J375 Exam 2 UPDATED Exam Questions
and CORRECT Answers
strategic alliances - CORRECT ANSWER - any cooperative effort between 2 or more
independent organizations to develop, manufacture or sell products or services
motivation for alliances - CORRECT ANSWER - an organizational form of exchange that
should produce a gain from trade due to some comparative or absolute advantage
implication of strategic alliances - CORRECT ANSWER - choose partners that are better
at something than you are (complementary resources)
3 types of alliances - CORRECT ANSWER - 1. nonequity alliance
2. equity alliance
3. joint venture
nonequity alliance - CORRECT ANSWER - contracts
-licensing
-supply & distribution agreements
equity alliance - CORRECT ANSWER - cross equity holdings
-partners each own a stake in each other
joint venture - CORRECT ANSWER - joint equity holdings
-independent firm is created
How strategic alliances create value - CORRECT ANSWER - 1. improve current
operations
2. shape competitive environment
,3. facilitate entry and exit
Improving Current Operations - CORRECT ANSWER - one way strategic alliances create
value
1. Exploiting Economies of Scale
-a partner brings increased market share and/or manufacturing capacity
2. Learning from partners
-a partner brings technology and or market knowledge
3. Risk and cost sharing
-a partner bears a portion of the risk and/or cost of the alliance
Shaping the Competitive Environment - CORRECT ANSWER - one way a strategic
alliance creates value
1. Facilitating Technology Standards
-partners may agree on a standard and avoid a market battle for the standard
2. Facilitating tacit collusion
-partners communicate in subtle legal ways (however, this communicate between rivals is illegal)
Facilitating Entry and Exit - CORRECT ANSWER - one way strategic alliances create
value.
1. Low-Cost Entry Into new Industries (instant access and legitimacy)
2. low cost exit from industries (partner is informed buyer)
3. managing uncertainty
(alliances may serve as real options)
4. low cost entry into new geographic markets
Three Forms of Misappropriating Value - CORRECT ANSWER - 1. Adverse Selection
2. Moral Hazard
3. Holdup
, Adverse Selection - CORRECT ANSWER - misrepresenting the value of inputs (say have
something and don't)
Moral Hazard - CORRECT ANSWER - providing inputs of lesser value than promised
(not providing their best)
Holdup - CORRECT ANSWER - exploiting the transaction specific investment of partners
(Nokia in Microsoft deal)
Incentives to misappropriate value (cheat) - CORRECT ANSWER - an alliance is an
exchange context in which:
-partner inputs may be difficult to monitor
-actual value creation may be difficult to monitor
-value appropriation may be:
difficult to monitor
subject to power dynamics
Are strategic alliances rare? - CORRECT ANSWER - As a form of organizing economic
exchange: No.
However, the sources of value creation within alliances may be rare.
What about strategic alliances may be rare? - CORRECT ANSWER - -firms may form a
combination of complementary resources within an alliance that is rare.
-the stock of complementary resources may be limited so that first movers have rare combination
Are strategic alliances costly to imitate? - CORRECT ANSWER - As a form of organizing
economic exchange, NO. (the organizational form is easily duplicated)
and CORRECT Answers
strategic alliances - CORRECT ANSWER - any cooperative effort between 2 or more
independent organizations to develop, manufacture or sell products or services
motivation for alliances - CORRECT ANSWER - an organizational form of exchange that
should produce a gain from trade due to some comparative or absolute advantage
implication of strategic alliances - CORRECT ANSWER - choose partners that are better
at something than you are (complementary resources)
3 types of alliances - CORRECT ANSWER - 1. nonequity alliance
2. equity alliance
3. joint venture
nonequity alliance - CORRECT ANSWER - contracts
-licensing
-supply & distribution agreements
equity alliance - CORRECT ANSWER - cross equity holdings
-partners each own a stake in each other
joint venture - CORRECT ANSWER - joint equity holdings
-independent firm is created
How strategic alliances create value - CORRECT ANSWER - 1. improve current
operations
2. shape competitive environment
,3. facilitate entry and exit
Improving Current Operations - CORRECT ANSWER - one way strategic alliances create
value
1. Exploiting Economies of Scale
-a partner brings increased market share and/or manufacturing capacity
2. Learning from partners
-a partner brings technology and or market knowledge
3. Risk and cost sharing
-a partner bears a portion of the risk and/or cost of the alliance
Shaping the Competitive Environment - CORRECT ANSWER - one way a strategic
alliance creates value
1. Facilitating Technology Standards
-partners may agree on a standard and avoid a market battle for the standard
2. Facilitating tacit collusion
-partners communicate in subtle legal ways (however, this communicate between rivals is illegal)
Facilitating Entry and Exit - CORRECT ANSWER - one way strategic alliances create
value.
1. Low-Cost Entry Into new Industries (instant access and legitimacy)
2. low cost exit from industries (partner is informed buyer)
3. managing uncertainty
(alliances may serve as real options)
4. low cost entry into new geographic markets
Three Forms of Misappropriating Value - CORRECT ANSWER - 1. Adverse Selection
2. Moral Hazard
3. Holdup
, Adverse Selection - CORRECT ANSWER - misrepresenting the value of inputs (say have
something and don't)
Moral Hazard - CORRECT ANSWER - providing inputs of lesser value than promised
(not providing their best)
Holdup - CORRECT ANSWER - exploiting the transaction specific investment of partners
(Nokia in Microsoft deal)
Incentives to misappropriate value (cheat) - CORRECT ANSWER - an alliance is an
exchange context in which:
-partner inputs may be difficult to monitor
-actual value creation may be difficult to monitor
-value appropriation may be:
difficult to monitor
subject to power dynamics
Are strategic alliances rare? - CORRECT ANSWER - As a form of organizing economic
exchange: No.
However, the sources of value creation within alliances may be rare.
What about strategic alliances may be rare? - CORRECT ANSWER - -firms may form a
combination of complementary resources within an alliance that is rare.
-the stock of complementary resources may be limited so that first movers have rare combination
Are strategic alliances costly to imitate? - CORRECT ANSWER - As a form of organizing
economic exchange, NO. (the organizational form is easily duplicated)
