunity maximization approach.