Strategic Management: Concepts and Cases, 5e (Dyer) Chapter 1 What Is Business Strategy? 1) The origin of strategy comes from the role of a(n) ________. Great individuals in this role provide ________. A) architect of the greatest buildings in the world; a good goal B) architect of the greatest buildings in the world; high level orchestration and vision C) general in a war; a good goal D) general in a war; high level orchestration and vision Answer: D Diff: 1 Section Reference: 1: What Is Business Strategy? Learning Objective: 1: Define business strategy, including the importance of competitive advantage, the four choices that are critical to strategy formulation, and the strategic management process. Bloom code: Knowledge Standard 1: AACSB || Analytic 2) ________ is defined as a company's plan to create and capture value in a marketplace. A) Business strategy B) Competitive advantage C) Infrastructure process D) Market value Answer: A Diff: 1 Section Reference: 1: What Is Business Strategy? Learning Objective: 1: Define business strategy, including the importance of competitive advantage, the four choices that are critical to strategy formulation, and the strategic management process. Bloom code: Knowledge Standard 1: AACSB || Analytic 3) ________ is the difference between a customer's willingness to pay for a product and the firm's total costs to provide the product. A) Advantage B) Cost C) Process D) Value Answer: D Diff: 1 Section Reference: 1: What Is Business Strategy? Learning Objective: 1: Define business strategy, including the importance of competitive advantage, the four choices that are critical to strategy formulation, and the strategic management process. Bloom code: Knowledge Standard 1: AACSB || Analytic 1
4) ________ can be best defined as when an organization generates and captures more value compared to its rivals. A) Client advantage B) Competitive advantage C) Employer advantage D) Unique value Answer: B Diff: 1 Section Reference: 1: What Is Business Strategy? Learning Objective: 1: Define business strategy, including the importance of competitive advantage, the four choices that are critical to strategy formulation, and the strategic management process. Bloom code: Knowledge Standard 1: AACSB || Analytic 5) Firms that capture more value than competitors generate ________. A) higher costs B) higher profits C) lower assets D) lower market value Answer: B Diff: 1 Section Reference: 1: What Is Business Strategy? Learning Objective: 1: Define business strategy, including the importance of competitive advantage, the four choices that are critical to strategy formulation, and the strategic management process. Bloom code: Knowledge Standard 1: AACSB || Analytic 6) Gems Corp. is a leading jewelry brand that finds it hard to make as much profit as its competitors. To overcome this, the employees of Gems Corp. decide to work harder to provide unique value to customers and increase the sales of the company. After a year, it makes more profits than its competitors. This scenario best illustrates ________. A) client advantage B) internal analysis C) external analysis D) competitive advantage Answer: D Diff: 3 Section Reference: 1: What Is Business Strategy? Learning Objective: 1: Define business strategy, including the importance of competitive advantage, the four choices that are critical to strategy formulation, and the strategic management process. Bloom code: Application Standard 1: AACSB || Analytic
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7) The industry and geographic area that a company competes in, is referred to as its ________. A) niche B) business C) segment D) market Answer: D Diff: 1 Section Reference: 1: What Is Business Strategy? Learning Objective: 1: Define business strategy, including the importance of competitive advantage, the four choices that are critical to strategy formulation, and the strategic management process. Bloom code: Knowledge Standard 1: AACSB || Analytic 8) Adia and Ali are two business partners who want to set up a company that sells imported sports gear and equipment. To make sure that the company makes and retains profit, they must choose an area that is close to where their products have the highest demand. This area should allow them consistently to make profit. In this scenario, Adia and Ali are looking for a ________. A) market B) strategy C) cost advantage D) mission Answer: A Diff: 3 Section Reference: 1: What Is Business Strategy? Learning Objective: 1: Define business strategy, including the importance of competitive advantage, the four choices that are critical to strategy formulation, and the strategic management process. Bloom code: Application Standard 1: AACSB || Analytic 9) ________ can be best defined as the reason a firm wins with customers or the value proposition it offers to customers, such as a low-cost advantage or differentiation advantage. A) Switching costs B) Unique value C) Complementary products D) SWOT analysis Answer: B Diff: 1 Section Reference: 1: What Is Business Strategy? Learning Objective: 1: Define business strategy, including the importance of competitive advantage, the four choices that are critical to strategy formulation, and the strategic management process. Bloom code: Knowledge Standard 1: AACSB || Analytic 3
10) The employees of Flamingo Inc., a greeting card company, focus on providing unmatched customer satisfaction. Unlike its competitors, the employees of Flamingo take the time to listen to the needs of individual customers and design custom-made cards upon request. The customers of Flamingo state that the company provides a large variety of affordable products to choose from. The company has won many awards for providing complete customer satisfaction. In this scenario, which of the following does Flamingo Inc. provide to its customers? A) Backward integration B) Switching costs C) Complementary products D) Unique value Answer: D Diff: 3 Section Reference: 1: What Is Business Strategy? Learning Objective: 1: Define business strategy, including the importance of competitive advantage, the four choices that are critical to strategy formulation, and the strategic management process. Bloom code: Application Standard 1: AACSB || Analytic 11) Which of the following is NOT a way strategists can typically increase a customer's willingness to pay? A) Improving the features or quality of the product B) Increasing the investment in equipment or physical assets C) Providing a complementary product or service D) Widespread adoption of the product Answer: B Diff: 1 Section Reference: 1: What Is Business Strategy? Learning Objective: 1: Define business strategy, including the importance of competitive advantage, the four choices that are critical to strategy formulation, and the strategic management process. Bloom code: Knowledge Standard 1: AACSB || Analytic
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12) Returns in excess of what an investor expects from other investments with a similar amount of risk are referred to as ________. A) unique value B) complimentary value C) above-average profits D) above-average losses Answer: C Diff: 1 Section Reference: 1: What Is Business Strategy? Learning Objective: 1: Define business strategy, including the importance of competitive advantage, the four choices that are critical to strategy formulation, and the strategic management process. Bloom code: Knowledge Standard 1: AACSB || Analytic 13) The Mykari Publishing House invested in buying high-end machinery that allowed its newspapers to be printed at twice the speed of average printing machines. The executives of the company stated that this would increase the company's profit margin by 12% as opposed to the usual 7 to 8% that it makes annually. When the finances of the company were tallied this year, it was found that the profits increased to about 19%. This scenario best illustrates ________. A) return of equity B) above-average profits C) complimentary value D) unique value Answer: B Diff: 3 Section Reference: 1: What Is Business Strategy? Learning Objective: 1: Define business strategy, including the importance of competitive advantage, the four choices that are critical to strategy formulation, and the strategic management process. Bloom code: Application Standard 1: AACSB || Analytic 14) Which of the following is true of competitive advantage? A) It requires a company to consistently outperform its rivals in generating value and realizing above-average profits. B) It should be avoided by organizations that are not trying to make a profit. C) It is usually achieved by firms that provide general as well as imitable products. D) It can be measured by using only tangible outcomes. Answer: A Diff: 2 Section Reference: 1: What Is Business Strategy? Learning Objective: 1: Define business strategy, including the importance of competitive advantage, the four choices that are critical to strategy formulation, and the strategic management process. Bloom code: Comprehension Standard 1: AACSB || Analytic 5
15) Which of the following statements about risks is true? A) Investing in a utility company that supplies power to customers, who have few alternative sources of power, can be very risky. B) Investors take up risks every time when they are not sure if their investments will be a gain or a loss. C) Investing in a stable firm is generally considered very risky even if it has a long history of profitability. D) Investors face less risk when they put their money into start-up companies that try to launch products based on new technologies. Answer: B Diff: 2 Section Reference: 1: What Is Business Strategy? Learning Objective: 1: Define business strategy, including the importance of competitive advantage, the four choices that are critical to strategy formulation, and the strategic management process. Bloom code: Comprehension Standard 1: AACSB || Analytic 16) Which of the following is the main purpose of a strategic management process? A) Ensuring that all employees have managers and supervisors to lead their teams B) Creating an organization that functions systematically according to its vision, mission, and goals C) Creating a high-level plan that can be implemented without fierce competition and undue risk D) Specifying a high-level plan that an organization will employ to create and capture value Answer: D Diff: 2 Section Reference: 1: What Is Business Strategy? Learning Objective: 1: Define business strategy, including the importance of competitive advantage, the four choices that are critical to strategy formulation, and the strategic management process. Bloom code: Comprehension Standard 1: AACSB || Analytic
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17) The management of Neptune Inc. creates a definite plan of action that will surely create profits for the company. It allocates and sectionalizes its machinery and personnel. The main office is moved to a prime location that helps attract customers and facilitates competitive development. This plan of action helps Neptune Inc. retain its competitive advantage and has also grow as a company. Which of the following terms does this scenario best illustrate? A) Strategic tools B) Strategic management process C) Functional strategy D) Business unit strategy Answer: B Diff: 3 Section Reference: 1: What Is Business Strategy? Learning Objective: 1: Define business strategy, including the importance of competitive advantage, the four choices that are critical to strategy formulation, and the strategic management process. Bloom code: Application Standard 1: AACSB || Analytic 18) Which of the following statements is true of external analysis? A) It focuses on the weaknesses a company must overcome and the threats that a company might come across. B) It studies the factors that influence an organization's appeal and environment. C) It focuses on the factors that influence employees of an organization to leave. D) It analyzes a firm's resources and capabilities to assess how effectively it is able to deliver unique value. Answer: B Diff: 2 Section Reference: 1: What Is Business Strategy? Learning Objective: 1: Define business strategy, including the importance of competitive advantage, the four choices that are critical to strategy formulation, and the strategic management process. Bloom code: Comprehension Standard 1: AACSB || Analytic
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19) The Board of Directors of Miranay Corp. assesses and evaluates the firm's industry structure. To track the factors that could affect Miranay's performance, it tries to scan the industry's positive and negative trends. The Board of Directors of Miranay Corp. is involved in a(n) ________. A) financial analysis B) internal analysis C) external analysis D) profit analysis Answer: C Diff: 3 Section Reference: 1: What Is Business Strategy? Learning Objective: 1: Define business strategy, including the importance of competitive advantage, the four choices that are critical to strategy formulation, and the strategic management process. Bloom code: Application Standard 1: AACSB || Analytic 20) Which of the following statements best describes the term internal analysis? A) It studies the infrastructure of a company to gauge the number of employees it can recruit. B) It examines a company's resources and capabilities to configure a firm's ability to deliver unique value. C) It examines the emotions of a firm's employees to identify their weaknesses. D) It examines the efficiency of employees through the help of standardized tests and group discussions. Answer: B Diff: 2 Section Reference: 1: What Is Business Strategy? Learning Objective: 1: Define business strategy, including the importance of competitive advantage, the four choices that are critical to strategy formulation, and the strategic management process. Bloom code: Comprehension Standard 1: AACSB || Analytic
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21) Ravi, a supervisor at Autumn Inc., notices that the company has been successful in outperforming its competitors in the industry and declares that the company has achieved competitive advantage. Yolanda, a manager at Autumn Inc., argues that this is not true. Which of the following strengthens Ravi's claim? A) Autumn Inc. decides to outscore a superior company in the next quarter. B) Autumn Inc. has been consistently outperforming its rivals in generating above-average profits. C) Autumn Inc. has reduced the amount it pays to suppliers. D) Autumn Inc.'s strategy can be pursued by competitors as it is not too costly. Answer: B Diff: 3 Section Reference: 1: What Is Business Strategy? Learning Objective: 1: Define business strategy, including the importance of competitive advantage, the four choices that are critical to strategy formulation, and the strategic management process. Bloom code: Analysis Standard 1: AACSB || Reflective Thinking 22) The board of directors of White Corp. meets to analyze the company's competencies and scope for improvement. It also examines whether White Corp. has been able to meet its potential customers' requirements. The board of directors of White Corp. is involved in a(n) ________. A) external analysis B) financial analysis C) profit analysis D) internal analysis Answer: D Diff: 3 Section Reference: 1: What Is Business Strategy? Learning Objective: 1: Define business strategy, including the importance of competitive advantage, the four choices that are critical to strategy formulation, and the strategic management process. Bloom code: Application Standard 1: AACSB || Analytic
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23) If a company is considering what industry, customer segment, or location is most attractive as a business area, this is a ________ strategic choice in strategic management. A) Markets to Pursue B) Resources and Capabilities to Develop C) Sustaining Advantage D) Unique Value to Offer Answer: A Diff: 1 Section Reference: 1: What Is Business Strategy? Learning Objective: 1: Define business strategy, including the importance of competitive advantage, the four choices that are critical to strategy formulation, and the strategic management process. Bloom code: Knowledge Standard 1: AACSB || Analytic 24) If a company is debating a cost advantage versus a differentiation strategy as a way to outperform competitors, this is a ________ strategic choice in strategic management. A) Markets to Pursue B) Resources and Capabilities to Develop C) Sustaining Advantage D) Unique Value to Offer Answer: D Diff: 1 Section Reference: 1: What Is Business Strategy? Learning Objective: 1: Define business strategy, including the importance of competitive advantage, the four choices that are critical to strategy formulation, and the strategic management process. Bloom code: Knowledge Standard 1: AACSB || Analytic 25) If a company is considering what assets the firm should accumulate over time or the processes it should develop to achieve specific goals, this is a ________ strategic choice in strategic management. A) Markets to Pursue B) Resources and Capabilities to Develop C) Sustaining Advantage D) Unique Value to Offer Answer: B Diff: 1 Section Reference: 1: What Is Business Strategy? Learning Objective: 1: Define business strategy, including the importance of competitive advantage, the four choices that are critical to strategy formulation, and the strategic management process. Bloom code: Knowledge Standard 1: AACSB || Analytic
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26) If a company is creating barriers to imitation as a way to prevent other companies from offering the same value, this is a ________ strategic choice in strategic management. A) Markets to Pursue B) Resources and Capabilities to Develop C) Sustaining Advantage D) Unique Value to Offer Answer: C Diff: 1 Section Reference: 1: What Is Business Strategy? Learning Objective: 1: Define business strategy, including the importance of competitive advantage, the four choices that are critical to strategy formulation, and the strategic management process. Bloom code: Knowledge Standard 1: AACSB || Analytic 27) Sweetmeats Inc., a deli, produces its own grains, such as corn, wheat, rice, and oats. The employees create different types of breads without having to buy the grains from other sources. This has helped them sell their bread items to customers at much lower prices than other neighboring delis. This scenario best illustrates a(n) ________. A) complementary service B) emergent strategy C) international process D) cost advantage Answer: D Diff: 3 Section Reference: 1: What Is Business Strategy? Learning Objective: 1: Define business strategy, including the importance of competitive advantage, the four choices that are critical to strategy formulation, and the strategic management process. Bloom code: Application Standard 1: AACSB || Analytic
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28) Fashion Mart Corp., a clothing company, offers the best quality material made using the finest threads and advanced textile machinery. It offers an extended product guarantee to its customers, something that its competitors have found difficult to achieve. This guarantee claims that the clothes that Fashion Mart creates will not wear out even after 200 washes. This guarantee has helped Fashion Mart to retain its loyal customer base and to frequently get new customers. This scenario best illustrates ________. A) forward integration B) backward integration C) a differentiation strategy D) a cost advantage Answer: C Diff: 3 Section Reference: 1: What Is Business Strategy? Learning Objective: 1: Define business strategy, including the importance of competitive advantage, the four choices that are critical to strategy formulation, and the strategic management process. Bloom code: Application Standard 1: AACSB || Analytic 29) The owners of Carpo Inc., a watch company, also own a steel company and a leather goods manufacturing company. This relieves them from expenses that they would have to bear, if they had to rely on outside sources for the raw materials needed to make their watches. This enables the company to produce watches at a much lesser cost than other companies in the industry. This scenario best illustrates a ________. A) complementary service B) emergent strategy C) unique value D) cost advantage Answer: D Diff: 3 Section Reference: 1: What Is Business Strategy? Learning Objective: 1: Define business strategy, including the importance of competitive advantage, the four choices that are critical to strategy formulation, and the strategic management process. Bloom code: Application Standard 1: AACSB || Analytic
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30) Which of the following is an example of a resource? A) An overdue B) A mission C) A patent D) A goal Answer: C Diff: 1 Section Reference: 1: What Is Business Strategy? Learning Objective: 1: Define business strategy, including the importance of competitive advantage, the four choices that are critical to strategy formulation, and the strategic management process. Bloom code: Knowledge Standard 1: AACSB || Analytic 31) Lavender Furniture established itself in 1965 as a small firm. It was situated on a small stretch of land located miles away from the town. Over the years, due to the high quality of its products, it acquires enough profits to own multiple assets, such as a bigger plot and machinery, recruit employees and establish itself as a brand. Which of the following is an element of the strategic management process that Lavender Furniture has acquired? A) Values B) Resources C) Capabilities D) Fame Answer: B Diff: 3 Section Reference: 1: What Is Business Strategy? Learning Objective: 1: Define business strategy, including the importance of competitive advantage, the four choices that are critical to strategy formulation, and the strategic management process. Bloom code: Application Standard 1: AACSB || Analytic
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32) Appetit Corp. is a famous deli in the metropolitan city of Atika. The company became popular because of its consistency in the quality of bread it provided and its creativity in adding unique elements to create different flavors. One of Appetit's products is an infusion of peanut butter and barbeque sauce filled in a bun. Appetit Corp. also engages its customers in contests that ask them to make their own unique variety of bread, which later features among the company's products with the winner's name. All these factors have helped to create unique value that keeps its customers coming back for more. This scenario best illustrates Appetit Corp.'s ________. A) capabilities B) substitutes C) values D) resources Answer: A Diff: 3 Section Reference: 1: What Is Business Strategy? Learning Objective: 1: Define business strategy, including the importance of competitive advantage, the four choices that are critical to strategy formulation, and the strategic management process. Bloom code: Application Standard 1: AACSB || Analytic 33) The goal of a strategic business plan is to ________. A) create competitive advantage B) create a monopolistic market C) improve employee morale D) drive competitors out of business Answer: A Diff: 2 Section Reference: 1: What Is Business Strategy? Learning Objective: 1: Define business strategy, including the importance of competitive advantage, the four choices that are critical to strategy formulation, and the strategic management process. Bloom code: Comprehension Standard 1: AACSB || Analytic
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34) Identify the first decision a company has to make as part of its business strategy. A) Choose a market in which to compete. B) Choose a competitor to compete with. C) Decide what unique value to offer to customers. D) Decide ways to maintain a competitive advantage. Answer: A Diff: 2 Section Reference: 1: What Is Business Strategy? Learning Objective: 1: Define business strategy, including the importance of competitive advantage, the four choices that are critical to strategy formulation, and the strategic management process. Bloom code: Comprehension Standard 1: AACSB || Analytic 35) Delivering unique value requires ________. A) improving employee satisfaction B) investing in a stable firm with a long history of profitability, such as a utility company that supplies power to customers with few choices C) developing resources and capabilities that allow a company to perform activities better than competitors D) producing more products than rivals Answer: C Diff: 2 Section Reference: 1: What Is Business Strategy? Learning Objective: 1: Define business strategy, including the importance of competitive advantage, the four choices that are critical to strategy formulation, and the strategic management process. Bloom code: Comprehension Standard 1: AACSB || Analytic 36) In the context of a firm, resources refer to the ________. A) assets that the firm accumulates over time, such as plants, equipment, land, brands, patents, cash, and people B) processes or recipes the firm develops to coordinate human activity to achieve specific goals C) investor's uncertainty about the profits or losses that will result from a particular investment D) advantages that firms have over their competitors in the activities associated with producing a product or service Answer: A Diff: 2 Section Reference: 1: What Is Business Strategy? Learning Objective: 1: Define business strategy, including the importance of competitive advantage, the four choices that are critical to strategy formulation, and the strategic management process. Bloom code: Comprehension Standard 1: AACSB || Analytic
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37) In the context of a firm, capabilities refers to ________. A) processes the firm develops to coordinate human activity to achieve specific goals B) assets that the firm accumulates over time, such as plants, equipment, and people C) its focus on offering features, quality, convenience, or image that customers cannot get from competitors D) a company's primary purpose that often specifies the business in which the firm intends to compete Answer: A Diff: 2 Section Reference: 1: What Is Business Strategy? Learning Objective: 1: Define business strategy, including the importance of competitive advantage, the four choices that are critical to strategy formulation, and the strategic management process. Bloom code: Comprehension Standard 1: AACSB || Analytic 38) A company's ________ outlines the company's primary purpose and often specifies the business(es) in which the firm intends to compete or the customers it intends to serve. A) mission B) price sensitivity C) segmentation analysis D) SWOT analysis Answer: A Diff: 1 Section Reference: 2: What Information and Analysis Guides Strategy Formulation? Learning Objective: 2: Summarize the information that the company's mission and thorough external and internal analysis provide to guide strategy. Bloom code: Knowledge Standard 1: AACSB || Analytic 39) ________ can be used interchangeably with mission; a mission ________ need to be formally stated at the start of a business. A) Purpose or vision; does B) Purpose or vision; does not C) Strategy or processes; does D) Strategy or processes; does not Answer: B Diff: 1 Section Reference: 2: What Information and Analysis Guides Strategy Formulation? Learning Objective: 2: Summarize the information that the company's mission and thorough external and internal analysis provide to guide strategy. Bloom code: Knowledge Standard 1: AACSB || Analytic
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40) A group of four people wants to start an office supply chain. They realize that if their company has to function well, they must set the primary aim for which the company has entered that particular business. This aim will help the company function in an organized manner and provide the staff with a focus to meet their goals. Which of the following does this scenario depict? A) Capabilities B) Resources C) Mission D) Integration Answer: C Diff: 3 Section Reference: 2: What Information and Analysis Guides Strategy Formulation? Learning Objective: 2: Summarize the information that the company's mission and thorough external and internal analysis provide to guide strategy. Bloom code: Application Standard 1: AACSB || Analytic 41) Katherine is the CEO of a car dealership company called Red Cars. When looking for new investors for the company, she usually says that Red Cars wants to "Be the best automotive retailer in the eyes of its customers, employees, and shareholders." Which of the following does this statement best reflect? A) Red Cars' mission B) Red Cars' strategy C) Red Cars' capabilities D) Red Cars' resources Answer: A Diff: 3 Section Reference: 2: What Information and Analysis Guides Strategy Formulation? Learning Objective: 2: Summarize the information that the company's mission and thorough external and internal analysis provide to guide strategy. Bloom code: Application Standard 1: AACSB || Analytic 42) A ________ is the combined and summarized results of external analysis with internal analysis of the firm. A) mission B) price sensitivity C) segmentation analysis D) SWOT analysis Answer: D Diff: 1 Section Reference: 2: What Information and Analysis Guides Strategy Formulation? Learning Objective: 2: Summarize the information that the company's mission and thorough external and internal analysis provide to guide strategy. Bloom code: Knowledge Standard 1: AACSB || Analytic 17
43) The management of Earth Network Inc., a cell phone company, wants to conduct an overall study of the company. The top officials want to identify Earth Network's competencies, limitations that the company needs to improve on, areas of growth, as well as the areas that the company should completely avoid. The managers feel that this study will help them advance as an organization. This study to be conducted by the management of Earth Network Inc. can be best categorized as an example of a ________. A) trend analysis B) growth-share matrix C) SWOT analysis D) PEST analysis Answer: C Diff: 3 Section Reference: 2: What Information and Analysis Guides Strategy Formulation? Learning Objective: 2: Summarize the information that the company's mission and thorough external and internal analysis provide to guide strategy. Bloom code: Application Standard 1: AACSB || Analytic 44) ________ refers to customers' willingness to pay as identified in an ________ analysis. A) Price sensitivity; external B) Price sensitivity; internal C) A segmentation analysis; external D) A segmentation analysis; internal Answer: A Diff: 1 Section Reference: 2: What Information and Analysis Guides Strategy Formulation? Learning Objective: 2: Summarize the information that the company's mission and thorough external and internal analysis provide to guide strategy. Bloom code: Knowledge Standard 1: AACSB || Analytic 45) MindaX is a beverage manufacturing company. Despite its various promotional efforts, the company finds it difficult to get more customers. Its market analysts later determine that its price is the reason. They are sold at $10 per liter, which makes it difficult for customers to buy this beverage frequently, so, they opt for other lower priced sodas instead. This scenario best illustrates ________. A) price reduction B) price increase C) price allocation D) price sensitivity Answer: D Diff: 3 Section Reference: 2: What Information and Analysis Guides Strategy Formulation? Learning Objective: 2: Summarize the information that the company's mission and thorough external and internal analysis provide to guide strategy. Bloom code: Application Standard 1: AACSB || Analytic 18
46) ________ refers to specific groups of customers who all have similar needs as identified in an ________ analysis. A) Price sensitivity; external B) Price sensitivity; internal C) A segmentation analysis; external D) A segmentation analysis; internal Answer: C Diff: 1 Section Reference: 2: What Information and Analysis Guides Strategy Formulation? Learning Objective: 2: Summarize the information that the company's mission and thorough external and internal analysis provide to guide strategy. Bloom code: Knowledge Standard 1: AACSB || Analytic 47) Summer Inc., a departmental store, wants to provide better service to its customers. This includes providing expertise in each type of product and brand. To accomplish this, the general manager of the store suggests that they should begin by identifying the different types of customers. By classifying customers, into various groups, such as mothers, athletes, tech-savvy customers and so on, the store's customer care personnel can specialize on detailed product information. With the help of this classification, the store provides better service to each customer by offering more brands to choose from. This scenario best illustrates ________. A) segmentation analysis B) group allocation C) group dynamics D) division dynamics Answer: A Diff: 3 Section Reference: 2: What Information and Analysis Guides Strategy Formulation? Learning Objective: 2: Summarize the information that the company's mission and thorough external and internal analysis provide to guide strategy. Bloom code: Application Standard 1: AACSB || Analytic
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48) ________ explains why some firms outperform others within the same industry with the assumption that each company is a collection of competencies that are deployed to deliver unique value. A) Complementary products or services B) Resource-based view of firm C) Attractiveness of an industry D) Segmentation analysis Answer: B Diff: 1 Section Reference: 2: What Information and Analysis Guides Strategy Formulation? Learning Objective: 2: Summarize the information that the company's mission and thorough external and internal analysis provide to guide strategy. Bloom code: Knowledge Standard 1: AACSB || Analytic 49) The managers at Spring Hotels want to find out how their competitor, Crimson Valley Hotels, consistently outdoes them. Spring Hotels have the same facilities and equipment as Crimson Valley Hotels, but each month its efforts to reach the benchmark set by Crimson Valley Hotels fails. This is because Crimson Valley has elements such as great location, beautiful architectural design, and customer-friendly employees that create an edge over other companies in its industry. Which of the following does this scenario exemplify? A) Complementary products or services B) Resource-based view of firm C) Attractiveness of an industry D) Segmentation analysis Answer: B Diff: 3 Section Reference: 2: What Information and Analysis Guides Strategy Formulation? Learning Objective: 2: Summarize the information that the company's mission and thorough external and internal analysis provide to guide strategy. Bloom code: Application Standard 1: AACSB || Analytic 50) Identify a true statement about the role of external analysis in creating a business strategy. A) It involves standardized surveys to gauge employee satisfaction. B) It involves an examination of the competition and the forces that shape industry competition and profitability. C) It involves the examination of a company's set of resources and capabilities that can be deployed to deliver unique value to customers. D) It involves the study of a firm's operational practices to improve efficiency. Answer: B Diff: 2 Section Reference: 2: What Information and Analysis Guides Strategy Formulation? Learning Objective: 2: Summarize the information that the company's mission and thorough external and internal analysis provide to guide strategy. Bloom code: Comprehension Standard 1: AACSB || Analytic 20
51) Which of the following statements is true of the resource-based view of a firm? A) It analyzes the factors that influence an organization's appeal and environment. B) It was developed to make an inventory of the resources available in a company. C) It was developed to explain why some firms outperform other firms in the same industry. D) It examines the efficiency of employees through standardized tests and group discussions. Answer: C Diff: 2 Section Reference: 2: What Information and Analysis Guides Strategy Formulation? Learning Objective: 2: Summarize the information that the company's mission and thorough external and internal analysis provide to guide strategy. Bloom code: Comprehension Standard 1: AACSB || Analytic 52) ________ strategy refers to decisions that are made by senior executives about where to compete in terms of industries and markets. A) Business unit B) Corporate C) Functional D) Segmentation Answer: B Diff: 1 Section Reference: 3: How Are Strategies Formulated? Learning Objective: 3: Discuss how strategies are formulated and implemented in order to achieve objectives. Bloom code: Knowledge Standard 1: AACSB || Analytic 53) The executives at Purple Inc. hold a meeting where they decide the best way to showcase their products. They have a brainstorming session to identify the best geographical areas to conduct business that will bring them maximum profits. They also identify their competitors and decide whether they would be able to withstand top companies selling similar products. The executives at Purple Inc. are discussing a(n) ________ strategy. A) emergent B) functional C) business unit D) corporate Answer: D Diff: 3 Section Reference: 3: How Are Strategies Formulated? Learning Objective: 3: Discuss how strategies are formulated and implemented in order to achieve objectives. Bloom code: Application Standard 1: AACSB || Analytic
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54) SunLite Corp. runs fitness centers which are owned by the parent company Cyan Inc. Ryan, the manager of Cyan Inc., needs to decide on how to overcome competition by other fitness centers. He finally decides to bring in advanced facilities, such as imported gym equipment, to give faster results and keep SunLite centers open for patrons 24×7. Ryan feels that this will allow the company to gain more profits. This scenario best illustrates a ________. A) business unit strategy B) functional strategy C) emergent strategy D) strategy vehicle Answer: A Diff: 3 Section Reference: 3: How Are Strategies Formulated? Learning Objective: 3: Discuss how strategies are formulated and implemented in order to achieve objectives. Bloom code: Application Standard 1: AACSB || Analytic 55) Sheng, the CEO of Mirrorz Inc., comes up with a plan to implement business unit strategies successfully. He decides to do this by making technical advancements in the manufacturing process of the products and developing a solid financial system run by an efficient team. He also plans to establish a marketing team that would sell to people who would not normally buy the product. The ultimate mission of the company would be to provide a customer friendly environment. The plan initiated by Sheng can be best categorized as a(n) ________. A) segmentation analysis B) emergent strategy C) functional strategy D) business unit strategy Answer: C Diff: 3 Section Reference: 3: How Are Strategies Formulated? Learning Objective: 3: Discuss how strategies are formulated and implemented in order to achieve objectives. Bloom code: Application Standard 1: AACSB || Analytic
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87) What are the disadvantages to outsourcing? Answer: There are two major dangers of outsourcing: a loss of capabilities (particularly the capability to innovate) and a lack of control over critical assets or activities. In addition to leading to a loss of innovation capabilities, outsourcing can lead to a loss of control as suppliers that provide key inputs gain bargaining power. Diff: 1 Section Reference: 5: Dangers of Outsourcing Learning Objective: 5: Discuss the actions a manager could take to prevent a subcontractor from becoming a competitor. Bloom code: Knowledge Standard 1: AACSB || Analytic
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Strategic Management: Concepts and Cases, 5e (Dyer) Chapter 8 Strategic Alliances 1) A ________ is a cooperative arrangement in which two or more firms combine their resources and capabilities to create new value. A) contractual alliance B) equity alliance C) joint venture D) strategic alliance Answer: D Diff: 1 Section Reference: 1: What Is a Strategic Alliance? Learning Objective: 1: Distinguish the conditions under which to use a strategic alliance, vertical integration, and an arm's-length supplier relationship. Bloom code: Knowledge Standard 1: AACSB || Analytic 2) Zeal Inc., a software firm, decides to enter the publishing industry. While it has the financial resources required to enter the new market, it lacks the expertise and technical knowledge required to establish itself in the new industry. So, Zeal Inc. enters into strategic alliance with Chrome Corp., a leading e-publisher. Which of the following is likely to be true in this case? A) Chrome is likely to lose its relational advantage through this alliance. B) Zeal and Chrome are likely to cooperate even at the stage of research and development. C) Zeal's vision is likely to contradict that of Chrome. D) Chrome is likely to provide its expertise only at the marketing stage. Answer: B Diff: 3 Section Reference: 1: What Is a Strategic Alliance? Learning Objective: 1: Distinguish the conditions under which to use a strategic alliance, vertical integration, and an arm's-length supplier relationship. Bloom code: Application Standard 1: AACSB || Analytic 3) Which of the following statements is true about strategic alliances? A) Strategic alliances exclude functions that are bought through bidding. B) In strategic alliances, the power to make decisions is always evenly distributed amidst the firms. C) In strategic alliances, companies may choose to cooperate at any stage along the value chain. D) Strategic alliances usually lead to one of the firms losing their relational advantage. Answer: C Diff: 2 Section Reference: 1: What Is a Strategic Alliance? Learning Objective: 1: Distinguish the conditions under which to use a strategic alliance, vertical integration, and an arm's-length supplier relationship. Bloom code: Comprehension Standard 1: AACSB || Analytic 1
4) Which of the following statements is true about firms that establish strategic alliances? A) Firms that collaborate at the sales stage are not considered strategic partners. B) Firms that produce different products cannot enter a strategic alliance. C) Firms can collaborate to improve their performance at any stage along the value chain. D) Firms often enter strategic alliances at the cost of losing their relational advantage. Answer: C Diff: 2 Section Reference: 1: What Is a Strategic Alliance? Learning Objective: 1: Distinguish the conditions under which to use a strategic alliance, vertical integration, and an arm's-length supplier relationship. Bloom code: Comprehension Standard 1: AACSB || Analytic 5) Drew's Cafe Inc. and Cuppa Corp., two local coffee chains, combine resources to enter the global market. They retain their individual ownership; however, they agree to share production facilities and manpower, and they also decide to market their products through combined promotional tools. The arrangement made by the two retail chains to combine resources and collaborate for a common objective refers to a ________. A) strategic alliance B) mass-customization strategy C) standardization venture D) product-differentiation strategy Answer: A Diff: 3 Section Reference: 1: What Is a Strategic Alliance? Learning Objective: 1: Distinguish the conditions under which to use a strategic alliance, vertical integration, and an arm's-length supplier relationship. Bloom code: Application Standard 1: AACSB || Analytic 6) In a ________, firms cooperate to create competitive advantage through their collaboration. A) cooperative strategy B) differentiation agreement C) equity relationship D) unequal partnership Answer: A Diff: 1 Section Reference: 1: What Is a Strategic Alliance? Learning Objective: 1: Distinguish the conditions under which to use a strategic alliance, vertical integration, and an arm's-length supplier relationship. Bloom code: Knowledge Standard 1: AACSB || Analytic
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7) In a ________, firms cooperate to create competitive advantage through their collaboration. A) differentiation agreement B) equity relationship C) relational advantage D) unequal partnership Answer: C Diff: 1 Section Reference: 1: What Is a Strategic Alliance? Learning Objective: 1: Distinguish the conditions under which to use a strategic alliance, vertical integration, and an arm's-length supplier relationship. Bloom code: Knowledge Standard 1: AACSB || Analytic 8) In a(n) ________, the buyer purchases an input with no obligation to have a long-term relationship with the supplier. A) arm's length relationship B) differentiation agreement C) equity relationship D) unequal partnership Answer: A Diff: 1 Section Reference: 1: What Is a Strategic Alliance? Learning Objective: 1: Distinguish the conditions under which to use a strategic alliance, vertical integration, and an arm's-length supplier relationship. Bloom code: Knowledge Standard 1: AACSB || Analytic 9) Which of the following statements is true about how an arm's-length relationship is used in strategic alliance? A) Firms cannot buy inputs from multiple sources using the arm's-length relationship. B) Firms typically use the arm's-length relationship between internal departments. C) Firms that use the arm's-length relationship acquire the production facilities of other firms. D) Firms use the arm's-length relationship to purchase inputs at the lowest price. Answer: D Diff: 2 Section Reference: 1: What Is a Strategic Alliance? Learning Objective: 1: Distinguish the conditions under which to use a strategic alliance, vertical integration, and an arm's-length supplier relationship. Bloom code: Comprehension Standard 1: AACSB || Analytic
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10) Identify the firm that is using an arm's-length relationship to establish a strategic alliance. A) Ochre Inc. manufactures all the components required for production within the firm. B) Sapphire Inc. acquires the production facility of Brick Corp. to enter a foreign market. C) Jade Corp. sends out a bid to suppliers for raw materials required for production. D) Leo Corp. forms a twenty-year contract with a wholesaler to sell its goods. Answer: C Diff: 3 Section Reference: 1: What Is a Strategic Alliance? Learning Objective: 1: Distinguish the conditions under which to use a strategic alliance, vertical integration, and an arm's-length supplier relationship. Bloom code: Application Standard 1: AACSB || Analytic 11) Timber Inc. enters an exclusive partnership to ally with Teal Corp. to enter a foreign market. Which of the following statements is likely to be true in this case? A) Timber and Teal are unlikely to receive inputs or activity from each other. B) Timber is likely to buy an activity from Teal using an arm's-length relationship. C) Timber is likely to send a bid to Teal along with other suppliers for the lowest price. D) Timber is likely to acquire an activity or input from Teal to create a new value. Answer: D Diff: 3 Section Reference: 1: What Is a Strategic Alliance? Learning Objective: 1: Distinguish the conditions under which to use a strategic alliance, vertical integration, and an arm's-length supplier relationship. Bloom code: Application Standard 1: AACSB || Analytic 12) Redwood Inc. has an arm's-length relationship with Blue Ink Corp. Which of the following is likely to be true in this case? A) Redwood is likely to conduct all functions within the firm. B) Redwood is likely to choose another firm over Blue Ink for lower costs. C) Blue Ink is unlikely to have made the deal through a bid. D) Blue Ink's manufacturing units are likely to have been acquired by Redwood. Answer: B Diff: 3 Section Reference: 1: What Is a Strategic Alliance? Learning Objective: 1: Distinguish the conditions under which to use a strategic alliance, vertical integration, and an arm's-length supplier relationship. Bloom code: Application Standard 1: AACSB || Analytic
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13) Victor Corp., a high-end mobile manufacturer that targets businesspeople, decides to increase its customer base. It forms a strategic alliance with Gray Inc. to produce new instruments designed to attract students. Gray helps design products that change how Victor is perceived by young customers. Which of the following is the primary objective of this strategic alliance? A) To source inputs or activities that create more productivity B) To source inputs or activities that influence the brand C) To source inputs or activities that reduce the total costs D) To source inputs or activities that increase productivity of existing products Answer: B Diff: 3 Section Reference: 1: What Is a Strategic Alliance? Learning Objective: 1: Distinguish the conditions under which to use a strategic alliance, vertical integration, and an arm's-length supplier relationship. Bloom code: Application Standard 1: AACSB || Analytic 14) An air conditioner manufacturer, Hues Corp., decides to form a strategic alliance with a firm to source components that make up the highest percentage of total costs. Which of the following suppliers is it most likely to choose as a partner? A) Jades Inc., which manufactures the packages required for Hues Corp. B) Black Corp., which prints the Hues Corp. logo on the air conditioners C) Fin Inc. which produces the compressors used in Hues Corp. air conditioners D) Den Corp., which produces the designer vents for Hues Corp. Answer: C Diff: 3 Section Reference: 1: What Is a Strategic Alliance? Learning Objective: 1: Distinguish the conditions under which to use a strategic alliance, vertical integration, and an arm's-length supplier relationship. Bloom code: Application Standard 1: AACSB || Analytic
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15) Which of the following statements best describes a strategic alliance? A) It is a cooperative arrangement in which two or more firms combine their resources and capabilities to create new value. B) It is an arrangement where a firm purchases an input from another firm with no obligation to have a long-term relationship with the other firm. C) It is an unofficial arrangement in which two large firms cooperate unofficially to control production and prices within a certain market segment. D) It is a cooperative arrangement where a firm which is on the verge of shutting down sells all of its assets to another firm. Answer: A Diff: 2 Section Reference: 1: What Is a Strategic Alliance? Learning Objective: 1: Distinguish the conditions under which to use a strategic alliance, vertical integration, and an arm's-length supplier relationship. Bloom code: Comprehension Standard 1: AACSB || Analytic 16) The most common way to distinguish one type of alliance from another is by the ________. A) motive behind the alliance B) mechanism used to govern the alliance C) products of the firms involved in the alliance D) measure of profit each firm derives out of the alliance Answer: B Diff: 2 Section Reference: 1: What Is a Strategic Alliance? Learning Objective: 1: Distinguish the conditions under which to use a strategic alliance, vertical integration, and an arm's-length supplier relationship. Bloom code: Comprehension Standard 1: AACSB || Analytic 17) Which of the following inputs qualifies as "strategic" inputs that merit forming an alliance relationship? A) High value inputs that make up a high percentage of one's total costs B) Inputs that do not differentiate one's product in the minds of customers C) Activities that require a lot of unskilled manpower D) Activities that require no coordination to achieve the desired quality Answer: A Diff: 2 Section Reference: 1: What Is a Strategic Alliance? Learning Objective: 1: Distinguish the conditions under which to use a strategic alliance, vertical integration, and an arm's-length supplier relationship. Bloom code: Comprehension Standard 1: AACSB || Analytic
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18) A ________ is a cooperation between firms that is managed directly through signed documents without an independent firm being created. A) contractual alliance B) equity alliance C) joint venture D) strategic alliance Answer: A Diff: 1 Section Reference: 1: What Is a Strategic Alliance? Learning Objective: 1: Distinguish the conditions under which to use a strategic alliance, vertical integration, and an arm's-length supplier relationship. Bloom code: Knowledge Standard 1: AACSB || Analytic 19) A ________ is a cooperation between firms that is managed directly through signed documents without an independent firm being created. A) equity alliance B) joint venture C) nonequity alliance D) strategic alliance Answer: C Diff: 1 Section Reference: 1: What Is a Strategic Alliance? Learning Objective: 1: Distinguish the conditions under which to use a strategic alliance, vertical integration, and an arm's-length supplier relationship. Bloom code: Knowledge Standard 1: AACSB || Analytic 20) Crimson Corp., a painting unit, collaborates with a car manufacturing company. They sign a contract that specifies the tasks of each party in alliance. Which of the following is being exemplified in this scenario? A) A nonequity alliance B) An equity alliance C) A coordination alliance D) A vertical alliance Answer: A Diff: 3 Section Reference: 2: Types of Alliances Learning Objective: 2: Explain the different types of strategic alliances, how they are governed and the conditions under which each type is preferred. Bloom code: Application Standard 1: AACSB || Analytic
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21) Marcel, the CEO of an automobile company, considers extending his research and development facility by collaborating with a multinational company. He believes that a contractual alliance will be ideal for this collaboration, but other senior members of the management oppose a contractual alliance. Which of the following statements is likely to strengthen Marcel's argument? A) The relationship between the two firms is likely to be supported by equity investments. B) The two firms are likely to seek a joint venture through the collaboration. C) Cooperation between the two firms is not likely to depend on cross-equity holdings. D) Interdependence between the two firms is not likely to be low. Answer: C Diff: 3 Section Reference: 2: Types of Alliances Learning Objective: 2: Explain the different types of strategic alliances, how they are governed and the conditions under which each type is preferred. Bloom code: Analysis Standard 1: AACSB || Reflective Thinking 22) If one firm receives a license or permission to use a resource from another firm in return for a percentage of the revenues or profits, this is called a(n) ________ agreement. A) distribution B) input C) licensing D) supply Answer: C Diff: 1 Section Reference: 2: Types of Alliances Learning Objective: 2: Explain the different types of strategic alliances, how they are governed and the conditions under which each type is preferred. Bloom code: Knowledge Standard 1: AACSB || Analytic 23) If a vendor agrees to develop certain customized inputs for a customer, this is called a(n) ________ agreement. A) distribution B) input C) licensing D) supply Answer: D Diff: 1 Section Reference: 2: Types of Alliances Learning Objective: 2: Explain the different types of strategic alliances, how they are governed and the conditions under which each type is preferred. Bloom code: Knowledge Standard 1: AACSB || Analytic
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24) If a retailer agrees to provide certain customized services to help sell a product, this is called a(n) ________ agreement. A) distribution B) input C) licensing D) supply Answer: A Diff: 1 Section Reference: 2: Types of Alliances Learning Objective: 2: Explain the different types of strategic alliances, how they are governed and the conditions under which each type is preferred. Bloom code: Knowledge Standard 1: AACSB || Analytic 25) Sepia Inc., a fertilizer company, needs permission to test its new products on plantations owned by an agro-based industry. In return, Sepia is willing to pay a percentage of revenue to the agro-based industry. In this case, which of the following contractual alliances should be adopted by Sepia? A) A licensing agreement B) A supply agreement C) A distribution agreement D) An input agreement Answer: A Diff: 3 Section Reference: 2: Types of Alliances Learning Objective: 2: Explain the different types of strategic alliances, how they are governed and the conditions under which each type is preferred. Bloom code: Application Standard 1: AACSB || Analytic 26) John requires 500 shirts of a particular fabric and quality. He partners with Loumang Inc., a fabric manufacturing company, to develop certain customized inputs. Which of the following is being exemplified in this scenario? A) A licensing agreement B) A supply agreement C) A distribution agreement D) A profit agreement Answer: B Diff: 3 Section Reference: 2: Types of Alliances Learning Objective: 2: Explain the different types of strategic alliances, how they are governed and the conditions under which each type is preferred. Bloom code: Application Standard 1: AACSB || Analytic
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27) Velara Inc., a healthcare company, owns 35% stake in the firm that supplies most of its raw materials. This encourages the supplier to align its incentives with Velara's needs. Which of the following is being exemplified in this case? A) A licensing agreement B) An equity alliance C) A distribution agreement D) A contractual alliance Answer: B Diff: 3 Section Reference: 2: Types of Alliances Learning Objective: 2: Explain the different types of strategic alliances, how they are governed and the conditions under which each type is preferred. Bloom code: Application Standard 1: AACSB || Analytic 28) A ________ occurs when cooperating firms combine resources to form an independent firm in which they invest. A) contractual alliance B) equity alliance C) joint venture D) strategic alliance Answer: C Diff: 1 Section Reference: 1: What Is a Strategic Alliance? Learning Objective: 1: Distinguish the conditions under which to use a strategic alliance, vertical integration, and an arm's-length supplier relationship. Bloom code: Knowledge Standard 1: AACSB || Analytic 29) Borpon Inc. and Biocolog Corp. are well-established biotechnology companies. They enter into a strategic alliance in which they create and own a legally independent company. The new company is created from resources and assets contributed by the parent firms. Revenues, expenses, and profits are equally shared by both firms. Which of the following strategic alliances is adopted by Borpon and Biocolog? A) A contractual alliance B) An equity alliance C) A distribution agreement D) A joint venture Answer: D Diff: 3 Section Reference: 2: Types of Alliances Learning Objective: 2: Explain the different types of strategic alliances, how they are governed and the conditions under which each type is preferred. Bloom code: Application Standard 1: AACSB || Analytic
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30) Sands Inc., a financial firm, partners with another organization that is at a similar stage along the value chain. The parent organizations create a legally independent firm. However, Sands brings more resources to the new firm than the other partner. Which of the following is being exemplified in this case? A) A contractual alliance B) An equity alliance C) A distribution agreement D) A joint venture Answer: D Diff: 3 Section Reference: 2: Types of Alliances Learning Objective: 2: Explain the different types of strategic alliances, how they are governed and the conditions under which each type is preferred. Bloom code: Application Standard 1: AACSB || Analytic 31) Which of the following statements is true about firms in a joint venture? A) The firms contribute knowledge, but each performs its roles separately. B) The contributions made by individual firms are easy to measure. C) The parent firms share revenues and expenses in a particular ratio. D) The dependency level between partners is low. Answer: C Diff: 2 Section Reference: 2: Types of Alliances Learning Objective: 2: Explain the different types of strategic alliances, how they are governed and the conditions under which each type is preferred. Bloom code: Comprehension Standard 1: AACSB || Analytic 32) An organization wants to form a strategic alliance with another firm. The second firm is at the same level along the value chain. It cannot contribute the same level of financial resources, although it can contribute an extensive level of knowledge. To accommodate these factors, they decide to start a legally independent firm. Which of the following alliances will be best suited for the organization? A) A contractual alliance B) An equity alliance C) A distribution agreement D) A joint venture Answer: D Diff: 3 Section Reference: 2: Types of Alliances Learning Objective: 2: Explain the different types of strategic alliances, how they are governed and the conditions under which each type is preferred. Bloom code: Application Standard 1: AACSB || Analytic
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33) A ________ alliance is an alliance between firms that are positioned at different stages along the value chain. A) profit B) horizontal C) selling D) vertical Answer: D Diff: 1 Section Reference: 2: Types of Alliances Learning Objective: 2: Explain the different types of strategic alliances, how they are governed and the conditions under which each type is preferred. Bloom code: Knowledge Standard 1: AACSB || Analytic 34) Suppliers and buyers would form a ________ alliance. A) profit B) horizontal C) selling D) vertical Answer: D Diff: 1 Section Reference: 2: Types of Alliances Learning Objective: 2: Explain the different types of strategic alliances, how they are governed and the conditions under which each type is preferred. Bloom code: Knowledge Standard 1: AACSB || Analytic 35) A ________ alliance is between two firms that do not have a supplier-buyer relationship and are typically positioned at a common stage of the value chain. A) profit B) horizontal C) selling D) vertical Answer: B Diff: 1 Section Reference: 2: Types of Alliances Learning Objective: 2: Explain the different types of strategic alliances, how they are governed and the conditions under which each type is preferred. Bloom code: Knowledge Standard 1: AACSB || Analytic
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36) Competitors would form a ________ alliance. A) profit B) horizontal C) selling D) vertical Answer: B Diff: 1 Section Reference: 2: Types of Alliances Learning Objective: 2: Explain the different types of strategic alliances, how they are governed and the conditions under which each type is preferred. Bloom code: Knowledge Standard 1: AACSB || Analytic 37) An organization enters into an alliance with a firm that is positioned at a different stage along the value chain. The alliance is formed to combine unique resources and lower transaction costs. In this case, which of the following alliances has been adopted by the organization? A) A profit alliance B) A selling alliance C) A vertical alliance D) A horizontal alliance Answer: C Diff: 3 Section Reference: 2: Types of Alliances Learning Objective: 2: Explain the different types of strategic alliances, how they are governed and the conditions under which each type is preferred. Bloom code: Application Standard 1: AACSB || Analytic 38) Two organizations, Purple Inc. and Spring Corp., are positioned at a common stage of the value chain. However, they do not have a supplier-buyer relationship. They form an alliance to benefit from complementary activities. Which of the following is exemplified in this scenario? A) A horizontal alliance B) A vertical alliance C) A joint venture D) A supply agreement Answer: A Diff: 3 Section Reference: 2: Types of Alliances Learning Objective: 2: Explain the different types of strategic alliances, how they are governed and the conditions under which each type is preferred. Bloom code: Application Standard 1: AACSB || Analytic
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39) A U.S.-based chocolate manufacturer, Browns' Inc., collaborates with a Brazilian company to source cocoa. The cocoa sourced from Brazil along with Browns' unique recipe creates products that are differentiated based on taste and quality. The alliance between the two firms is an example of ________. A) a joint venture B) a vertical alliance C) a horizontal alliance D) a distribution agreement Answer: B Diff: 3 Section Reference: 2: Types of Alliances Learning Objective: 2: Explain the different types of strategic alliances, how they are governed and the conditions under which each type is preferred. Bloom code: Application Standard 1: AACSB || Analytic 40) A contractual alliance is preferred when ________. A) firms bring knowledge, but each can perform their roles separately B) firms bring difficult-to-measure contributions that must be combined C) interdependence between partners is low D) the contribution of each partner is difficult to measure Answer: C Diff: 2 Section Reference: 2: Types of Alliances Learning Objective: 2: Explain the different types of strategic alliances, how they are governed and the conditions under which each type is preferred. Bloom code: Comprehension Standard 1: AACSB || Analytic 41) Identify a true statement about a nonequity alliance. A) It is an alliance in which two or more firms write a contract to govern their relationship. B) It is an alliance in which the collaborating firms supplement contracts with equity holdings in their alliance partners. C) It is an alliance in which collaborating firms create and jointly own a legally independent company. D) It is an alliance in which one of the collaborating firms invests in product development and the other focuses on sales. Answer: A Diff: 2 Section Reference: 2: Types of Alliances Learning Objective: 2: Explain the different types of strategic alliances, how they are governed and the conditions under which each type is preferred. Bloom code: Comprehension Standard 1: AACSB || Analytic
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42) In an equity alliance, ________. A) two or more firms write a contract to govern their equity relationship B) the collaborating firms often supplement contracts with equity holdings in their alliance partners C) a supplier may agree to develop certain customized inputs for a customer D) a distributor or retailer may agree to provide certain customized services in order to help sell a product Answer: B Diff: 2 Section Reference: 2: Types of Alliances Learning Objective: 2: Explain the different types of strategic alliances, how they are governed and the conditions under which each type is preferred. Bloom code: Comprehension Standard 1: AACSB || Analytic 43) When do firms tend to opt for equity alliances? A) When it is easy to specify what each party is supposed to do in the relationship B) When it is easy to specify the rewards that should come from meeting one's obligations in the alliance C) When an alliance requires less interdependence among the firms involved D) When an alliance requires the joint creation of new resources and capabilities by the partners Answer: D Diff: 2 Section Reference: 2: Types of Alliances Learning Objective: 2: Explain the different types of strategic alliances, how they are governed and the conditions under which each type is preferred. Bloom code: Comprehension Standard 1: AACSB || Analytic 44) Identify a true statement about a horizontal alliance. A) It occurs between firms that have a supplier-buyer relationship. B) It occurs when the output of one of the firms in the relationship is the input of the other. C) It occurs only between firms that are positioned at different stages along the value chain. D) It can occur between companies who do not do the same activities but do complementary ones. Answer: D Diff: 2 Section Reference: 2: Types of Alliances Learning Objective: 2: Explain the different types of strategic alliances, how they are governed and the conditions under which each type is preferred. Bloom code: Comprehension Standard 1: AACSB || Analytic
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