Ch 9 Corporate Strategy, Strategic Alliances, Mergers and Acquisitions

Lupita is the CEO of JustFixIt Incorporated, a firm that merges technology with commercial hardware. She has been struggling with the decision to allocate her resources for the development of a new system or go to the market and search for an already established system. The board of directors for JustFixIt Incorporated suggested that the firm enter a contractual agreement with a partner. This scenario best illustrates the concept of

the Build-Borrow-Buy framework.

A microchip company wants a computer company to produce more powerful tablets and therefore use more of its chips. That same computer company wants the microchip maker to create chips with faster processing power. Which approach could these companies take so that both can serve stockholders well?

The two companies should enter a strategic alliance to bring about a win-win situation for them and to limit their rivals’ power.

In 1990, Roche, a Swiss pharmaceutical company, initially invested $2.1 billion to purchase a controlling interest in the biotech startup Genentech. In 2009, after witnessing the success of Genentech’s drug discovery and development projects, Roche spent $47 billion to purchase the remaining minority interest in Genentech, making it a wholly owned subsidiary. In terms of strategic alliances, this scenario best indicates

the real-options perspective.

A drawback of using cross-border strategic alliances to enter new foreign markets is that

some of the firm’s proprietary know-how may be appropriated by the foreign partner.

MedAI Diagnostics, a digital-health startup developing AI-based imaging tools, is preparing to enter hospital markets. Which strategy would most effectively help it commercialize its innovation?

Partner with a major medical-equipment company that already serves hospitals.

Luca is the proud owner of American BBQ Eateries LLC. It currently operates in the southeast and has recently entered into a non-equity alliance with Big Bills BBQ Grills Incorporated, with a promise of sharing codified information via a licensing agreement. Which of the following best represents this level of sharing knowledge?

explicit knowledge

Which of the following statements is true of an equity alliance?

In an equity alliance, the partners frequently exchange personnel to make the acquisition of tacit knowledge possible.

Which of the following is an example of explicit knowledge?

a research summary

Several notable firms, including Eli Lilly, HP, Procter & Gamble, and IBM, each wish to become the alliance “partner of choice” for small technology ventures, colleges, and inventors. They each know that ________is a necessary and critical element for an alliance to be a success.

building interorganizational trust

Which of the following examples describes the task of an alliance manager?

Omar trained the employees of his alliance partner in the skills needed to create a display for a wide-screen television.

Which of the following is true of acquisitions?

They can be friendly or hostile.

When large, incumbent firms buy startup companies, the transaction is generally described as a(n)

acquisition.

Horizontal integration through mergers and acquisitions can help firms strengthen their competitive positions by increasing

differentiation.

Which of the following is a result of horizontal integration in terms of Porter’s five forces model?

There is a reduction of excess capacity in the market.

What is the term for the process of merging with a competitor at the same stage of the industry value chain?

horizontal integration

The main reason behind Google’s decision to acquire the Israeli start-up company Waze for $1 billion was probably to

gain access to a new capability.

Which of the following reasons motivated Meta Platforms to acquire Instagram, a photo and video-sharing social media site, for $1 billion?

the desire to preempt rivals

Why did Quaker Oats Company’s acquisition of Snapple fail?

managerial hubris

Adidas acquired Reebok primarily to

overcome its competitive disadvantage against Nike.

PolarTech Electronics, a global smartphone manufacturer, decided to acquire AquaCore Utilities, a water-treatment company, to diversify its business portfolio. Executives argued that PolarTech’s management expertise and strong brand could easily translate into success in a new industry. However, the deal later underperformed and failed to deliver the expected synergies. What does this scenario best illustrate?

managerial hubris