Question

1. Which of the following statements is NOT true about strategic alliances?

   		Strategic alliances refer to cooperative agreements between potential or actual competitors.
   		A firm that enters long-term alliances is expanding its strategic flexibility by committing to its alliance partners.
   		Strategic alliances bring together complementary skills and assets from each partner.
   		Joint venture is not a type of strategic alliances.

As compared to exporting and licensing, FDI may be more expensive and risky.

1. True

   False

Which of the following is not a reason why firms prefer to acquire existing assets rather than undertake greenfield investments?

1. 		Even though greenfield investments are comparatively less risky for a firm, acquisitions always yield higher profits.
   		Mergers and acquisitions are quicker to execute than greenfield investments.
   		Firms make acquisitions because they believe they can increase the efficiency of the acquired unit by transferring capital, technology, or management skills.
   		Foreign firms are acquired because those firms have valuable strategic assets.

Answer 1

1. A firm that enters long-term alliances is expanding its strategic flexibility by committing to its alliance partners.

Explanation: Such a long-term commitment reduces the flexibility of the firm.

2. True

Explanation: FDI involves business ownership in a foreign country.

3. Even though greenfield investments are comparatively less risky for a firm, acquisitions always yield higher profits.

Explanation: Acquisition does not always result in a higher profit.