Obtaining Technology: Planning

MULTIPLE CHOICE

     1.   The strategic reasons a firm would look to use a merger or acquisition include all of the following except:

a.
the firm’s current product line is falling quickly behind that of its competitors
b.
a new competitor is about to enter the market the dynamics of the industry will change
c.
the firm discoveries its processes are not as efficient or effective as competitors’
d.
the firm believes its current products or processes are not going to be successful in long run
e.
the firm wishes to eliminate all potential competitors

ANS:  E                    PTS:   1

     2.   The key element of planning externally focused technology acquisition efforts is to:

a.
determine the nature of competitors
b.
determine the nature of the external activity that will occur
c.
determine the industry structure
d.
determine the firm’s internal resources
e.
determine the top management’s orientation to such activities.

ANS:  B                    PTS:   1

     3.   A ____ is defined as a partnership of two more corporations to achieve strategically significant objectives that are mutually beneficial.

a.
Limited Partnership
b.
Strategic Partnership
c.
Strategic Alliance
d.
Limited Alliance
e.
Informal Alliance

ANS:  C                    PTS:   1

     4.   In a strategic alliance the firm must evaluate whether the strategic benefits outweigh the ____.

a.
time
b.
lost opportunities
c.
ideas not pursued
d.
value destruction
e.
transaction costs

ANS:  E                    PTS:   1

     5.   ____ refers to two or more firms combine equity and form a new third entity.

a.
franchising
b.
joint venture
c.
licensing
d.
subcontracting
e.
acquisition

ANS:  B                    PTS:   1

     6.   All of the following are part of the three broad categories that Kogut summarized as the reasons for alliances except:

a.
organizational learning
b.
cost savings
c.
strategic behavior
d.
profit maximization
e.
all of these choices

ANS:  D                    PTS:   1

     7.   Which of the following is not a concern when forming an alliance?

a.
losing your employees to the other company
b.
finding the proper partner
c.
getting the timing right
d.
measuring real costs and profits from the alliance
e.
protecting intellectual property

ANS:  A                    PTS:   1

     8.   All of the following are concerns in forming an alliance except:

a.
finding proper partner
b.
lack of shared vision
c.
allocation of resources
d.
timing
e.
communication

ANS:  C                    PTS:   1

     9.   Alliances that are ____ in their formality have agreements that include clear documentation but where less interaction and agreement is required of each party in the alliance.

a.
advanced
b.
intermediate
c.
sophisticated
d.
strong
e.
strategic

ANS:  B                    PTS:   1

   10.   In a licensing arrangement, a firm agrees to pay a firm for the right to do what?

a.
to buy the firm
b.
to manufacture or sell the firm’s product
c.
to outsource
d.
to form an alliance
e.
to informally work together

ANS:  B                    PTS:   1

   11.   The goal in forming a strategic alliance is to develop relationships where:

a.
everyone experiences higher costs
b.
there are no strategic advantages
c.
there are no transaction costs
d.
the strategic advantages do not outweigh the transaction costs involved with the alliance
e.
the strategic advantages equal the equity costs involved with the alliance

ANS:  D                    PTS:   1

   12.   The party that sells the concept of the franchise to the entrepreneur is the:

a.
franchisee
b.
franchise broker
c.
franchisor
d.
corporate entrepreneur
e.
franchise connector

ANS:  C                    PTS:   1

   13.   A consortia is described as ____.

a.
organizations that invest together to create a third entity
b.
organizations joining together to share expertise and funding for development of new products or processes
c.
an organization that sells the model to conduct a business to another entity
d.
ownership in a firm that is transferred to a new party
e.
an organization created based on the direction of the government

ANS:  B                    PTS:   1

   14.   Which are examples of intermediate alliances?

a.
consortia and franchises
b.
franchises and subcontracting
c.
joint ventures and franchising
d.
subcontracting and joint ventures
e.
consortia and licensing agreements

ANS:  E                    PTS:   1

   15.   Franchising:

a.
Is growing at a very slow pace
b.
Is one of the most rapidly growing business arrangements in the global economy
c.
Is very hard to get into
d.
Can be a large liability to you
e.
Requires little paperwork

ANS:  B                    PTS:   1

   16.   The franchisor typically provides all of the following except:

a.
directions on running the business
b.
operating systems
c.
inputs into the product produced
d.
standards for operations
e.
royalty fee

ANS:  E                    PTS:   1

   17.   The success of franchisees is:

a.
very risky
b.
not used in technology focused firms
c.
a small proportion of the United States economy
d.
higher than most small business
e.
not likely in international settings

ANS:  D                    PTS:   1

   18.   Subcontracting of a firm’s activities should focus on:

a.
those that are strategically the most critical
b.
those that are the most expensive
c.
those that are the smallest part of the organization
d.
those the firm does not like to do
e.
those that concern things which do not concern the firm’s competitive advantage

ANS:  E                    PTS:   1

   19.   Joint ventures and franchise agreements are both examples of:

a.
Formal alliances
b.
Informal alliances
c.
Semiformal alliances
d.
Intermediate alliances
e.
Temporary alliances

ANS:  A                    PTS:   1

   20.   International alliances are:

a.
easier to successfully implement
b.
harder to successfully implement
c.
rare
d.
difficult only if it involves an emergent market
e.
only now occurring in great numbers

ANS:  B                    PTS:   1

   21.   Subcontracting is an example of a(n):

a.
informal alliance
b.
formal alliance
c.
mixture of formal and informal alliance
d.
joint venture
e.
licensing agreement

ANS:  C                    PTS:   1

   22.   The disadvantage of belonging to a consortia include:

a.
strategic drift
b.
contract monitoring costs
c.
little control over quality
d.
knowledge leakage
e.
culture class

ANS:  D                    PTS:   1

   23.   The duration of a subcontract is:

a.
long term
b.
short term
c.
term mixed
d.
as long as either party finds it a benefit
e.
as long as a contract is in force

ANS:  E                    PTS:   1

   24.   Mergers and acquisitions can allow a firm to accomplish a variety of strategic goals. Which one is not associated with the purchasing firm?

a.
Enter a market quickly or increase speed to market
b.
Avoid costs and risks of new product development
c.
Gain market power
d.
Earn premiums from the stock market
e.
Acquire knowledge

ANS:  D                    PTS:   1

   25.   Over the past decade, approximately ____ percent of mergers/acquisitions have failed or significantly under performed within three years of the deal.

a.
40
b.
50
c.
60
d.
70
e.
80

ANS:  C                    PTS:   1

   26.   The outright purchase of a firm or some part of that firm is known as:

a.
Acquisition
b.
Merger
c.
Joint Venture
d.
Franchising
e.
Alliance

ANS:  A                    PTS:   1

   27.   Agency theory is grounded in the belief:

a.
managers emphasize their own self interest
b.
managers are resources
c.
resources are the key reason for the success of firms
d.
relatedness is the key to success in acquisitions
e.
technology is grounded by the founding agent

ANS:  A                    PTS:   1

   28.   Second movers are successful when:

a.
the industry grows slowly
b.
there is high customer loyalty
c.
there is low customer loyalty
d.
technology changes quickly
e.
the industry is fragmented

ANS:  C                    PTS:   1

   29.   Market power refers to:

a.
market demand for the product
b.
when a firm is large enough to shape a market’s actions
c.
the ability to advertise a product actively
d.
the ability to attract key employees
e.
the gathering of key resources for the firm

ANS:  B                    PTS:   1

   30.   Relatedness is decided by whether the firms:

a.
have the same SIC code
b.
are in the same value chain
c.
share managerial backgrounds
d.
appear to be from the same industry
e.
require similar skills to operate key functions

ANS:  E                    PTS:   1

   31.   Firms that pursue ____ perform better than firms that pursue ____.

a.
related acquisitions, unrelated acquisitions
b.
unrelated acquisitions, related acquisitions
c.
informal alliances, acquisitions
d.
formal alliances, informal alliances
e.
licensing, informal alliances

ANS:  A                    PTS:   1

   32.   A firm that is a supplier to a firm that is acquired would be a(n):

a.
related acquisition
b.
vertical acquisition
c.
horizontal acquisition
d.
unrelated acquisition
e.
joint venture

ANS:  B                    PTS:   1

   33.   Typically a vertical acquisition is motivated by:

a.
market power
b.
reaching new customers
c.
cost reduction
d.
risk diffusion
e.
increased size

ANS:  C                    PTS:   1

   34.   The keys in planning for a merger or acquisition includes all of the following except:

a.
whether the merger and acquisition creates value
b.
the evaluation of whether the technology has the ability to maintain competitive advantage
c.
compatibility
d.
immediate ability to be profitable
e.
design of organizational systems, structures and processes

ANS:  D                    PTS:   1

   35.   In managing a merger or acquisition the ____ should be involved.

a.
the accounting department
b.
the engineering department
c.
the marketing department
d.
the legal department
e.
there is expertise throughout the organization that needs to be involved

ANS:  E                    PTS:   1

   36.   A merger is:

a.
a combination of equals
b.
when one firm dominates the combination
c.
an informal arrangement
d.
typically a better approach
e.
the typical format of most combinations in the United States

ANS:  A                    PTS:   1

   37.   A spinoff:

a.
occurs when a firm splits its stock
b.
is a rare event
c.
occurs when a unit of a firm is sold
d.
typically occurs with a merger
e.
is the suggested strategy for growing firms

ANS:  C                    PTS:   1

TRUE/FALSE

     1.   The goal in forming a strategic alliance is to develop relationships where the strategic advantages outweigh the transaction costs involved with the alliance.

ANS:  T                    PTS:   1

     2.   Success rates for franchisees are slightly lower than most other forms of startup businesses.

ANS:  F                    PTS:   1

     3.   In mergers the parties are not considered equal partners.

ANS:  F                    PTS:   1

     4.   A strategic alliance is defined as a partnership of two or more corporations or business units to achieve strategically significant objectives that are mutually beneficial.

ANS:  T                    PTS:   1

     5.   Franchising is one of the most rapidly growing business arrangements in the global economy.

ANS:  T                    PTS:   1

     6.   An acquisition refers to the outright purchase of a firm or some part of a firm, whereas a merger occurs when two firms combine as relative equals.

ANS:  T                    PTS:   1

     7.   A firm can gain access to external technological capabilities through joint ventures and/or mergers with companies who possess the desired technology.

ANS:  T                    PTS:   1

     8.   The development and maintenance of alliances have monitoring costs.

ANS:  T                    PTS:   1

     9.   An example of a formal form of alliance is a franchise agreement.

ANS:  T                    PTS:   1

   10.   In recent years the number and amounts of mergers and acquisitions in the U.S. and around the world have leveled off.

ANS:  F                    PTS:   1

   11.   Subcontracting is the easiest alliance that can occur.

ANS:  F                    PTS:   1

   12.   In general, firms that pursue related mergers or acquisitions perform better than those that pursue unrelated mergers or acquisitions.

ANS:  T                    PTS:   1

   13.   There is always value created in a merger and acquisition.

ANS:  F                    PTS:   1

   14.   Franchises are typically short term alliances.

ANS:  F                    PTS:   1

   15.   Subcontracting has strong controls over quality.

ANS:  F                    PTS:   1

SHORT ANSWER

     1.   Discuss why a firm may need to change its technology mix through alliance formation.

ANS: 

·
product line falling behind its competitors
·
new competitors enter or are about to enter
·
processes not as efficient as competitors
·
firm believes its processes/products not going to be successful long-term

PTS:   1

     2.   Explain the different types of mergers and acquisitions.

ANS: 

·
Related – acquiring or joining a firm that have the same skills as your own
·
Unrelated – acquiring or joining a firm that does not have the same skills
·
Horizontal – acquiring or joining a firm that is in the same industry as you
·
Vertical – acquiring or joining a firm that is in a different industry

PTS:   1

     3.   What are the major concerns for a firm trying to acquire technology through alliance building?

ANS: 

·
Finding the proper partner
·
Dealing with the ambiguities of the relationship
·
Discovering that the partnering firms have a lack of shared vision
·
Getting the timing right
·
Communicating effectively and efficiently

PTS:   1

     4.   Discuss the three reasons for alliances:

ANS: 

·
Organizational learning

–
Firms seek to gain knowledge about products, processes, and markets

–
Amount of learning is dependant upon the intern to learn, the receptivity to new info, and the transparency of the partnering firm
·
Cost savings

–
There are transaction costs associated with forming an alliance, but these costs should be out weighted by the cost reductions/eliminations produced from the alliance
·
Strategic behaviors

–
Matching competitors actions – enter into alliances to develop a strategic response to competitors

PTS:   1

     5.   Describe the different types of strategic alliances:

ANS: 

·
Joint ventures – two or more firms combine equity to form a third entity
·
Franchise agreement – a contract between a parent and franchisee to sell a given product or conduct of business under the parents trademark
·
Consortia – several organizations joining together to share expertise and funding for developing, gathering and distributing new knowledge
·
Licensing – a firm agrees to pay a firm for the right to either manufacture or sell a product

PTS:   1

     6.   What are the critical questions for partners entering a strategic alliance?

ANS: 

·
do we have clear goals
·
what is each party responsible for
·
will each party promise to develop solutions to problems
·
will member promise to meet goals of alliance
·
who is responsible if solutions fail
·
what are conditions for dissolution of alliance
·
how will disagreements be solved

PTS:   1

     7.   Discuss the major mistakes to avoid in a merger or acquisition.

ANS: 

·
not enough study of existing systems
·
over emphasis on needs of larger or stronger party
·
time table for blending is unreasonable
·
insufficient resources
·
managers focus on making deal rather than making it work
·
over emphasis on must be together on all things

PTS:   1