Quiz Chapter 11 Making Alliances and Acquisitions Work

The business strategy in which each partner in an alliance holds stock in the other firm is known as _____.

a. Merging

b. Strategic investing

c. Cross-shareholding

d. Acquisition

C

Which of the following is true of non-equity-based alliances?

a. They are associations between firms that are based on the sharing of ownership between them.

b. They are associations between firms based on contracts between them.

c. They involve strategic investment.

d. They involve cross-shareholding.

B

Which of the following statements is true of equity-based strategic alliances?

a. They involve franchising and licensing.

b. They do not involve the sharing of ownership.

c. They do not include cross-shareholding.

d. They include strategic investment.

D

Which of the following is a difference between a merger and an acquisition?

a. Unlike a merger, an acquisition is the combination of operations and management of two firms to establish a new legal entity.

b. Unlike a merger, an acquisition is a transfer of the control of operations from one firm to another.

c. Unlike an acquisition, a merger does not involve the sharing of ownership.

d. Unlike an acquisition, a merger is a non-equity based alliance.

B

In the context of financial investments, which of the following statements is true of a real option?

a. It is an investment in practical operations as opposed to financial capital.

b. It is an investment that draws obligation to take some action in the future.

c. It is an investment done in two phases, a large investment to buy an option followed by a gradual increase in investment.

d. It is an investment that cannot be withdrawn.

A

Which of the following is an advantage of strategic alliances?

a. They help companies to sequentially scale up or scale down their investments.

b. They ensure that companies choose the right partners for future investments.

c. They eliminate potential partner opportunism.

d. They help companies to be immune to their competitors' activities.

A

Which of the following is a disadvantage of strategic alliances?

a. Strategic alliances lack the flexibility to sequentially scale up or scale down an investment.

b. Partner opportunism is always a threat in strategic alliances.

c. Access to complementary assets is prohibited in strategic alliances.

d. Partners in a strategic alliance are obligated to pursue an acquisition even if it turns out to be a bad idea.

B

Acquisition premium is the difference between acquisition price and:

a. triple the market value of the most valuable asset of the target firm.

b. the futuristic value of target firms.

c. the market value of target firms.

d. double the market value of the least valuable asset of the target firm.

C

For acquisitions to add value, which of the following conditions must be met by one or all of the firms involved in creating acquisitions?

a. The capabilities of the firm must be easily imitable.

b. The capabilities of the firm must be unique.

c. The resources of the firm must be substitutable.

d. The resources of the firm must be readily available in the market.

B

According to the three stage model of formation of alliances, which of the following best illustrates the sequential order of major decisions to be taken during the process?

a. Decision on the mode of growth in Stage One; choice between a contract or an equity approach in Stage Two; and decision on the specification of relationship in Stage Three

b. Choice between a contract or an equity approach in Stage One; decision on the mode of growth in Stage Two; and decision on the specification of relationship in Stage Three

c. Decision on the specification of relationship in Stage One; choice between a contract or an equity approach in Stage Two; and decision on the mode of growth in Stage Three

d. Choice between a contract or an equity approach in Stage One; decision on the specification of relationship in Stage Two; and decision on the mode of growth in Stage Three

A

Firms are most likely to adopt an equity approach of alliance formation when:

a. the shared resources are easy to imitate and substitutable.

b. they do not prefer direct control over joint activities.

c. they do not fear expropriation of their intellectual property.

d. the shared capabilities are more tacit and hard to codify.

D

Firms adopting a contractual approach usually:

a. possess capabilities that are more tacit.

b. do not have direct control over joint activities on a continuing basis.

c. fear expropriation of their intellectual property.

d. possess capabilities that are hard to codify.

B

In the context of the stages of the dissolution process, mediation by third parties occurs during the phase called _____.

a. initiation

b. uncoupling

c. aftermath

d. going public

D

Which of the following is a difference between equity relationships and contractual relationships?

a. Equity relationships have drawbacks whereas contractual relationships do not.

b. Firms that fear their intellectual property may be expropriated prefer contractual relationships.

c. Contractual relationships allow firms to have some direct control over joint activities, whereas equity relationships usually do not.

d. Equity relationships allow firms to have some direct control over joint activities, whereas contractual relationships usually do not.

D

Which of the following is true of the third phase of alliance dissolution?

a. One firm still doesn't realize the dissolution is occurring

b. Involves mediation by third parties

c. Can be friendly or hostile

d. Involves going public

C

During which phase of alliance dissolution is a firm likely to search for a new partner?

a. Initiation

b. Uncoupling

c. Aftermath

d. Going public

C

An attractive feature of a new alliance partner after the dissolution of an alliance is:

a. A history of contested dissolutions

b. Cultural differences

c. A strict and extensive negotiation process

d. If those firms have successfully learned from past alliances

D

Which of the following is a factor that may influence alliance performance?

a. Equity

b. Nationality

c. Relational capacities

d. All of the above

D

Which of the following is NOT one of the potential motives for acquisition?

a. Managerial

b. Persuasive

c. Hubristic

d. Synergistic

B

In the context of dissolution of alliances, who among the following is likely to have a first-mover advantage?

a. The party that breaks the news of dissolution first

b. The party that initiates reconciliation first

c. The party that starts the uncoupling process first

d. The party that starts a new relationship first

A

In the context of alliance performance, which of the following statements about learning and experience is true?

a. Learning is often used as a proxy for experience in assessing alliance performance.

b. Learning as a factor has an ambiguous, direct impact on alliance performance.

c. Experience impacts alliance performance in a linear fashion.

d. Experience is relatively easy to measure when compared to learning.

D

Which of the following statements is true of the relation between experience and alliance performance?

a. Experience tends to be indirectly proportional to alliance performance up to a certain limit beyond which it tends to be directly proportional to alliance performance.

b. Experience tends to be directly proportional to alliance performance until the dissolution of an alliance.

c. Experience tends to be indirectly proportional to alliance performance until the dissolution of an alliance.

d. Experience tends to be directly proportional to alliance performance up to a certain limit beyond which the performance is not affected by further increase in experience.

D

Which of the following is the most important synergistic motive for acquisitions from a resource-based view?

a. To leverage superior resources

b. To respond to formal institutional constraints and transitions

c. To follow norms and chase fads of mergers and acquisitions

d. To realize one's desire for power, prestige, and money

A

Which of the following types of motives for acquisition adds value rather than reducing value?

a. Synergistic

b. Hubristic

c. Managerial

d. Friendly

A

Which of the following is a reason that acquiring international assets can be more problematic than acquiring domestic assets?

a. Inadequate pre-acquisition screening

b. Failure in integration

c. Institutional and cultural distance

d. Failure to address multiple stakeholders' concern

C

Which of the following statements is true of hubristic motives for acquisitions from a resource-based view?

a. According to this view, mergers and acquisitions (M&As) are carried out to leverage superior managerial capabilities.

b. The hubristic motives, in theory, increase the value of acquisitions.

c. The hubristic motives stem from overconfidence in one's capabilities.

d. According to this view, mergers and acquisitions (M&As) are carried out to enhance market power and scale economies.

C

According to the managerial motives for acquisitions, mergers and acquisitions (M&As) are carried out to:

a. leverage superior managerial capabilities.

b. respond to formal institutional constraints and transitions.

c. enhance market power and scale economies.

d. satisfy one's desire for power, prestige, and money.

D

Which of the following pre-acquisition problems causes acquisitions to fail?

a. Overpayments for targets

b. Failure in integration

c. Poor organizational fit between the companies involved

d. Failure to address multiple stakeholders' concern

A

Which of the following post-acquisition problems causes acquisitions to fail?

a. Overpayments for targets

b. Falling into synergy traps

c. Poor strategic fit

d. Poor organizational fit

D

Which of the following pre-acquisition problems causes cross-border acquisitions to fail?

a. Clashes of organizational cultures

b. Clashes of national cultures

c. Nationalistic media-level concerns against foreign takeovers

d. Nationalistic firm-level concerns over foreign takeovers

C

Which of the following post-acquisition problems causes cross-border acquisitions to fail?

a. Clashes of national culture

b. Nationalistic media-level concerns against foreign takeovers

c. Nationalistic political concerns against foreign takeovers

d. Lack of familiarity with foreign culture

A

Which of the following is the most important action that a manager should take while managing alliances?

a. The manager should pay attention to the soft relationship capabilities.

b. The manager should avoid equity-based alliances.

c. The manager should never walk away from a proposed deal.

d. The manager should avoid overpayment.

A

Which of the following is true of the collapse of an acquisition deal?

a. A lack of soft relationship capabilities is likely to blame.

b. The manager should have avoided trying to make the deal.

c. Overpaying is preferred to the deal collapsing.

d. It may be a blessing in disguise.

D

When managing acquisitions, managers are advised to:

a. prioritize financial figures over the soft relational capabilities.

b. avoid overpayment for targets.

c. never walk away from a proposed deal.

d. avoid equity-based alliances.

B