Chapter 14- strategies for firm growth

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Questions and Answers

What is a key advantage of participating in strategic alliances?

Gain access to a specific resource (correct)

Partial loss of decision autonomy

Loss of proprietary information

Increased management complexities

What type of alliance typically matches a company with excess distribution capacity with a company that has a product to sell?

Technological Alliance

Joint Venture

Marketing Alliance (correct)

Strategic Partnership

What is a joint venture?

A type of marketing alliance that focuses on foreign sales

An entity created when two or more firms pool a portion of their resources (correct)

A type of strategic alliance that involves cooperation in R&D

A partnership between two or more firms to achieve a specific goal

What is a potential risk of participating in strategic alliances?

Risk becoming dependent on a partner Signup and view all the answers

What is a key difference between strategic alliances and joint ventures?

Strategic alliances are informal, while joint ventures are formal Signup and view all the answers

What is a potential benefit of participating in joint ventures?

Risk and cost sharing Signup and view all the answers

What is a key advantage of participating in international strategic alliances?

Gain access to a foreign market Signup and view all the answers

What is a key characteristic of technological alliances?

Cooperation in R&D, engineering, and manufacturing Signup and view all the answers

What is a strategy for increasing revenue by improving the quality of an existing product or service?

Improving an Existing Product or Service Signup and view all the answers

What is the term for increasing sales of a product or service through greater marketing efforts or increased production capacity?

Market Penetration Signup and view all the answers

What is a strategy for growth that involves making additional variations of a product to appeal to a broader range of customers?

Product Line Extension Signup and view all the answers

What is the term for a business that seeks to derive significant competitive advantage by selling products or services in multiple countries?

International New Venture Signup and view all the answers

What is a strategy for growth that involves expanding to additional geographic locations?

Geographic Expansion Signup and view all the answers

What is a type of foreign-market entry strategy that involves producing a product at home and shipping it to a foreign market?

Exporting Signup and view all the answers

What is a type of foreign-market entry strategy that involves the establishment of a firm that is jointly owned by two or more otherwise independent firms?

Joint Venture Signup and view all the answers

What is an example of a joint venture between an American and a Japanese company?

Fuji-Xerox Signup and view all the answers

What is licensing in the context of international expansion?

An arrangement where a firm grants permission to another firm to manufacture a product for specified royalties Signup and view all the answers

What is the main difference between a franchisor and a franchisee?

A franchisor is a company with an established business method, while a franchisee is an individual who owns a franchise Signup and view all the answers

What is a turnkey project in the context of international expansion?

A project where a contractor builds a facility in another country and turns over the keys to the project when it is completed Signup and view all the answers

What is a wholly owned subsidiary in the context of international expansion?

A company that has made the decision to manufacture a product in a foreign country and establish a permanent presence Signup and view all the answers

What is one advantage of emphasizing external growth strategies?

Reducing competition Signup and view all the answers

What is one disadvantage of emphasizing external growth strategies?

Incompatibility of top management Signup and view all the answers

What is franchising in the context of international expansion?

An agreement between a franchisor and a franchisee to operate a business Signup and view all the answers

What is an example of an external growth strategy?

Licensing Signup and view all the answers

Study Notes

Strategic Alliances and Joint Ventures

A strategic alliance is a partnership between two or more firms developed to achieve a specific goal.
Participating in alliances can boost a firm's rate of patenting, product innovation, and foreign sales.
Strategic alliances tend to be informal and do not involve the creation of a new entity.

Types of Alliances

Technological Alliances: feature cooperation in R&D, engineering, and manufacturing.
Marketing Alliances: typically match a company with excess distribution capacity with a company that has a product to sell.

Joint Ventures

A joint venture is an entity created when two or more firms pool a portion of their resources to create a separate, jointly owned organization.

Advantages and Disadvantages of Strategic Alliances and Joint Ventures

Advantages: gain access to specific resources, economies of scale, risk and cost sharing, gain access to a foreign market, learning, speed to market, and neutralizing or blocking competitors.
Disadvantages: loss of proprietary information, management complexities, financial and organizational risks, risk becoming dependent on a partner, partial loss of decision autonomy, partners' cultures may clash, and loss of organizational flexibility.

International Expansion

International new ventures are businesses that, from their inception, seek to derive significant competitive advantage by using their resources to sell products or services in multiple countries.
International expansion is a complex form of growth.

Foreign-Market Entry Strategies

Exporting: producing a product at home and shipping it to a foreign market.
Joint Ventures: involves the establishment of a firm that is jointly owned by two or more otherwise independent firms.
Licensing: an arrangement whereby a firm with proprietary rights to a product grants permission to another firm to manufacture that product for specified royalties or other payments.
Franchising: an agreement between a franchisor and a franchisee, where the franchisor has an established business method and brand.
Turnkey Project: a contractor from one country builds a facility in another country, trains the personnel, and turns over the keys to the project when it is completed.
Wholly Owned Subsidiary: a company that has made the decision to manufacture a product in a foreign country and establish a permanent presence.

External Growth Strategies

Mergers and Acquisitions
Licensing
Strategic Alliances and Joint Ventures
Franchising

Advantages and Disadvantages of Emphasizing External Growth Strategies

Advantages: reducing competition, gaining access to proprietary products or services, gaining access to new products and markets, obtaining access to technical expertise, gaining access to an established brand name, economies of scale, and diversification of business risk.
Disadvantages: incompatibility of top management, clash of corporate cultures, operational problems, increased business complexity, loss of organizational flexibility, and antitrust implications.

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Description

Learn about the advantages and disadvantages of participating in strategic alliances and joint ventures, including access to resources, economies of scale, and risk sharing.