External Growth Methods: Strategic Alliances
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Questions and Answers

What is an advantage of strategic alliances formed without capital?

  • Increased flexibility (correct)
  • Greater investment required
  • Stronger union
  • Enhanced commitment

    • Which disadvantage is associated with strategic alliances that involve capital?

  • Easier implementation
  • Weaker ties
  • Immediate trust
  • Longer negotiations (correct)

    • What is a disadvantage of alliances without capital?

  • Possibility of stronger ties
  • Less flexible arrangements
  • Increased trust and commitment
  • Lack of trust and commitment (correct)

    • Which example illustrates a capital alliance?

    <p>Renault-Nissan Alliance</p> Signup and view all the answers

    How do strategic alliances formed with capital primarily differ from those without?

    <p>They involve longer negotiations</p> Signup and view all the answers

    What is one reason companies form strategic alliances?

    <p>Access to additional resources</p> Signup and view all the answers

    What is a potential benefit of forming a strategic alliance?

    <p>Possibility of 'real options'</p> Signup and view all the answers

    What characterizes a strategic alliance's flexibility?

    <p>Quick start and finish</p> Signup and view all the answers

    How does forming strategic alliances strengthen competitive positions?

    <p>It helps in jointly addressing common threats</p> Signup and view all the answers

    What is a primary benefit of forming alliances with competitors?

    <p>Increasing market size</p> Signup and view all the answers

    Which strategic alliance is known to require significant investments?

    <p>Hulu created by Disney</p> Signup and view all the answers

    What should be evaluated first before considering mergers or acquisitions?

    <p>The different options for strategic alliances</p> Signup and view all the answers

    What distinguishes strategic alliances from collusive agreements?

    <p>Strategic alliances are permitted legally</p> Signup and view all the answers

    What is the term used for cooperation among competing companies?

    <p>Coopetition</p> Signup and view all the answers

    Which framework is useful for assessing whether internal resources are superior to those of competitors?

    <p>VRIO framework</p> Signup and view all the answers

    Under what condition should mergers or acquisitions be seriously considered?

    <p>When resources must be accessed with maximum guarantees</p> Signup and view all the answers

    Which of the following is an example of a strategic alliance?

    <p>A partnership between Daimler and Tesla</p> Signup and view all the answers

    What is a significant risk associated with mergers and acquisitions?

    <p>Failure in partner integration</p> Signup and view all the answers

    Which of the following is a characteristic of successful strategic alliances?

    <p>Common objectives and shared risks</p> Signup and view all the answers

    Which type of resources may companies seek through strategic alliances?

    <p>Complementary resources such as distribution channels</p> Signup and view all the answers

    Which strategy may allow a company to access capabilities available in another firm without a full merger?

    <p>Licensing agreements</p> Signup and view all the answers

    What is the first step in assessing the relevance of internal resources for entering a target market?

    <p>Evaluating similarity of existing resources to market needs</p> Signup and view all the answers

    Which of the following is NOT a valid reason to prefer joint ventures over outright acquisitions?

    <p>More control over operations</p> Signup and view all the answers

    What is a common factor in the failures of mergers and acquisitions like Daimler and Chrysler?

    <p>Incompatibility of corporate cultures</p> Signup and view all the answers

    What is an explicit agreement in the context of competitive behavior?

    <p>Rivals agree on quantity and price</p> Signup and view all the answers

    What is meant by implicit agreements among companies?

    <p>Observations of competitive behavior that influence decisions</p> Signup and view all the answers

    Why do companies enter into strategic alliances?

    <p>To leverage the capabilities and competencies of partners</p> Signup and view all the answers

    What describes a learning race in the context of strategic alliances?

    <p>The faster partner gains more competitive advantage</p> Signup and view all the answers

    Which of the following is NOT a main type of strategic alliance?

    <p>Franchise agreements</p> Signup and view all the answers

    What characterizes an alliance without capital?

    <p>No ownership participation from partners</p> Signup and view all the answers

    What is a defining feature of joint ventures?

    <p>They create a new entity where partners are owners</p> Signup and view all the answers

    What type of strategic alliance includes cross-shareholdings?

    <p>Alliances with capital</p> Signup and view all the answers

    What is a key requirement when selecting a strategic partner for an alliance?

    <p>Compatibility with the partner</p> Signup and view all the answers

    Which of the following describes a merger?

    <p>The union of two or more companies into a new entity</p> Signup and view all the answers

    What is a primary distinguishing factor of an acquisition compared to a merger?

    <p>Acquisition can be total or partial</p> Signup and view all the answers

    What is essential for managing a strategic alliance effectively?

    <p>Ensuring costs do not exceed the benefits generated</p> Signup and view all the answers

    Which of the following is an example of a friendly acquisition?

    <p>Amazon acquiring Whole Foods Market</p> Signup and view all the answers

    Which of the following statements is true regarding strategic alliances?

    <p>They require significant commitment from both parties.</p> Signup and view all the answers

    Which of the following is NOT a component of managing strategic alliances?

    <p>Designing competitive pricing strategies</p> Signup and view all the answers

    What benefit is typically sought by companies entering into a merger?

    <p>Strengthened market position through combined resources</p> Signup and view all the answers

    What typically occurs during a hostile takeover?

    <p>The acquired company opposes the absorption.</p> Signup and view all the answers

    What is a primary benefit of horizontal integration in mergers?

    <p>Reconfigures the industry structure, reducing competitive intensity.</p> Signup and view all the answers

    Why might banks frequently engage in mergers?

    <p>To address oversupply and competitive pressure.</p> Signup and view all the answers

    What defines vertical integration in the context of mergers?

    <p>Acquiring a company that operates at a different stage of the supply chain.</p> Signup and view all the answers

    What effect do mergers typically have on Porter's five competitive forces?

    <p>They can reduce rivalry among existing competitors.</p> Signup and view all the answers

    What is a common reason for the merger of companies in mobile telecommunications?

    <p>To reduce oversupply and competitive pressures.</p> Signup and view all the answers

    Which of the following scenarios is an example of horizontal integration?

    <p>An airline merges with a competitor airline.</p> Signup and view all the answers

    What typically characterizes a successful merger between two competitor companies?

    <p>There is complementary strength in operations and markets.</p> Signup and view all the answers

    Study Notes

    External Growth Methods

    • External growth methods are a corporate strategy
    • The agenda includes strategic alliances, management of strategic alliances, mergers and acquisitions, and mergers, acquisitions and competitive advantage

    Strategic Alliances

    • Strategic alliances are voluntary agreements between companies
    • They involve sharing resources, capabilities, and knowledge
    • Alliances can be used for entering new markets or developing new products/processes/services
    • Alliances are considered "strategic" if they affect a company's ability to compete
    • A survey of Fortune 1000 companies showed 80% believe strategic alliances generate over 25% of their income

    Why Companies Form Strategic Alliances

    • Entering new markets
      • Example: joint venture between Volkswagen and SAIC
      • Example: alliance between Disney+ and Movistar
    • Reducing uncertainty associated with new markets
      • Example: alliances between large pharmaceutical companies and biotech start-ups
    • Accessing additional resources
      • Example: alliance between Telefónica and El Corte Inglés, or Telefónica and Vodafone; or Mercedes-Tesla

    Strengthening the Competitive Position

    • Strategic alliances can strengthen competitive positions
    • Alliances with competitors can increase market size
    • Example: alliance between Google, Intel and TAG Heuer; or Daimler-Tesla
    • This is also known as 'coopetition'
    • Explicit and implicit collaborations can occur with competitors and rivals

    Learning from Partners

    • Learning from partner capabilities and competencies
    • Strategic alliances allow for learning races where one partner learns faster, and gains an advantage
    • Example: strategic alliance between Toyota and GM

    Types of Strategic Alliances

    • Alliances without capital: do not involve participation in the capital of the strategic partner
    • Alliances with capital: involve participation of at least one company in the capital of the strategic partner
    • Joint ventures: companies form a new entity, with shared ownership

    Managing Strategic Alliances

    • Between 30% and 70% of strategic alliances are considered failures by at least one party
    • Risks associated with strategic alliances include opportunistic behaviors
      • Example: contracts fail to foresee all necessary resources
    • Companies should discover whether their partner's capacity to collaborate is overestimated versus expectations
    • One company may need to make more specific investments related to the alliance than another

    Mergers and Acquisitions

    • Mergers and acquisitions are often part of a company's corporate strategy
    • A merger combines two or more independent companies into a new joint entity
      • Usually between companies of similar size
      • Example: PSA and FCA merger created the Stellantis group
    • An acquisition involves a company purchasing another company
      • Friendly acquisitions: both parties agree
      • Hostile acquisitions: the target doesn't agree
      • Example: Disney's acquisition of Pixar; or the attempted acquisition of Endesa by Gas Natural

    Mergers with Competitors

    • Mergers with competitors can reconfigure the industry structure
    • This can reduce competitive intensity in industries with oversupply
    • Example: PSA and PCA merger

    Why Companies Merge/Acquire

    • Overcome entry barriers to new markets
    • Gain access to a new market
    • Acquire new capabilities or distinctive skills
    • Reduce competitive intensity by acquiring potential competitors

    Reasons Why Mergers/Acquisitions Destroy Value

    • Difficulties in integrating companies with differing organizational cultures
    • Failure to achieve expected synergies
    • Over-indebtedness through significant take-over bids
    • Over-diversification and increased company size

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    CUNEF External Growth Methods PDF

    Description

    Explore the concept of external growth methods, focusing on strategic alliances between companies. Understand how these voluntary agreements can lead to shared resources, market entry, and competitive advantage. This quiz delves into real-world examples and the reasons behind forming strategic alliances.

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