CH-13 Strategic Entrepreneurship – Strategic Management: Concepts and Cases: Competitiveness and Globalization : Exam Guide

Chapter 13 Strategic Entrepreneurship True/False 1. An organization engaging in strategic entrepreneurship focuses on identifying opportunities that it can exploit through innovations. A. True B. False Answer: True 2. Most large, complex firms innovate through cooperative strategies or strategic alliances, but not through internal activities. A. True B. False Answer: False 3. Corporate entrepreneurship describes the opportunity seeking and exploitation of innovations in new start-up enterprises. A. True B. False Answer: False 4. Entrepreneurial opportunities exist because of competitive imperfections in the markets and among the factors of production. A. True B. False Answer: True 5. The essence of entrepreneurship is to capture most of the existing markets from less aggressive and innovative competitors. A. True B. False Answer: False 6. Entrepreneurship is the economic engine driving national economic growth in many nations. A. True B. False Answer: True 7. Innovation is the means by which the entrepreneur creates wealth. A. True B. False Answer: True 8. Entrepreneurial opportunities are conditions in which new goods or services can satisfy a need in the market. A. True B. False Answer: True 9. As a process, entrepreneurship results in the "creative destruction" of existing products (goods or services) or methods of producing them and replaces them with new products and production methods. A. True B. False Answer: True 10. Invention is defined as the adoption of a similar innovation by different firms. A. True B. False Answer: False 11. Joseph Schumpeter suggested that firms engage in three types of innovative activity when managing the innovation process: imitation, invention, and innovation. A. True B. False Answer: True 12. Evidence demonstrates that large firms with well-funded R&D operations are more effective at innovation than are smaller firms. A. True B. False Answer: False 13. Given the rapid rate of technological change, patents are not a useful gauge of a firm's entrepreneurial prowess. A. True B. False Answer: False 14. Rosalie has become totally preoccupied by her idea for creating a business leasing horses to riders on the same principle as time-shares on condominiums. Rosalie is researching the legal, financial, and insurance aspects of her idea and is preparing a prospectus to take to banks to ask for a business loan. Rosalie's significant other is complaining that she "sleeps, eats, and drinks" this concept. Rosalie has the entrepreneurial characteristic of passion. A. True B. False Answer: True 15. The entrepreneurial mind-set is found primarily among managerial and scientific employees. A. True B. False Answer: False 16. Bill Kroganski is the owner of a moderately successful industrial services firm. His reaction to the introduction of a new process technology that could be a direct competitor to the process his firm utilizes is fear. He spends his time considering ways to isolate his firm from this new technology. Bill has characteristics consistent with the entrepreneurial mind-set. A. True B. False Answer: False 17. If the company's workers have scant existing knowledge, their "absorptive capacity" to learn new knowledge will be limited. A. True B. False Answer: True 18. For firms to be entrepreneurial, they must stress individualism in their employees above all other characteristics. A. True B. False Answer: False 19. A society's cultural characteristics influence a nation's rate of entrepreneurship and its related practices. A. True B. False Answer: True 20. In order to be successful, a new entrepreneurial enterprise should be sheltered from the global environment until it is firmly established in domestic markets. A. True B. False Answer: False 21. Research has shown that internationally diversified firms are generally more innovative. A. True B. False Answer: True 22. Larger, established firms, mainly those competing globally, use their R&D labs to create disruptive technologies and products. A. True B. False Answer: True 23. Most innovations are incremental, not radical. A. True B. False Answer: True 24. Toyota's Prius, the first mass-produced hybrid-electric car is an example of a radical innovation as changed the industry by providing new functionalities for users. A. True B. False Answer: True 25. A company with a need for immediate, large returns should invest in research and development. A. True B. False Answer: False 26. While both incremental and radical innovations can create value, incremental innovations have the potential to contribute more significantly to a firm's efforts to earn above-average returns. A. True B. False Answer: False 27. Some of the new products to be produced by the joint venture between Intel and Nokia integrating smartphones and computers would be considered radical innovations. A. True B. False Answer: True 28. A product champion should come from outside the organization in order to ensure that the entrepreneurial vision has the objective support it needs. A. True B. False Answer: False 29. A innovation developed through autonomous strategic behavior will probably take the firm into new markets not addressed by its current strategy. A. True B. False Answer: True 30. Firms that continually change their strategic context and strategies because of the continuous changes in the current competitive landscape are in danger of losing sight of their main competitive strengths. A. True B. False Answer: False 31. Induced strategic behavior does not result in true innovation because it is a top-down process rather than a bottom- up process. A. True B. False Answer: False 32. Autonomous strategic behavior results in internal innovations that are highly consistent with the firm's current strategy. A. True B. False Answer: False 33. The iPod likely resulted from autonomous strategic behavior at Apple, though the iPhone was more the result of induced strategic behavior. A. True B. False Answer: True 34. Cross-functional work teams are best supported by vertical organizational structures. A. True B. False Answer: False 35. Political activity that is centered on the allocation of resources to the different functions may limit the effective use of cross-functional teams. A. True B. False Answer: True 36. An entrepreneurial mind-set, cross-functional product development teams, and shared values/leadership are the three ways that firms implement internal innovations. A. True B. False Answer: True 37. Innovations can only be produced by actions and activities within the firm. A. True B. False Answer: False 38. While smaller firms must use cooperative strategies as a means of producing innovations, larger firms with large R&D units such as P&G and 3M can produce most if not all innovations internally. A. True B. False Answer: False 39. Acquisitions are a means of extending the company's product line and increasing revenues. The capital market values growth. Therefore, some firms make acquisitions to improve their standing in the capital markets. A. True B. False Answer: True 40. Acquisitions are a low-risk approach to producing and managing innovation. A. True B. False Answer: False 41. A key risk of acquisitions is that a firm may substitute an ability to buy innovations for an ability to produce innovations internally. A. True B. False Answer: True 42. Entrepreneurial ventures often produce more radical innovations than do their larger, more established counterparts. A. True B. False Answer: True 43. Larger and well-established firms often have more resources and capabilities to produce more radical innovations than do smaller entrepreneurial firms. A. True B. False Answer: False 44. Women are the fastest-growing group of entrepreneurs in Africa and Asia. A. True B. False Answer: True Multiple Choice 45. Firms develop innovations in all the following ways EXCEPT A. through autonomous or induced strategic behavior. B. by acquiring other companies. C. through cooperative strategies. D. via divestiture of low-performing units. Answer: D 46. Pet Care Companion Connection (PCCC) is an organization that trains persons with mild-to-moderate mental disabilities to care for pets in a pet boarding facility. This organization has been successful in providing a quality service for pet owners and a supportive training environment for their trainees. The tuition charged to trainees is only somewhat higher than the fee, which day-care providers would charge for these individuals. Graduates of the program are qualified for employment by commercial kennels. PCCC is an example of A. taking advantage of a need in the marketplace. B. creative destruction of existing services for pet boarding. C. institutionalized entrepreneurship. D. internal corporate venturing. Answer: A 47. Isidore Security Services is a national provider of guard and security services for businesses. It has been in business for over 90 years, having been founded by one of Teddy Roosevelt's Rough Riders (Isidore O'Malley). Lately it has been losing clients to more aggressive and innovative firms offering remote security monitoring systems instead of a guard-based approach. The board of directors of Isidore Security Services is concerned that this downward trend may threaten the existence of this venerable firm and the jobs of its employees. A. This is an example of an established firm neglecting the opportunity-seeking aspect of strategic entrepreneurship. B. This example shows the dysfunctional aspects of unrestricted entrepreneurialism. C. This is an example of the lack of human capital hampering internal innovation. D. Isidore Security Services is suffering from the "novelty effect" wherein new firms are more attractive to clients/customers merely because they are new and not because they add value. Answer: A 48. The use or application of entrepreneurship within an established firm is called A. corporate emergence. B. transformational leadership. C. exceptional R&D. D. corporate entrepreneurship. Answer: D 49. Entrepreneurship is the process by which individuals or groups identify and pursue _______ without being immediately constrained by the _______ they currently control. A. opportunities; resources B. opportunities; core competencies C. threats; resources D. threats; core competencies Answer: A 50. _________ exist(s) when there is a need in the market that can be satisfied by new goods or services. A. Potentiality B. Market readiness C. Entrepreneurial opportunities D. Critical core competencies Answer: C 51. Since it replaces existing products and methods of production, entrepreneurship is a process of A. harnessing the human potential. B. creative destruction. C. creation of opportunity. D. exploitation of innovation. Answer: B 52. GreenBox, a company that recycles paper products to make cardboard cartons, has introduced a new product that resists damage by moisture. GreenBox can expect that A. this innovation will resist competitors' attempts to imitate it. B. its investors will react positively to the introduction of the new product because of the potential for higher returns. C. its investors will react negatively because of the risk and cost entailed in introducing a new product. D. this will be recognized in the industry as a radical innovation. Answer: B 53. Innovation creates a(n) A. opportunity for a new product or process. B. new product or process. C. commercial product. D. idea for potential exploitation. Answer: C 54. According to Peter Drucker,the primary goal of innovation is to A. promote social well being. B. increase the number of jobs. C. create wealth. D. support national economies. Answer: C 55. The three types of innovative activity include all of the following EXCEPT A. invention. B. imitation. C. implementation. D. innovation. Answer: C 56. Products developed through _________ are often offered at lower prices without as many features than products developed through A. innovation; imitation. B. imitation; invention. C. imitation; innovation. D. innovation; invention. Answer: C 57. The number of patents held by an organization is a rough guide to the A. effective use of organizational politics. B. future success of an initial public offering. C. amount of venture capital a firm will be able to attract. D. level of innovation in a firm. Answer: D 58. 3M's Cubitron II, described as "an industrial abrasive that cuts faster, lasts longer, sharpens itself, and requires less elbow grease than any other abrasive on the market" is an example of A. imitation of a competitor's product. B. a radical innovation. C. an incremental innovation. D. a(n) innovation created through a cooperative strategy. Answer: C 59. ____ are individuals, acting independently or as part of an organization, who see an opportunity and then take risks to develop an innovation to exploit it. A. Leaders B. Innovators C. Entrepreneurs D. Transformative leaders Answer: C 60. Entrepreneurs tend to have all the following characteristics EXCEPT A. willing to take responsibility for projects. B. passion. C. preference for certainly about projects. D. optimism. Answer: C 61. Roland has developed and patented an inexpensive and organic way to enhance the fertility of clay soils without the addition of chemical fertilizers. But established agricultural chemical companies have rejected his proposals. After 6 months of promoting his invention during his time off from his regular job, Roland has decided to set his dream aside. Roland lacks a key characteristic of successful entrepreneurs, which is A. the ability to identify opportunities. B. a corporate sponsor. C. financial slack. D. passion for his invention. Answer: D 62. If the firm's current employees are well-trained in their jobs, but also have other knowledge, skills, and abilities, these employees have A. social capital. B. entrepreneurial capabilities. C. high absorptive capacity to learn. D. intellectual slack. Answer: C 63. Knowledge must be transferred to others in the firm to enhance the entrepreneurial competence of the firm. This requires that A. the receiving party have adequate absorptive capacity to learn. B. the communication process be highly intensive. C. the knowledge be broken into the smallest comprehensible units. D. training consultants be involved in every step of transference. Answer: A 64. The risks of international entrepreneurship include all the following EXCEPT A. unstable foreign currencies. B. problems with market efficiencies. C. limitations on market size. D. strong "buy-domestic" programs. Answer: D 65. Research shows that internationally diversified firms tend to be _________ than domestic-only firms. A. less profitable B. more innovative C. less technologically advanced D. more likely to have an individualistic culture Answer: B 66. The level of entrepreneurial activity in a nation is _________ the nation's level of economic development. A. negatively related to B. independent of C. positively related to D. weakly related to Answer: C 67. _________ is one of the reasons for the differences in rates of entrepreneurship among different countries. A. Climate B. Competitiveness C. Culture D. Constitution Answer: C 68. Research suggests that _________ is needed to encourage entrepreneurial behavior. A. individualism rather than collectivism B. a balance between individualism and cooperative behavior C. collectivism rather than individualism D. limited autonomy and incentives Answer: B 69. AgroPharm is searching for a top-level executive. AgroPharm has marketed its products only to U.S. farmers and agribusinesses in the past. Now, the company plans to expand operations to Mexico and Central America in the next 2 years. To maximize the chances of success it is critical that the new executive A. be of Hispanic descent. B. have international experience. C. possess an advanced degree in animal science. D. have a background in managing agribusiness firms. Answer: B 70. Which of the following is true? For firms to be entrepreneurial, they require a culture with A. an emphasis on individualism in Western nations and an emphasis on collectivism in Eastern nations. B. an exceptionally high level of collectivism. C. a balance of individualism and collectivism. D. an exceptionally high level of individualism. Answer: C 71. Successfully creating innovations through internal means requires A. a highly individualistic culture. B. significant spending on R&D. C. acquisitions of innovative firms. D. venture capital. Answer: B 72. Panera Bread has innovated to improve the quality of its distribution system, to improve the quality of its bread dough, and to introduce new menu items. These are examples of A. incremental innovation. B. invention. C. imitation. D. the use of social capital. Answer: A 73. Panera Bread develops and produces its own dough-based products, but it works with manufacturing partners to create new soups. Panera Bread is therefore A. increasing its costs and reducing its potential to succeed. B. engaged in internal corporate venturing. C. pursuing innovation through both internal and cooperative strategies. D. not an innovative company. Answer: C 74. QuadroVax is investing heavily in research and development on new methods of vaccine development that would speed up the creation of vaccines for newly emerging viruses and to get these vaccines to the market rapidly. QuadroVax's shareholders can expect A. immediate wealth creation. B. a long wait for an uncertain payoff. C. a long wait for a high probability payoff. D. a large payoff in the short term with rapidly decreasing wealth generation in the longer run. Answer: B 75. A successful _________ innovation will be less risky but less profitable than a successful _________ innovation. A. incremental; radical B. radical; incremental C. alliance-generated; acquisition-generated D. acquisition-generated; alliance-generated Answer: A 76. The development of the original personal computer (PC) was a(n) _________ innovation at the time, whereas adding a different kind of whitening agent to a soap detergent in an example of a(n) _______ innovation. A. incremental; radical B. radical; incremental C. concentric; radical D. radical; concentric Answer: B 77. Innovations that involve significant technological breakthroughs and create new knowledge A. build incrementally on the firm's existing technologies and knowledge. B. are the most common type of innovation. C. involve substantial uncertainty and risk. D. typically have clear market opportunities. Answer: C 78. _________ involves internally developed incremental and radical innovations that result from deliberate efforts. A. Internal corporate venturing B. Autonomous strategic behaviors C. Bottom-up strategic behaviors D. Product championing Answer: A 79. Internal corporate venturing does NOT involve A. autonomous strategic behavior. B. induced strategic behavior. C. strategic alliances. D. product champions. Answer: C 80. WayWard Products has a deliberate strategy to encourage internal innovations. It has established processes to support autonomous strategic behavior as well as induced strategic behavior. WayWard Products is involved in A. entrepreneurial incubation. B. creative destruction. C. internal corporate venturing. D. cooperative innovation strategies. Answer: C 81. One of the distinguishing differences between the two sources of internal corporate venturing (autonomous strategic behavior and induced strategic behavior) is whether the innovation process A. is encouraged through a bottom-up or top-down process. B. is encouraged by a product champion or an entrepreneur external to the organization. C. relies on internal structure or existing strategy to encourage innovation. D. is in a large or small organization. Answer: A 82. Autonomous strategic behavior is a(n) _________ process in which product champions pursue new ideas. A. top-down B. horizontal C. integrated D. bottom-up Answer: D 83. The idea that it is "vital to sell the ideas to others in the organization so that innovations will be commercialized" is the rationale behind the use of A. product champions. B. joint ventures. C. strategic leadership. D. cross-functional teams. Answer: A 84. A negative effect of acquiring other firms for the purpose of innovation is A. innovations cannot be transferred between organizations. B. the effect it can have on the firm's own ability to produce innovations. C. innovations may not actually be present in the firm after the purchase is completed. D. the acquired firm's employees usually leave. Answer: B 85. Charles is a customer service representative for a home improvement store. He has creative ideas about how to increase customer satisfaction. Charles's talents will be most likely to be used in a firm that A. uses the induced strategic behavior form of internal corporate venturing. B. uses the autonomous strategic behavior form of internal corporate venturing. C. makes significant investment in research and development. D. focuses on an acquisition strategy for gaining innovative ideas. Answer: B 86. The new abrasive, Cubitron II, was developed through cooperative relationships among 3M business units. As such, Cubitron II is an example of A. the use of autonomous strategic behavior. B. the use of induced strategic behavior. C. development of radical innovations. D. innovation through acquisitions. Answer: B 87. To be successful, an autonomous process for developing new products relies on A. the diffusion of tacit knowledge. B. the acquisition of innovative firms. C. strategic alliances with other firms. D. internal corporate venturing. Answer: A 88. Induced strategic behavior is a process that fosters product innovations that A. are likely to change a firm's strategic intent and mission. B. will lead to greater financial returns. C. are aligned closely with current strategy and structure. D. will come to market in a short period of time. Answer: C 89. Induced strategic behavior as a form of internal innovation is a(n) _________ process. A. bottom-up B. top-down C. free-flowing D. external Answer: B 90. Through the work of cross-functional teams, product development stages are grouped into _________ processes. A. short-term and long-term B. parallel or overlapping C. serially ordered D. complementary Answer: B 91. In the implementation of internal innovations, formal and informal processes are best supported through ________ organizational structures. A. vertical B. horizontal C. functionally oriented D. multidivisional Answer: B 92. A major barrier to the use of cross-functional teams is A. excessive individualism of creative people. B. lack of communication skills of technical people. C. independent frames of reference of team members. D. lack of social capital by team members. Answer: C 93. A cross-functional product development team has been examining a proposed new product intensively for 6 months. The team has decided that although the product is unique and technologically advanced, the cost of production will exceed the price that the consumer would be willing to pay. At this point, the product development team should A. engage in creative destruction. B. recommend that the product be sold at a loss in order to create a new market. C. turn over the product evaluation to a new product-development team which may have more passion for the product. D. recommend that the project be set aside. Answer: D 94. When used effectively, cross-functional teams will often bring about A. faster product development processes. B. an increased need for additional information. C. conflicting information about the business environment. D. future cooperative alliances. Answer: A 95. Which of the following is one of the barriers to effectiveness when using cross-functional teams to integrate organizational functions? A. dissension within the top management team B. informal organizational processes within the firm C. the firm's strategic orientation D. organizational politics Answer: D 96. Cross-functional teams are useful in developing and commercializing new products because each team member brings his or her special competencies to the project. Each team member brings his/her point of view from his/his experience and background. On the other hand, these _____ may cause barriers to effective communication among team members. A. independent frames of reference B. entrepreneurial mind-sets C. professional rivalries D. politicized points of view Answer: A 97. A cross-functional work team is having difficulties in operating smoothly and friction has developed among some of the members. Many of the strongest complaints are from the representatives of management who complain that the research scientists are disorganized, haphazard, and undisciplined. Managers complain the scientists do not adhere to any fixed rules or procedures. On the other hand, the research scientists complain that the managerial representatives are excessively rule-oriented bureaucrats, and have no flexibility or spontaneity. The main problem with this team seems to be centered around differences in A. interpersonal orientation. B. time orientation. C. goal orientation. D. formality of structure. Answer: D 98. The dimensions on which functional departments can vary include all the following EXCEPT _________ orientation. A. time B. customer C. technological D. interpersonal Answer: C 99. The competition for resources among those representing different organizational functions within a firm often leads to A. erosion of social capital. B. heightened communication. C. organizational politics. D. empowerment of organizational members. Answer: C 100. The firm's culture promotes unity of purpose for cross-functional work teams through A. a collectivist structure. B. an entrepreneurial mind-set. C. shared values. D. resource allocation. Answer: C 101. Independent frames of reference and organizational politics are the two primary barriers to cross-functional team integration. Two methods to facilitate cross-functional integration are _________ and A. autonomous strategic behavior; induced strategic behavior. B. incremental innovations; radical innovations. C. bottom-up integration; top-down integration. D. shared values; effective leadership. Answer: D 102. Value creation through internal innovation originates with A. an entrepreneurial mind-set. B. cross-product development teams. C. shared values and entrepreneurial leadership. D. innovation. Answer: A 103. PracticalSolutions is a small firm providing employee assistance programs for companies with troubled employees. PracticalSolutions frequently partners with other consulting firms to provide creative solutions for companies with personnel problems. This history of partnering exemplifies A. intellectual capital. B. institutional capital. C. alignment of complementary assets. D. technological capital. Answer: C 104. Blixin Concrete Products, an established firm, is seeking a technologically advanced partner for a strategic alliance. If the potential partner is a new entrepreneurial venture, the main benefit the Blixin Concrete can offer is probably A. investment capital. B. management expertise. C. research and development competencies. D. social networks. Answer: A 105. Regarding partnering in cooperative alliances, entrepreneurial new companies may seek _____ while more established companies may need A. distribution channels; tacit knowledge. B. deep technological expertise; distribution channels. C. social capital; technical capital. D. investment capital; new technological knowledge. Answer: D 106. The main risk in a strategic alliance is that A. the alliance will not result in a successful innovation. B. critical employees will be hired away by the strategic partner. C. one partner will use the other partner's knowledge and use it to enhance its own competitive abilities. D. the partners will lose control over their internal processes. Answer: C 107. Why have large pharmaceutical companies been forming alliances with biotechnology companies? A. to evade legislative restrictions on drug research in the United States B. to develop new products and bring them to market C. because both firms had declining profitability and needed cash infusions from other firms D. in order to gain absorptive capacity Answer: B 108. New entrepreneurial firms are better than larger established firms at A. implementing innovations. B. gaining competitive advantage. C. making alliances. D. identifying entrepreneurial opportunities. Answer: D 109. _________ is(are) critical in order for a firm to gain access to resources from partners in a cooperative alliance. A. Complementary strategic goals B. Shared values C. An entrepreneurial mind-set D. Compatible organizational cultures Answer: A Essay 110. Define the three types of innovative activity. Which is the most critical activity for U.S. firms? Answer: Firms engage in three types of innovative activity. Invention is the act of creating and developing a new product or process. Innovation is the process of commercializing the products or processes that surfaced through invention. The success of an invention is judged by technical criteria. The success of innovation is judged by commercial criteria. Imitation is the adoption of an innovation by similar firms. Imitation usually leads to product or process standardization, offering the product at a lower price without as many features. Innovation is the most critical activity because commercializing inventions is difficult. 111. What is the importance of international entrepreneurship? Answer: In general, internationalization leads to improved firm performance. Research shows that new ventures that enter international markets increase their learning of new technological knowledge, which enhances their performance. Because of the learning and the economies of scale and scope afforded by operating in international markets, firms are often stronger competitors in their domestic markets as well. In addition, internationally diversified firms are generally more innovative than domestic-only firms. 112. Describe the three strategic approaches used to produce and manage innovation: internal corporate venturing, cooperative strategies, and acquisitions. Answer: Internal corporate venturing is the set of activities a firm uses to create inventions and innovations through internal means. There are two forms of internal corporate venturing, (1) autonomous strategic behavior (a bottom-up process employing product champions) and (2) induced strategic behavior (a top-down process whereby product innovations are fostered by the current strategy and structure of the firm). In the cooperative strategy approach to innovation, firms may choose to share their knowledge and skills sets with other organizations through strategic alliances. The ideal partners have complementary assets with the potential to lead to future innovations. Frequently, established firms exchange investment capital and distribution capabilities with newer, entrepreneurial firms with new technical knowledge. Acquisition of other companies represents the third approach firms use to produce and manage innovation. Acquiring another firm rapidly extends the firm's product line and increases the firm's revenues. However, firms using the acquisition strategy may lose the ability to innovate internally. 113. Discuss the differences between autonomous strategic behavior and induced strategic behavior. Answer: Autonomous strategic behavior and induced strategic behavior are the two processes of internal corporate venturing. Autonomous strategic behavior is a bottom-up process through which a product champion facilitates the commercialization of an innovative good or service. Induced strategic behavior is a top-down process in which a firm's current strategy and structure facilitate product or process innovations that are associated with them. 114. Discuss the methods an organization can use to facilitate cross-functional integration. Answer: Shared values and effective leadership support cross-functional integration. The firm's culture, based on its vision and mission, promotes unity and supports cross-functional integration. Strategic leaders set goals and allocate resources for cross-functional teams. A high-quality communication system allows team members to share knowledge. Effective communications helps create synergy and gains team members' commitment to innovation. 115. Discuss the potential benefits and disadvantages of innovation through cooperative strategies. Answer: A firm may not have the knowledge and capabilities necessary to be entrepreneurial and innovative. A strategic alliance in those cases offers an excellent means to obtain the needed knowledge and resources. However, strategic alliances are not without risks. The strategic alliance partner can appropriate a firm's technology or knowledge and use these to enhance its own competitive abilities. Additionally, a firm can become involved in too many alliances, which can harm its innovative capabilities. 116. Discuss the benefits and risks of acquiring another firm to gain access to innovations. Answer: Through acquisition an organization can gain another firm's innovations and innovative capabilities. Acquisitions are a means to rapidly extend the firm's product lines and increase revenues. Buying innovation, however, comes with the risk of reducing a firm's internal invention and innovative capabilities. Subjective Short Answer Case Scenario 1: Fear Not. Wim Vijkland was trained as an engineer in the Netherlands and, after college, worked several years in the Chinese operations of Philips Electronics and then Unilever. Between employers he returned home for several years to complete an MBA from Tiburg University in the southern Netherlands. His work gave him hands-on experience with overseas production, and rich sets of contacts in Mainland China and distribution channels in Europe and the United States. Wim has noted that many small and mid-sized European and U.S. manufacturers are interested in and would benefit from the low-cost Chinese production environment. Contrary to external stereotypes, he also believes that a Chinese factory can produce products that meet the most demanding technical and quality specifications met by manufacturers in more developed economies. At the same time, Vijkland understands that "foreigners" are generally reluctant to manufacture precision products in China for fear that the underlying proprietary technologies will be bootlegged and sold to competitors or outright copied. In an attempt to capitalize on this opportunity, Wim quit his job with Unilever and entered into a partnership with Sulin "Cathy" Liu, a local Beijing entrepreneur with whom Wim has worked extensively in the past. Cathy has a Ph.D. in physics from CalTech in California and an MBA from Hong Kong University of Science and Technology. They have dubbed their partnership FearNot, and organized it as a limited liability corporation (LLC). Their plan is to set up duty-free manufacturing zones in which they develop mini-factories that operate under their ownership and production guidance, while at the same time creating a firewall between the clients' proprietary production processes and the open Chinese market. It is the partners' hope that this combination of intellectual property protection and low-cost overseas production will provide U.S. and European firms an incentive to enlist FearNot's services. 117. (Refer to Case Scenario 1). What resources do Wim and Cathy bring to their venture? Answer: The purpose of this exercise is to develop a laundry list of the resources these two entrepreneurs bring to the venture. It is always easier to identify the resource gaps, but entrepreneurs tend to make do with what they have (i.e., exceed the limits of their resource base). Both Wim and Cathy have international backgrounds, which is positive for innovative and global firms. Wim apparently has good experience with many companies who are likely to be target clients. This means he probably has knowledge of their operating needs as well as the related contacts. Cathy brings local knowledge in addition to experience as an entrepreneur in China. Both of them bring technical expertise, as well as mutual respect and working relationships forged from prior interaction. 118. (Refer to Case Scenario 1). What resources appear to be missing? Answer: The most obvious gap is how FearNot will finance its manufacturing operations. Students will also want to note that the company does not yet have any clients so its reputation as an entity (versus the reputations of Wim and Cathy as individuals) is still not established. 119. (Refer to Case Scenario 1). What should FearNot focus on in its first months of operation? Answer: The best answers should quickly move to the fact that without clients, FearNot will not have much of a business. With this understanding, students can then flesh out a strategy for developing this initial customer base. Many solutions are possible here and it is important to explore various avenues. For instance, the company can target a few large and highly visible companies to begin building its reputation. Another route would be to develop a number of relationships with smaller firms to begin building its experience base. A third route might be to contact firms that are already manufacturing in China, but have an interest in having a local trusted representative manage it for them. These all appear to be viable applications of FearNot's intent and capabilities. There is no reason that it can not pursue all three at once (and perhaps others), subject to the time constraints of Cathy and Wim. 120. (Refer to Case Scenario 1). The likelihood of success of FearNot is increased because both Wim Vijkland and Cathy Liu to have international backgrounds. Answer: True Case Scenario 2: Compliance, Inc. Compliance, Inc. (CI) conducts clinical human and animal trials for the pharmaceutical and biotechnology industries. Revenues are split evenly between early and late drug development services and the firm is a leader in the laboratory technologies needed for such testing. One of CI's internal quality managers, Sharon Kline, has approached the CEO with a new business proposal. She would like to see the firm take one of its in-house software programs and develop it as a leading­edge commercial product for three specific target markets—medical care providers, payers of medical care, like insurance companies, and suppliers to medical care providers, like pharmaceutical companies. The features of the software are easy to use and include electronic distribution, data harvesting, and robust reporting capabilities. With this software Sharon believes that medical care providers will be able to collect data to market to and negotiate contracts with payers or employers, profile performance of individual physicians or practice sites, identify best clinical practices, generate reports that satisfy regulatory or accreditation requirements for provider sites, and supply professional societies with data for influencing payer and government policies. Another target market, insurance companies and other medical services payers, will be able to use the software to profile performance of individual physicians or practice sites, identify best clinical practices, generate reports that satisfy regulatory or accreditation requirements, and collect data to market to and negotiate contracts with employers. Finally, the software will allow suppliers to medical care providers to assess how products perform compared to competitor products, assess outcomes in real-world compared to clinical trial settings, obtain information on provider-specific practice patterns, determine whether products are being used correctly, get "face- time" with physicians and HMOs, obtain information on product switching behavior, offer providers a value-added service, and meet FDA post-marketing surveillance requirements. CI has never launched such a product before and, even if successful, software is a very different product than the clinical trials services it provides now. The CEO must determine how to build and manage this new business for CI. 121. (Refer to Case Scenario 2). Does CI's launch of the software product better fit the notion of autonomous or induced strategic behavior? Answer: While there may be some aspects of both, the best answers will point out that Sharon is clearly a champion for the software, and the CEO is wrestling with how to deal with this new product. Together, along with differences between clinical trials and software products, these factors best support the notion of autonomous strategic behavior. 122. (Refer to Case Scenario 2). Where does it appear that autonomous strategic behavior ends and induced strategic behavior begins in the software situation at CI? Answer: The best answers will suggest that CI's CEO has apparently taken an interest in the project, and this is thus likely the transition point between autonomous and induced strategic behavior at CI. Sharon was the initial champion, and may follow the product through launch, but the CEO is now determining the context in which the software product will be realized. 123. (Refer to Case Scenario 2). What actions would you recommend that the CEO undertake to ensure the success of the software venture? Answer: As the scenario suggests, software is a very different product than CI's other clinical trials businesses. The best answers will likely flesh out a theme where software is given an autonomous structure, but is then somehow linked back to the clinical businesses to advance its technology base, and provide it with access to CI's current customer base. Students may also suggest that CI monitor the software business closely to make sure that it is not being hampered by either CI's ownership of it, or its linkages to the clinical businesses. At some point, CI may opt to spin the successful software business out on its own and then benefit only indirectly through some minority stock ownership position. 124. (Refer to Case Scenario 2). The idea for the software product came about via induced strategic behavior. Answer: False 125. (Refer to Case Scenario 2). Sharon Kline approached the CEO of CI with a business proposal to take an in-house software program and develop it as a leading-edge commercial product. There is some risk in the idea because CI has never launched a product before and software is a very different product than the clinical trials services the company currently offers. This new product, if successful, would be considered a radical innovation. Answer: True Case Scenario 3: Bunnywac. Bunnywac is a global producer and seller of batteries for consumer electronics, and competes primarily by providing battery products equal in performance at a lower price. The worldwide battery industry suffers from issues of overcapacity and commoditization, brand segmentation and proliferation, the growing strength of global retailers, and the low-cost threat of new entrants from Asia. Bunnywac has grown quickly into one of the leading players in the battery industry primary through horizontal acquisitions, and is now counted among the top four companies in North and Latin America. Its presence in Europe and Latin America is negligible. A key factor in Bunnywac's rapid growth is its technology outsourcing arrangement with Mats. Mats is one of Japan's largest technology holding companies and Bunnywac's core battery technology is licensed from Mats. Bunnywac's license with Mats expires soon and it is concerned that Mats will not renew it, or will renew it only for a substantial price premium. Consequently, Bunnywac's CEO is exploring the possibility of developing its core technology in-house. 126. (Refer to Case Scenario 3). Does Bunnywac's development of its core battery technology better fit the notion of autonomous or induced strategic behavior? Answer: From the case scenario, the decision to enter the R&D side of the business appears to be driven by the CEO, who in turn is responding to potential threats from Mats. The best answers will thus state that these characteristics are more in line with induced strategic behavior, where internal corporate venturing is a top-down process. 127. (Refer to Case Scenario 3). What aspects of Bunnywac's development of its core battery technology do not fit the notion of strategic behavior that you identified above? Answer: It is important for students to see that Bunnywac's entry into basic R&D is not closely associated with its historic strategy and structure. Historically the firm has been a sales-oriented company that outsourced its core technology. Thus, such a move into the internal development of battery technology is likely to mean that Bunnywac's strategy and structure must also change. 128. (Refer to Case Scenario 3). How will Bunnywac's structure likely need to change if it does begin developing its core battery technologies in-house? Answer: The best answers here will discuss the implementation of internal corporate venturing. The most obvious structural change will be the addition of an R&D unit to the organization chart. While other suggestions may follow, at the very least students should point out that cross-functional product teams will likely be needed to coordinate the battery technology R&D with its various applications across Bunnywac's product lines. 129. (Refer to Case Scenario 3). Facing the risk that its technology supplier, Mats, will not renew its licensing arrangement, Bunnywac's CEO is exploring the possibility of developing its core battery technology in-house. If the license is not renewed, it is likely that the technology will be developed at Bunnywac via the autonomous strategic behavior approach. Answer: False Test Bank for Strategic Management: Concepts and Cases: Competitiveness and Globalization Michael A. Hitt, R. Duane Ireland, Robert E. Hoskisson 9781285425177, 9780538753098, 9781133495239, 9780357033838, 9781305502208, 9781305502147