Strategy Test 3 chapter 9

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  1. What is strategic alliance?
    Any cooperative effort between two or more independent organizations to develop, manufacture, or sell products or services
  2. Non-equity alliance?
  3. What is an equity alliance?
  4. What is a joint venture?
    new independent firm is created
  5. Why equity and joint ventures?
    • Both equity and joint ventures bind firms together more tightly than non-equity
    • alliances because firms have a financial interest in one another.
  6. How do alliances create value?
     Three ways
    Through improving current operations

    Shaping the competitive environment

    Facilitating business entry and exit
  7. What are Exploiting economies of scale?
    • when the per unit cost of producing something decreases as production volume
    • increases A partner may bring increased market share and/or manufacturing capacity
  8. Learning from partners?
    A partner may bring technology and/or market knowledge
  9. What's Risk and cost sharing?
    when there are high costs or high risks

    A partner bears a portion of the risk and/or cost of the alliance
  10. Low cost entry into new industries
    A partner may provide instant access to product markets
  11. Low cost exit from industries
    • An alliance partner is an informed buyer – reduces buyer uncertainty surrounding
    • the value of the businesses assets

    -Seller doesn’t have to give up a risk premium
  12. Managing uncertainty?
    Alliances may serve as real options
  13. Low cost entry into new geographic markets?
    • Partners provide local market knowledge, access, and legitimacy with governments and
    • customers
  14. While alliances can provide firms with tremendous benefits many alliances fail. Why?
    • 1)Firms may simply
    • overestimate the value creation potential of an alliance.
    • 2)Alliances may fail
    • because one or more alliance partners cheat, i.e. they don’t cooperate in a way
    • that maximizes the value of the alliance

    The difficulty of monitoring creates an incentive to cheat
  15. What are Three ways alliance partners may cheat?
    • Adverse selection – misrepresenting the value of resources a firm possesses – pre
    • alliance formation

    • Moral hazard – providing inputs of lesser value than promised – post alliance
    • formation

    Holdup– exploiting the transaction specific investments of partners
  16. Joint ventures are the preferred mode of alliances when the risk of cheating is high
    Joint ventures are the preferred mode of alliances when the risk of cheating is high
  17. What's the Big Challenge of
    Strategic Alliances?
    • Maximizing gains from
    • cooperation while minimizing the threat
    • of cheating
Card Set:
Strategy Test 3 chapter 9
2013-04-07 19:02:22
Strategy Test chapter

Strategy Test 3 chapter 9
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