EXAM 2. The exam is open book and open notes. Electronics are not allowed during the exam.
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1 MISHARI ALNAHEDH STRATEGIC MANAGEMENT MKT 450 Section 56 Fall 2017 EXAM 2 General Instructions You have 120 minutes to complete the exam. The exam is open book and open notes. Electronics are not allowed during the exam. You have to answer all questions. Keep answers brief and to the point. Long answers are not necessary if your argument is clear. Please write clearly- no points will be given for illegible answers. There are a total of 20 points allocated to all questions. Partial credits will be awarded for partially correct or incomplete answers. State clearly your assumptions when you derive a result. You must always show your thinking to get full credit. You MUST use a PEN. You may not use a pencil. Good Luck! I pledge my honor that I have not violated the Kuwait University Policy on Cheating and Plagiarism during this examination, that the answers on this examination represent my work solely, and that I have not provided nor received any help while taking the exam: أحعهذ بأوي لم أخالف مادة الغش في الئحت وظام المقزراث لجامعت الكىيج أثىاء حأديت هذا االخخبار وأحعهذ بأوي لم أغش او أشزع بالغش وأن اإلجاباث في هذا االخخبار حمثل جهذي الشخصي فقط وأوي لم أساعذ أي طالب آخز أو اسخخذم أي مساعذة مه اي شخص آخز أثىاء حأديت االخخبار : Print Name: KUID:
2 Part1. Short cases questions. Carefully read the information provided below before starting to answer the questions. 1. In 2006, Nintendo released its new seventh-generation console Nintendo Wii. Read the following excerpt from a USA Today article before answering the questions. Nintendo hopes Wii spells wiinner From USA Today - August 15, 2006 The Wii (pronounced wee) sports an innovative controller: To hit a tennis ball, you swing it like a racket; to drive an SUV over treacherous terrain, you twist it like a steering wheel; to shoot a duck, you point it like a pistol. Getting consumers to try it and jump-start Nintendo's (NTDOY) ambitious plan to trump Microsoft's (MSFT) Xbox 360 and Sony's (SNE) PlayStation 3 falls to Reginald Fils-Aime, 45, Nintendo of America's new president and chief operating officer.[ ] Q: What made Nintendo try to do something dramatically different with the Wii? A: Our focus is interactive game play, a whole new way to play, that puts fun back into this business. It allows everybody to pick up and play and isn't focused on the core gamer. [ ] Q: The Wii seems to emphasize the controller, not heavy attention on graphics. Is that by design? A: That is exactly by design. Our visuals for Wii will look fantastic, but in the end, prettier pictures will not bring new gamers and casual gamers into this industry. It has to be about the ability to pick up a controller, not be intimidated, and have fun immediately. The trick is being able to do that, not only with the new casual gamer, but do it in a way that the core gamer gets excited as well. [ ] Q: Sounds like you're more focused on new customers and not necessarily taking share from the other guys. A: The interesting thing is if you do expand the market, you do both. You grow the category, but you'll also dramatically increase your market share. As an example, Nintendo DS in Japan outsells all of our competitors by a factor of five to one. We are so far in advance of our handheld competitors that they're not even on the map. That's all based on a market expansion strategy. And that's what we're looking to do with home consoles. a) Assume that Sony decided to buy a game publisher company that develops games for Sony PlayStation. (i) The acquisition decision is an example of: [circle only one] (1 points) Imitation Related Diversification Invention Unrelated Diversification Innovation Forward Vertical Integration Backward Vertical Integration Horizontal Growth (ii) Explain how you reached your answer in part (a-i) above. (2 points) 2
3 b) In 2006, the videogame consoles market is dominated by Sony PlayStation. Explain how Nintendo s development of Nintendo Wii helps Nintendo gain market leadership in the highly competitive consoles market. Provide details and use a graph to illustrate your answer. (3 points) c) Microsoft, a multinational technology company best known for its operating system Microsoft Windows, decided in 2001 to enter the video games industry by introducing the gaming console Xbox. Justify Microsoft s decision to use internal development as a new market entry mode, as opposed to acquisition or joint venture? Explain your answer carefully with details. (3 points) 3
4 2. On June 25, 2012, Microsoft purchased Yammer, a social network service for businesses, for $1.2 billion in cash. Yammer allows companies to create private, Facebook-style social networks where employees can chat and collaborate. According to the New York Times, Microsoft planned to fold Yammer into a division responsible for selling Office, its lucrative suite of business applications, which is facing threats from cheaper online options. We said, Look, we won t go shopping, but give us a fair price, Yammer board member George Zachary told the Times. The software giant did more than that. During its latest financial round, Yammer was appraised at a market value of $600 million. Microsoft paid twice as much. Microsoft first approached Yammer in early 2012 and submitted its opening acquisition bid in May. a) Explain how Microsoft, the buyer of Yammer, could be a victim of the winner s curse. (2 points) b) Explain how it is possible that Microsoft s acquisition of Yammer was not a case of winner s curse. Provide details to receive full points. (3 points) 4
5 c) How can transaction cost economics justify the decision of Microsoft to acquire Yammer? Explain your answer with details to receive points. (2 points) 3. (i) Why is the online social networks industry (e.g. Facebook) a winner-take-all industry? (ii) Compare your answer to why the computer operating systems (e.g. M.S. Windows) industry is a winner-take-all industry. (Hint: the reasons for the two industries are not exactly the same) (4 points) 5
6 BONUS QUESTION 1: What are the TWO most interesting topics to you in this course? (1 point) Industry analysis Strategy and finance (lecture 1) Corporate governance and agency theory Competitive strategy and advantage Technology and innovation Vertical integration and transaction costs Diversification and growth strategies BONUS QUESTION 2: When was Kuwait University s College of Business Administration first awarded the international AACSB accreditation? (1 point)
EXAM 2. The exam is open book and open notes. Electronics are not allowed during the exam.
MISHARI ALNAHEDH STRATEGIC MANAGEMENT MKT 450 Section 56 Fall 2017 EXAM 2 General Instructions You have 120 minutes to complete the exam. The exam is open book and open notes. Electronics are not allowed
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