Etextbook 978 0133126143 Strategic Management and Business Policy Globalization Innovation and Sustainability

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Brief Contents
PART ONE Introduction to Strategic Management and Business Policy 1
CHAPTER 1 Basic Concepts of Strategic Management 2
CHAPTER 2 Corporate Governance 40
CHAPTER 3 Social Responsibility and Ethics in Strategic Management 68
PART TWO Scanning the Environment 89

CHAPTER 4 Environmental Scanning and Industry Analysis 90
CHAPTER 5 Internal Scanning: Organizational Analysis 126
PART THREE Strategy Formulation 161

CHAPTER 6 Strategy Formulation: Situation Analysis and Business Strategy 162
CHAPTER 7 Strategy Formulation: Corporate Strategy 184
CHAPTER 8 Strategy Formulation: Functional Strategy and Strategic Choice 214
PART FOUR Strategy Implementation and Control 243

CHAPTER 9 Strategy Implementation: Organizing for Action 244
CHAPTER 10 Strategy Implementation: Staffing and Directing 274
CHAPTER 11 Evaluation and Control 302
PART FIVE Introduction to Case Analysis 331

CHAPTER 12 Suggestions for Case Analysis 332
PART SIX Cases in Strategic Management 1-1

GLOSSARY G-1
NAME INDEX I-1
SUBJECT INDEX I-6
v
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Contents
Preface xxiii
About the Authors xxxi
PART ONE Introduction to Strategic Management and Business Policy 1
CHAPTER 1 Basic Concepts of Strategic Management 2

The Study of Strategic Management 4
Phases of Strategic Management 4
Benefits of Strategic Management 5
Globalization, Innovation, and Sustainability: Challenges to Strategic Management 7
Impact of Globalization 8
Impact of Innovation 9
Global Issue: REGIONAL TRADE ASSOCIATIONS REPLACE NATIONAL TRADE BARRIERS 9
Impact of Sustainability 10
Theories of Organizational Adaptation 11
Creating a Learning Organization 12
Basic Model of Strategic Management 13
Environmental Scanning 14
Strategy Formulation 16
Strategy Implementation 19
Evaluation and Control 21
Feedback/Learning Process 21
Initiation of Strategy: Triggering Events 22
Strategic Decision Making 23
What Makes a Decision Strategic 23
Mintzberg’s Modes of Strategic Decision Making 24
Strategic Decision-Making Process: Aid to Better Decisions 25
The Strategic Audit: Aid to Strategic Decision Making 26
End of Chapter Summary 27
APPENDIX 1.A Strategic Audit of a Corporation 32
vii
viii CONTENTS
CHAPTER 2 Corporate Governance 40

Role of the Board of Directors 43
Responsibilities of the Board 44
Members of a Board of Directors 46
Innovation Issue: JCPENNEY AND INNOVATION 47
Strategy Highlight: AGENCY THEORY VERSUS STEWARDSHIP THEORY
IN CORPORATE GOVERNANCE 49
Nomination and Election of Board Members 52

Organization of the Board 53
Impact of the Sarbanes–Oxley Act on U.S. Corporate Governance 54
Global Issue: GLOBAL BUSINESS BOARD ACTIVISM AT YAHOO! 56
Trends in Corporate Governance 57
The Role of Top Management 58
Responsibilities of Top Management 58
Sustainability Issue: CEO PAY AND CORPORATE PERFORMANCE 59
CHAPTER 3 Social Responsibility and Ethics in Strategic Management 68

Social Responsibilities of Strategic Decision Makers 70
Responsibilities of a Business Firm 70
Sustainability 73
Corporate Stakeholders 74
Sustainability Issue: MARKS & SPENCER LEADS THE WAY 74
Strategy Highlight: JOHNSON & JOHNSON CREDO 77
Ethical Decision Making 77
Some Reasons for Unethical Behavior 78
Global Issue: HOW RULE-BASED AND RELATIONSHIP-BASED GOVERNANCE SYSTEMS
AFFECT ETHICAL BEHAVIOR 79
Innovation Issue: TURNING A NEED INTO A BUSINESS TO SOLVE THE NEED 81
Encouraging Ethical Behavior 82
PART TWO Scanning the Environment 89
CHAPTER 4 Environmental Scanning and Industry Analysis 90

Environmental Scanning 92
Identifying External Environmental Variables 92
C O NT E N T S ix
Sustainability Issue: GREEN SUPERCARS 94

Global Issue: SUVs POWER ON IN CHINA 102
Identifying External Strategic Factors 103
Industry Analysis: Analyzing the Task Environment 104
Porter’s Approach to Industry Analysis 104
Industry Evolution 108
Innovation Issue: TAKING STOCK OF AN OBSESSION 109
Categorizing International Industries 109
International Risk Assessment 110
Strategic Groups 110
Strategic Types 112
Hypercompetition 112
Using Key Success Factors to Create an Industry Matrix 113
Competitive Intelligence 114
Sources of Competitive Intelligence 115
Strategy Highlight: EVALUATING COMPETITIVE INTELLIGENCE 116
Monitoring Competitors for Strategic Planning 117
Forecasting 118
Danger of Assumptions 118
Useful Forecasting Techniques 118
The Strategic Audit: A Checklist for Environmental Scanning 120
Synthesis of External Factors—EFAS 120
CHAPTER 5 Internal Scanning: Organizational Analysis 126

A Resource-Based Approach to Organizational Analysis 128
Core and Distinctive Competencies 128
Using Resources to Gain Competitive Advantage 129
Determining the Sustainability of an Advantage 130
Business Models 132
Value-Chain Analysis 133
Industry Value-Chain Analysis 134
Corporate Value-Chain Analysis 135
Scanning Functional Resources and Capabilities 136
Basic Organizational Structures 137
Corporate Culture: The Company Way 138
x CONTENTS
Global Issue: MANAGING CORPORATE CULTURE FOR GLOBAL COMPETITIVE

ADVANTAGE: ABB VS. PANASONIC 140
Strategic Marketing Issues 140

Innovation Issue: DOCOMO MOVES AGAINST THE GRAIN 142
Strategic Financial Issues 143
Strategic Research and Development (R&D) Issues 144
Strategic Operations Issues 146
Strategic Human Resource (HRM) Issues 147
Sustainability Issue: THE OLYMPIC GAMES—SOCHI 2014 AND RIO 2016 150
Strategic Information Systems/Technology Issues 151
The Strategic Audit: A Checklist for Organizational Analysis 153
Synthesis of Internal Factors 153
PART THREE Strategy Formulation 161
CHAPTER 6 Strategy Formulation: Situation Analysis and Business Strategy 162

Situational Analysis: SWOT Approach 164
Generating a Strategic Factors Analysis Summary (SFAS) Matrix 164
Finding a Propitious Niche 165
Review of Mission and Objectives 168
Business Strategies 169
Porter’s Competitive Strategies 169
Global Issue: THE NIKE SHOE STRATEGY VS. THE NEW BALANCE SHOE STRATEGY 171
Innovation Issue: CHEGG AND COLLEGE TEXTBOOKS 174
Cooperative Strategies 175
Sustainability Issue: STRATEGIC SUSTAINABILITY—ESPN 176
CHAPTER 7 Strategy Formulation: Corporate Strategy 184

Corporate Strategy 186
Directional Strategy 186
Growth Strategies 187
Strategy Highlight: TRANSACTION COST ECONOMICS ANALYZES VERTICAL
GROWTH STRATEGY 191
International Entry Options for Horizontal Growth 192

Global Issue: GLOBAL EXPANSION IS NOT ALWAYS A PATH TO EXPANSION 192
Controversies in Directional Growth Strategies 196
C O NT E N T S xi
Stability Strategies 197

Retrenchment Strategies 198
Portfolio Analysis 200
BCG Growth-Share Matrix 200
Sustainability Issue: GENERAL MOTORS AND THE ELECTRIC CAR 202
Advantages and Limitations of Portfolio Analysis 203
Managing a Strategic Alliance Portfolio 204
Corporate Parenting 205
Innovation Issue: TO RED HAT OR NOT? 205
Developing a Corporate Parenting Strategy 206
Horizontal Strategy and Multipoint Competition 207
CHAPTER 8 Strategy Formulation: Functional Strategy and Strategic Choice 214

Functional Strategy 216
Marketing Strategy 216
Financial Strategy 217
Research and Development (R&D) Strategy 219
Operations Strategy 220
Global Issue: WHY DOESN’T STARBUCKS WANT TO EXPAND TO ITALY? 221
Purchasing Strategy 222
Sustainability Issue: HOW HOT IS HOT? 223
Logistics Strategy 224
Innovation Issue: WHEN AN INNOVATION FAILS TO LIVE UP TO EXPECTATIONS 224
Human Resource Management (HRM) Strategy 225
Information Technology Strategy 225
The Sourcing Decision: Location of Functions 226
Strategies to Avoid 229
Strategic Choice: Selecting the Best Strategy 229
Constructing Corporate Scenarios 230
The Process of Strategic Choice 235
Developing Policies 236
PART FOUR Strategy Implementation and Control 243
CHAPTER 9 Strategy Implementation: Organizing for Action 244

Strategy Implementation 246
Who Implements Strategy? 247
xii CONTENTS
What Must Be Done? 248

Developing Programs, Budgets, and Procedures 248
Sustainability Issue: A BETTER BOTTLE—ECOLOGIC BRANDS 249
Achieving Synergy 252
How Is Strategy to Be Implemented? Organizing for Action 253
Structure Follows Strategy 253
Stages of Corporate Development 254
Innovation Issues: THE P&G INNOVATION MACHINE STUMBLES 255
Organizational Life Cycle 258
Advanced Types of Organizational Structures 260
Reengineering and Strategy Implementation 263
Six Sigma 264
Designing Jobs to Implement Strategy 265
International Issues in Strategy Implementation 266
International Strategic Alliances 266
Stages of International Development 267
Global Issue: OUTSOURCING COMES FULL CIRCLE 268
Centralization Versus Decentralization 268
CHAPTER 10 Strategy Implementation: Staffing and Directing 274

Staffing 276
Staffing Follows Strategy 277
Selection and Management Development 279
Innovation Issue: HOW TO KEEP APPLE “COOL” 279
Problems in Retrenchment 281
International Issues in Staffing 283
Leading 285
Sustainability Issue: PANERA AND THE “PANERA CARES COMMUNITY CAFÉ” 285
Managing Corporate Culture 286
Action Planning 290
Management by Objectives 292
Total Quality Management 292
International Considerations in Leading 293
Global Issue: CULTURAL DIFFERENCES CREATE IMPLEMENTATION
PROBLEMS IN MERGER 295

C O NT E N T S xiii
CHAPTER 11 Evaluation and Control 302

Evaluation and Control in Strategic Management 304
Measuring Performance 304
Appropriate Measures 304
Types of Controls 305
Innovation Issue: REUSE OF ELECTRIC VEHICLE BATTERIES 306
Activity-Based Costing 307
Enterprise Risk Management 308
Primary Measures of Corporate Performance 308
Balanced Scorecard Approach: Using Key Performance Measures 311
Sustainability Issue: E-RECEIPTS 311
Primary Measures of Divisional and Functional Performance 313
Responsibility Centers 314
Using Benchmarking to Evaluate Performance 315
International Measurement Issues 316
Global Issue: COUNTERFEIT GOODS AND PIRATED SOFTWARE: A GLOBAL PROBLEM 318
Strategic Information Systems 318
Enterprise Resource Planning (ERP) 319
Radio Frequency Identification (RFID) 319
Divisional and Functional is Support 320
Problems in Measuring Performance 320
Short-Term Orientation 320
Goal Displacement 322
Guidelines for Proper Control 323
Strategic Incentive Management 323
PART FIVE Introduction to Case Analysis 331
CHAPTER 12 Suggestions for Case Analysis 332

The Case Method 334
Researching the Case Situation 334
Financial Analysis: A Place to Begin 335
Analyzing Financial Statements 335
Common-Size Statements 339
Z-Value and the Index of Sustainable Growth 339
Useful Economic Measures 340
Format for Case Analysis: The Strategic Audit 341
xiv CONTENTS

APPENDIX 12.A Resources for Case Research 345
APPENDIX 12.B Suggested Case Analysis Methodology Using the Strategic Audit 347
APPENDIX 12.C Example of Student-Written Strategic Audit 350
PART SIX Cases in Strategic Management 1-1
SECTION A Corporate Governance: Executive Leadership

CASE 1 The Recalcitrant Director at Byte Products, Inc.: Corporate Legality versus
Corporate Responsibility 1-7
(Contributors: Dan R. Dalton, Richard A. Cosier, and Cathy A. Enz)
A plant location decision forces a confrontation between the board of directors and the CEO
regarding an issue in social responsibility and ethics.
CASE 2 The Wallace Group 2-1

(Contributor: Laurence J. Stybel)
Managers question the company’s strategic direction and how it is being managed by its founder and
CEO. Company growth has resulted not only in disorganization and confusion among employees, but
in poor overall performance. How should the board deal with the company’s founder?
SECTION B Business Ethics

CASE 3 Everyone Does It 3-1
(Contributors: Steven M. Cox and Shawana P. Johnson)
When Jim Willis, Marketing VP, learns that the launch date for the company’s new satellite will be late
by at least a year, he is told by the company’s president to continue using the earlier published date
for the launch. When Jim protests that the use of an incorrect date to market contracts is unethical,
he is told that spacecraft are never launched on time and that it is common industry practice to list
unrealistic launch dates. If a realistic date was used, no one would contract with the company.
CASE 4 The Audit 4-1

(Contributors: Gamewell D. Gantt, George A. Johnson, and John A. Kilpatrick)
A questionable accounting practice by the company being audited puts a new CPA in a difficult
position. Although the practice is clearly wrong, she is being pressured by her manager to ignore it
because it is common in the industry.
SECTION C Corporate Social Responsibility

CASE 5 Early Warning or False Sense of Security? Concussion Risk and the Case of the
Impact-Sensing Football Chinstrap 5-1
(Contributors: Clifton D. Petty, and Michael R. Shirley)
In 2009, Battle Sports Science, headquartered in Omaha, Nebraska, was built with a focus on
new “enhancing safety for athletes.” Specifically, the company wanted to protect young athletes who might
have suffered a concussion. Battle Sports Science attempted to gain market attention for its US$149.99
impact indicator (chin strap) through endorsements, and had enlisted a number of NFL players. The
company hoped to sell the device to sports programs (schools) as well as to individual players.
C O NT E N T S xv
SECTION D International Issues in Strategic Management

CASE 6 A123 Systems: A New Lithium-Ion Battery System for Electric
and Hybrid Cars 6-1
(Contributor: Alan N. Hoffman)
In 2007, A123 was developing its hybrid electric vehicle business. A123 entered into a partnership
new with Cobasys to introduce lithium-ion batteries into the automotive market. A123 also entered into an
agreement with GM to use their batteries in the Saturn Vue Plug-in Hybrid development program and
to co-develop a lithium-ion battery for the Chevrolet Volt. A123 faced cash flow shortages after its
2009 IPO and its ultimate survival was threatened by its diminishing funds for continued operations.
CASE 7 Guajilote Cooperativo Forestal, Honduras 7-1

(Contributors: Nathan Nebbe and J. David Hunger)
This forestry cooperative has the right to harvest, transport, and sell fallen mahogany trees in
La Muralla National Park of Honduras. Although the cooperative has been successful thus far, it is
facing some serious issues: low prices for its product, illegal logging, deforestation by poor farmers,
and possible world trade restrictions on the sale of mahogany.
SECTION E General Issues in Strategic Management
INDUSTRY ONE: INTERNET COMPANIES

CASE 8 Google Inc. (2010): The Future of the Internet Search Engine 8-1
(Contributor: Patricia A. Ryan)
Google, an online company that provides a reliable Internet search engine, was founded in 1998 and
soon replaced Yahoo as the market leader in Internet search engines. By 2010, Google was one of
the strongest brands in the world. Nevertheless, its growth by acquisition strategy was showing signs
of weakness. Its 2006 acquisition of YouTube had thus far not generated significant revenue growth.
Groupon, a shopping Web site, rebuffed Google’s acquisition attempt in 2010. Is it time for a strategic
change?
CASE 9 Amazon.com, Inc.: Retailing Giant to High-Tech Player? 9-1

In 2012, more than half of all Amazon sales came from computers, mobile devices including the
Kindle, Kindle Fire, and Kindle Touch, and other electronics, as well as general merchandise from
home and garden supplies to groceries, apparel, jewelry, health and beauty products, sports and
new outdoor equipment, tools, and auto and industrial supplies. Amazon was at a crossroads with regard
to its push into technology versus its general merchandise. Amazon also faced other challenges,
including those from state governments that wanted it to collect sales taxes so it would not adversely
compete against local businesses.
CASE 10 Blue Nile, Inc.: “Stuck in the Middle” of the Diamond Engagement
Ring Market 10-1
Blue Nile Inc. has developed into the largest online retailer of diamond engagement rings. Unlike
traditional jewelry retailers, Blue Nile operates completely store-front-free, without in-person
new consultation services. The business conducts all sales online or by phone, and sales include both
engagement (70%) and non-engagement (30%) categories. Blue Nile’s vision is to educate its
customer base so customers can make an informed, confident decision no matter what event they
are celebrating. It wants to make the entire diamond-buying process easy and hassle-free.
xvi CONTENTS
INDUSTRY TWO: ENTERTAINMENT AND LEISURE

CASE 11 Groupon Inc.: Daily Deal or Lasting Success? 11-1
(Contributors: Nick Falcone, Eric Halbruner, Ellie A. Fogarty, and Joyce Vincelette)
Groupon began as a local Chicago discount service and became a global phenomenon seemingly
overnight. It was a great idea. The company was the first of its kind and changed the way consumers
new spend, shop, and think about discounts. But how could Groupon, based on such innovation and having
experienced such exceptional growth, be in such a precarious position? A wave of competition had
swelled, including the likes of technology giants and both general and niche daily deals services, all
replicating Groupon’s business model. How could Groupon compete against large companies and
their expansive resources?
CASE 12 Netflix Inc.: The 2011 Rebranding/Price Increase Debacle 12-1

On September 18, 2011, Netflix CEO and co-founder Reed Hastings announced on the Netflix blog
that the company was splitting its DVD delivery service from its online streaming service, rebranding
its DVD delivery service Qwikster, as a way to differentiate it from its online streaming service, and
new creating a new Web site for it. Three weeks later, in response to customer outrage and confusion,
Hastings rescinded the decision to rebrand the DVD delivery service Qwikster and reintegrated it
into Netflix. Nevertheless, only five weeks after the initial split, Netflix acknowledged that it had lost
800,000 U.S. subscribers and expected to lose many more, thanks both to the Qwikster debacle and the
price hike the company had decided was necessary to cover increasing content costs.
CASE 13 Carnival Corporation & plc (2010) 13-1

(Contributors: Michael J. Keeffe, John K. Ross III, Sherry K. Ross, Bill J. Middlebrook,
and Thomas L. Wheelen)
With its “fun ship,” Carnival Cruises changed the way people think of ocean cruises. The cruise
became more important than the destination. Through acquisition, Carnival expanded its product line
to encompass an entire range of industry offerings. How can Carnival continue to grow in the industry
it now dominates?
CASE 14 Zynga, Inc. (2011): Whose Turn Is It? 14-1

(Contributors: Zachary Burkhalter, Daniel Zuller, Concetta Bagnato, Joyce Vincelette,
and Ellie A. Fogarty)
Zynga built its company around social gaming. This new type of gaming transformed the gaming
industry on multiple levels and across various platforms. Zynga originally built its games using the
new
Facebook platform and then capitalized on the company’s unique method of social networking to
capture audiences around the world. However, this strong reliance on Facebook and changes in
consumer gaming practices caused some concern among outside investors as to the future of Zynga.
INDUSTRY THREE: FOOD AND BEVERAGE

CASE 15 The Boston Beer Company: Brewers of Samuel Adams Boston Lager
(Mini Case) 15-1
The Boston Beer Company, founded in 1984 by Jim Koch, is viewed as pioneer in the American craft
beer revolution. Brewing over one million barrels of 25 different styles of beer, Boston Beer is the
sixth-largest brewer in the United States. Even though overall domestic beer sales declined 1.2% in
2010, sales of craft beer have increased 20% since 2002, with Boston Beer’s increasing 22% from
2007 to 2009. How can the company continue its rapid growth in a mature industry?
C O NT E N T S xvii
CASE 16 Panera Bread Company (2010): Still Rising Fortunes? 16-1

(Contributors: Joyce P. Vincelette and Ellie A. Fogarty)
Panera Bread is a successful bakery-café known for its quality soups and sandwiches. Even though
Panera’s revenues and net earnings have been rising rapidly, new unit expansion throughout North
America has fueled this growth. Will revenue growth stop once expansion slows? The retirement
of CEO Ronald Shaich, the master baker who created the “starter” for the company’s phenomenal
growth, is an opportunity to rethink Panera’s growth strategy.
CASE 17 Whole Foods Market (2010): How to Grow in an Increasingly

Competitive Market? (Mini Case) 17-1
(Contributors: Patricia Harasta and Alan N. Hoffman)
Whole Foods Market is the world’s leading retailer of natural and organic foods. The company
differentiates itself from competitors by focusing on innovation, quality, and service excellence,
allowing it to charge premium prices. Although the company dominates the natural/organic foods
category in North America, it is facing increasing competition from larger food retailers like Wal-
Mart, who are adding natural/organic foods to their offerings.
CASE 18 Burger King (Mini Case) 18-1

(Contributor: J. David Hunger)
Founded in Florida in 1953, Burger King has always trailed behind McDonald’s as the second-largest
fast-food hamburger chain in the world. Although its total revenues dropped only slightly from 2009,
its 2010 profits dropped significantly, due to high expenses. Burger King’s purchase by an investment
group in 2010 was an opportunity to rethink the firm’s strategy.
CASE 19 Church & Dwight: Time to Rethink the Portfolio? 19-1

(Contributor: Roy A. Cook)
Church & Dwight, the maker of ARM & HAMMER Baking Soda, has used brand extension to
successfully market multiple consumer products based on sodium bicarbonate. Searching for a new
growth strategy, the firm turned to acquisitions. Can management successfully achieve a balancing act
based on finding growth through expanded uses of sodium bicarbonate while assimilating a divergent
group of consumer products into an expanding international footprint?
INDUSTRY FOUR: APPAREL

CASE 20 Under Armour 20-1
(Contributors: Ram Subramanian and Pradeep Gopalakrishna)
Under Armour’s footwear sales declined by 4.5% during the second quarter of 2009 and showed
a 16.6% decline in the first six months of 2010 compared to 2009. This was in contrast to its
new performance apparel, the company’s core category, which saw a 32.2% uptick over 2009. Under
Armour had tremendous growth opportunities in the apparel category in China. However, CEO Kevin
Plank wanted Under Armour to be a leading player in the field of athletic footwear.
CASE 21 TOMS Shoes (Mini Case) 21-1

Founded in 2006 by Blake Mycoskie, TOMS Shoes is an American footwear company based in Santa
Monica, California. Although TOMS Shoes is a for-profit business, its mission is more like that of a
not-for-profit organization. The firm’s reason for existence is to donate to children in need one new
pair of shoes for every pair of shoes sold. By 2010, the company had sold over one million pairs of
shoes. How should the company plan its future growth?
xviii CONTENTS
CASE 22 Best Buy Co. Inc. (2009): A Sustainable Customer-Centricity Model? 22-1
Best Buy, the largest consumer electronics retailer in the United States, operates 4000 stores in North
America, China, and Turkey. It distinguishes itself from competitors by deploying a differentiation
strategy based on superior service rather than low price. The recent recession has stressed its finances
and the quality of its customer service. How can Best Buy continue to have innovative products, top-
notch employees, and superior customer service while facing increased competition, operational costs,
and financial stress?
INDUSTRY FIVE: SPECIALTY RETAILING

CASE 23 Rosetta Stone Inc.: Changing the Way People Learn Languages 23-1
(Contributors: Christine B. Buenafe and Joyce P. Vincelette)
Rosetta Stone’s mission was to change the way people learn languages. The company blended
language learning with technology at a time when globalization connected more and more individuals
and institutions to each other. How should the company move forward? Would it be appropriate for
Rosetta Stone to offer products like audio books or services in order to increase market share? Which
international markets could provide the company with a successful future?
CASE 24 Dollar General Corporation: 2011 Growth Expansion Plans (Mini Case) 24-1
(Contributor: Kathryn E. Wheelen)
With annual revenues of US$12.7 billion and 9200 stores in 35 states, Dollar General is the largest
of the discount “dollar stores” in the United States. Although far smaller than its “big brothers”
Wal-Mart and Target, Dollar General has done very well during the recent economic recession. In
2011, it planned to open 625 new stores in three new states. Given that the company has a substantial
long-term debt, is this the right time to expand its operations?
CASE 25 iRobot: Finding the Right Market Mix? 25-1

Founded in 1990, iRobot was one of the first companies to introduce robotic technology into the
consumer market. Employing over 500 robotic professionals, the firm planned to lead the robotics
industry. Unfortunately, its largest revenue source, home care robots, is a luxury good and vulnerable
to recessions. Many of iRobot’s patents are due to expire by 2019. The firm is highly dependent upon
suppliers to make its consumer products and the U.S. government for its military sales. What is the
best strategy for its future success?
SECTION D
I N D U S T R Y S I X : TRANSPORTATION
CASE 26 Tesla Motors, Inc.: The First U.S. Car Company IPO Since 1956 26-1
Tesla Motors was founded in 2004 to produce electric automobiles. Its first car, the Tesla Roadster,
sold for US$101,000. It could accelerate from 0 to 60 mph in 3.9 seconds, and cruise for 236 miles
new on a single charge. In contrast to existing automakers, Tesla sold and serviced its cars through the
Internet and its own Tesla stores. With the goal of building a full line of electric vehicles, Tesla Motors
faces increasing competition from established automakers. How can Tesla Motors succeed in an
industry dominated by giant global competitors?
CASE 27 Delta Air Lines (2012): Navigating an Uncertain Environment 27-1

(Contributors: Alan N. Hoffman and J. David Hunger)
Delta used mergers and acquisitions (M&A) successfully to solidify its strong position as a leader in
the airline industry. It has gone through five M&As since 1953, including the most recent acquisition
new of Northwest Airlines (Northwest), which turned Delta into an airline with major operations in every
region of the world. The Northwest merger took a toll on Delta’s financial position, however, by
contributing to its high long-term debt.
C O NT E N T S xix
In 2012, top management began cautiously exploring opportunities for entering new markets, routes,
and partnerships in order to boost market share. Management was also searching for ways to reduce
costs and expenses in an industry that was rapidly consolidating into fewer major national and
international players. Delta is considering purchasing from Conoco.
CASE 28 TomTom: New Competition Everywhere! 28-1

TomTom, an Amsterdam-based company that provides navigation services and devices, led the
navigation systems market in Europe and is second in popularity in the United States. However, the
company is facing increasing competition from other platforms using GPS technology, like cell phones
and Smartphones with built-in navigation functions. As its primary markets in the United States and
Europe mature, how can the company ensure its future growth and success?
SECTION G
INDUSTRY SEVEN: MANUFACTURING

CASE 29 General Electric, GE Capital, and the Financial Crisis of 2008: The Best of the
Worst in the Financial Sector? 29-1
The financial services industry was, by definition, volatile, and GE Capital was particularly hard
hit by the economic recession of 2008. With the credit markets illiquid and financial markets falling,
GE Capital found it was overexposed to commercial real estate and foreign residential mortgages.
new At this point, GE’s parent corporation stepped in, began reorganizing GE Capital, and significantly
downsized the unit. GE Capital hoped to see continued sustainable earnings growth with growing
margins and lower portfolio risk, and to return money to investors and resume paying dividends to its
parent company
CASE 30 AB Electrolux: Challenging Times in the Appliance Industry 30-1

AB Electrolux is currently the world’s second-largest appliance maker, behind Whirlpool. Electrolux
has over 50,000 employees in more than 50 countries around the world. Its headquarters are in
Stockholm, Sweden.
As the social and demographic trends continue to evolve, so do the opportunities afforded to
Electrolux. The most significant demographic shift globally is the growing middle class in Asia, which
includes families with incomes between US$6000 and US$30,000. It is estimated that by 2020 there
new will be one billion more people in the global middle class than there were in 2010. Correlated with
rising incomes worldwide, homeownership has also increased at a substantial rate, giving rise to
increased demand for consumer durables such as refrigerators, washing machines, and dishwashers.
INDUSTRY EIGHT: INFORMATION TECHNOLOGY

CASE 31 Apple Inc.: Performance in a Zero-Sum World Economy 31-1
(Contributors: Moustafa H. Abdelsamad, Hitesh (John) Adhia, David B. Croll, Bernard A.
Morin, Lawrence C. Pettit Jr., Kathryn E. Wheelen, Richard D. Wheelen, Thomas L.
Wheelen II, and Thomas L. Wheelen)
By the 1990s, Apple, the first company to mass-market a personal computer, had become a minor
player in an industry dominated by Microsoft. After being expelled from the company in 1985, founder
Steve Jobs returned as CEO in 1997 to reenergize the firm. The introduction of the iPod in 2001,
followed by the iPad, catapulted Apple back into the spotlight. However, in 2011 Jobs was forced to
take his third medical leave, leading to questions regarding his ability to lead Apple. How can Apple
continue its success? How dependent is the company on Steve Jobs?
xx CONTENTS
CASE 32 Dell Inc.: Changing the Business Model (Mini Case) 32-1
Dell, once the largest PC vendor in the world, is now battling with Acer for second place in the global
PC market. Its chief advantages—direct marketing and power over suppliers—no longer provides
a competitive advantage. The industry’s focus has shifted from desktop PCs to mobile computing,
software, and technology services, areas of relative weakness for Dell. Is it time for Dell to change
its strategy?
CASE 33 Logitech (Mini Case) 33-1

Logitech, the world’s leading provider of computer peripherals, was on the forefront of mouse,
keyboard, and videoconferencing technology. By 2010, however, Logitech’s products were threatened
by new technologies, such as touchpads, that could replace both the mouse and keyboard. As the
peripherals market begins to disintegrate, Logitech is considering a change in strategy.
CASE 34 Daktronics (A): The U.S. Digital Signage Industry 2010 34-1
(Contributors: Joseph Kavanaugh, Joshua Warne, and Carol J. Cumber)
The billboard, sign, and outdoor advertising industry in the United States is almost as old as the
Colonies. Lighted billboards, roadside signs, neon lights, and other forms of display are part of our
everyday environment. The newest segment of the industry, digital signage, is driven by 21st-century
new technologies in computers, peripherals, graphics, and new sources of light—liquid crystal display
(LCD), light-emitting diodes (LED), and others. Less than 20 years old, the digital segment (sales of
US$2.14 billion) was estimated to be 17.8% of the outdoor signage industry in 2008. This note reviews
the digital signage industry and explores the forces that are driving this emerging segment of the
advertising, messaging, and sign industry.
GLOSSARY G-1
NAME INDEX I-1
SUBJECT INDEX I-6
Dedicated to
SPECIAL DEDICATION TO TOM WHEELEN

Tom originated this book in the late 1970s and with his friend David Hunger brought the first edition
to fruition in 1982. What a ride it has been! After battling bone cancer, Tom died in Saint Petersburg,
Florida, on December 24, 2011. It was Tom’s idea from the very beginning to include the latest research
and useful material written in such a way that the typical student could read and understand the book
without outside assistance. That has been a key reason for the success of the book through its many
editions. Tom’s last months were spent working with the two new co-authors to map out the direction for
the 14th edition. We thank you, Tom, and bid you a fond farewell! This 14th edition is for you.
J. David Hunger
Alan N. Hoffman
Charles E. Bamford
This is a special dedication to Thomas L. Wheelen, co-author, father, and best friend,
May 30, 1935 – December 24, 2011. This is the 14th edition of SMBP the creation you and
Mr. Hunger started due to your friendship at the McIntire School of Commerce at UVA with that
adjoining door! It is not very often that two co-authors become the best of friends, but you both did.
That was a very special gift that Tom treasured until the end. We are so glad you were able to meet as
the dynamic foursome to discuss the 14th edition of SMBP! The new addition of co-authors
Alan Hoffman and Chuck Bamford gave you and Mr. Hunger the ability to relax and smell the roses.
We have come full circle with you being back at UVA! You were an amazing friend, visionary,
teacher, and leader! Thank you for pushing us to be who we are today! You were very blessed to
have two children as your best friends! You will never know how much you are missed!
Dad – chailleann againn go mbainfidh tú agus grá agat. Tá do Spiorad na hÉireann le linn i gcónaí!
GNPD KEW and RDW
Betty, Kari and Jeff, Maddie and Megan, Suzi and Nick, Summer and Kacey, Lori,
Merry, Dylan, and newborn Edan. Also to Wolfie (arf!).
David Hunger
To Will Hoffman, the greatest son in the world. . . . and to our saint Wendy Appel.
In memory of my good friend, Tom Wheelen, via con dios. Thank you, Tom and David.
Alan Hoffman
To Yvonne, for your support, advice, encouragement, love, and confidence. To David and Tom, for your
confidence, council, and mental energy in the revision of this remarkable text.
Chuck Bamford
This page intentionally left blank
Preface
Welcome to the 14th edition of Strategic Management and Business Policy! All of the
chapters have been updated, and most of the cases are new and different. We have added
several brand-new cases (Early Warning: Concussion Risk and the Case of the Impact
Sensing Chinstrap, A123, Amazon, Blue Nile, Groupon, Netflix, Zynga, Under Armour,
General Electric, AB Electrolux, Tesla Motors, Delta Airlines, and The U.S. Digital
Signage Industry Note) for a total of 13 new cases! Many of the cases are exclusive to this
edition! Although we still make a distinction between full-length and mini cases, we have
interwoven them throughout the book to better identify them with their industries.
This edition revamps the theme that runs throughout all 12 chapters. We utilize a three-
legged approach consisting of globalization, innovation, and sustainability. These three
strategic issues comprise the cornerstone that all organizations must build upon to push their
businesses forward. Each chapter incorporates specific vignettes about these three themes.
We continue to be the most comprehensive and practical strategy book on the market, with
chapters ranging from corporate governance and social responsibility to competitive strat-
egy, functional strategy, and strategic alliances.
FEATURES NEW TO THIS 14TH EDITION

For the first time in 30 years, the 14th edition has added two new authors to the text. Alan
Hoffman, a major contributor to the 13th edition, is a former textbook author and world-
renowned author of strategy business cases, and Chuck Bamford, who was a student of Tom
Wheelen and David Hunger back in 1980 at the University of Virginia (McIntire School of
Commerce), has authored four other textbooks. They join J. David Hunger and bring a fresh
perspective to this extraordinarily well-researched and practically crafted text. In that vein,
this edition of the text has:
■ Vignettes on Sustainability (which is widely defined as Business Sustainability),
Globalization (which we view as an expectation of business), and Innovation (which is
the single most important element in achieving competitive advantage) appear in every
chapter of the text.
■ Every example, chapter opening, and story has been updated. This includes chapter
opening vignettes examining companies such as: Five Guys, RIM (BlackBerry), HP’s
Board of Directors, Tata Motors, Costco, and Pfizer among many others.
■ Resource-based analysis (Chapter 5) has been added to the toolbox of students’ under-
standing of competitive advantage.
■ Extensive additions have been made to the text on strategy research.
■ Current consulting practices have been added to the topics of strategy formulation and
strategy implementation.
■ Thirteen new full-length cases have been added:
Twelve new comprehensive cases and one new Industry Note have been added to support
the 13 popular full-length cases and 8 mini-cases carried forward from past editions. Thir-
teen of the cases in the 14th edition are brand new and one case is an updated favorite from
xxiii
xxiv PREFACE
past editions. Of the 34 cases appearing in this book, 20 are exclusive and do not appear in
other books.
■ One of the new cases deals with corporate social responsibility issues (Early Warning:
Concussion Risk and the Case of the Impact Sensing Chinstrap).
■ Two of the new cases deal with international issues (A123, AB Electrolux).
■ Two of the new cases involve Internet companies (Amazon, Blue Nile).
■ Three of the new cases deal with Entertainment and Leisure (Groupon, Netflix,
and Zynga).
■ One new case deals with sports and apparel clothing (Under Armour).
■ One new Industry Note concerns digital signage. (Daktronics).
■ One new case concerns the financial crisis of 2008 (GE Capital).
■ Two new cases deal with transportation (Delta Airlines, Tesla Motors)
HOW THIS BOOK IS DIFFERENT FROM

OTHER STRATEGY TEXTBOOKS
This book contains a Strategic Management Model that runs through the first 11 chapters
and is made operational through the Strategic Audit, a complete case analysis methodology.
The Strategic Audit provides a professional framework for case analysis in terms of external
and internal factors and takes the student through the generation of strategic alternatives and
implementation programs.
To help the student synthesize the many factors in a complex strategy case, we devel-
oped three useful techniques:
■ The External Factor Analysis (EFAS) Table in Chapter 4
This reduces the external opportunities and threats to the 8 to 10 most important external
factors facing management.
■ The Internal Factor Analysis (IFAS) Table in Chapter 5
This reduces the internal strengths and weaknesses to the 8 to 10 most important internal
factors facing management.
■ The Strategic Factor Analysis Summary (SFAS) Matrix in Chapter 6
This condenses the 16 to 20 factors generated in the EFAS and IFAS tables into the 8 to
10 most important (strategic) factors facing the company. These strategic factors become
the basis for generating alternatives and act as a recommendation for the company’s
future direction.
Suggestions for case analysis are provided in Appendix 12.B (end of Chapter 12) and
contain step-by-step procedures on how to use a strategic audit in analyzing a case. This
appendix includes an example of a student-written strategic audit. Thousands of students
around the world have applied this methodology to case analysis with great success. The
Case Instructor’s Manual contains examples of student-written strategic audits for each of
the full-length comprehensive strategy cases.
P R E F AC E xxv
FEATURES
This edition contains many of the same features and content that helped make previous
editions successful. Some of the features include the following:
■ A strategic management model

CHAPTER 1 Learning Objectives runs throughout the first 11 chapters
basic concepts of After reading this chapter, you should be able to:
■ Understand the benefits of strategic ■ Identify some common triggering events as a unifying concept. (Explained in
Strategic ■
management
Explain how globalization and environ-
mental sustainability influence strategic
management
■
■
that act as stimuli for strategic change
Understand strategic decision-making
modes
Use the strategic audit as a method of an- Chapter 1)
Management ■ Understand the basic model of strategic
management and its components
alyzing corporate functions and activities
Environmental Strategy Strategy Evaluation Ford—A Study in Strategic Planning

Scanning: Formulation: Implementation: and Control:
Gathering Developing Putting Strategy Monitoring
The 21st-century story of the power of strategic planning and
Information Long-range Plans into Action Performance
implementation for Ford Motor Company really starts in January 2006.
1
External Mission Ford announced a US$1.6 billion loss in North American operations and a continu-
Reason for
ing loss of market share. Then CEO and grandson of the founder, William Clay (Bill) Ford
Natural Objectives
Environment: existence
announced the “Way Forward”—a surprisingly clear strategy document to lead the company
Resources and
PART
What
climate results
l to Strategies back to profitability by 2008 and reduce costs by over US$6 billion by 2010. The entire docu-
accomplish
h
Societal by when Plan to
Environment: achieve
hi the
he Policies ment was only 16 pages long and clearly laid out the way that Ford was going to change the
General forces mission &
objectives Broad Programs direction of the company. This was a corporate-level change document in the classic planning
Task guidelines
id li and Tactics
Environment: for decision mode of strategy.
Industry analysis making Activities
d d to
needed Budgets
accomplishh For the next nine months, the company attempted to implement the plan, and the result
a plan Cost of the Procedures
Internal programs by the third quarter of 2006 was a staggering US$5.6 billion loss that would end up being a
Structure: Sequence Performance loss of over US$12 billion before the year was out. Bill Ford and the Board of Directors realized
off steps
Chain of command needed to
Culture: do the job Actual results that they needed a CEO who could really implement the plan. Someone with an operations
Beliefs, expectations,
values approach and the willingness to make the tough decisions required by that plan. They tapped
Resources: Alan Mulally, the President and CEO of Boeing’s Commercial Airlines unit. He stated that "These
Assets, skills,
competencies, business results are clearly unacceptable. We are committed to dealing decisively with the fun-
knowledge
damental business reality that customer demand is shifting to smaller, more efficient vehicles.”
Mulally immediately eliminated the Ford dividend which had been a staple of the
Feedback/Learning: Make corrections as needed

blue chip company for decades. He sold off Volvo, Aston-Martin, Jaguar, and Land
Rover to other companies and sold most of Ford’s stock holdings in Mazda. He shut down
the historic Mercury line of vehicles and focused all of the company’s energy on two
Introduction to
MyManagementLab®
Strategic
vehicle lines: Ford and Lincoln. In what now looks even more brilliant than it did at the
Improve Your Grade! time, he secured US$23.6 billion in lines of credit to help the company through the change.
Over 10 million students improved their results using the Pearson MyLabs.Visit mymanagementlab.com It turned out to be prescient. When the other American automobile companies saw their
for simulations, tutorials, and end-of-chapter problems. sales plummet in 2009, Ford was able to thrive. In fact, Ford was the only American auto
2 3
Management
■ The strategic audit, a way
and Business
to operationalize the strategic Policy
decision-making process, serves
as a checklist in case analysis.
(Chapter 1)
FIGURE 2–1 Board of Directors’ Continuum ■ Corporate governance is examined in terms of

Low
DEGREE OF INVOLVEMENT IN STRATEGIC MANAGEMENT
High
the roles, responsibilities, and interactions of
(Passive)
Rubber Minimal Nominal Active

(Active)
top management and the board of directors and
Phantom Stamp Review Participation Participation Catalyst
Never knows Permits officers Formally reviews Involved to a Approves, Takes the
includes the impact of the Sarbanes–Oxley Act.
what to do, if to make all selected issues limited degree questions, and leading role in
anything; no
degree of
involvement.
decisions. It
votes as the
officers recom-
that officers
bring to its
attention.
in the perfor-
mance or review
of selected key
makes final de-
cisions on mis-
sion, strategy,
establishing
and modifying
the mission,
(Chapter 2)
mend on action decisions, policies, and objectives,
issues. indicators, or objectives. Has strategy, and
programs of active board policies. It has
managment. committees. a very active
Performs fiscal strategy
and manage- committee.
ment audits.
SOURCE: T. L. Wheelen and J. D. Hunger, “Board of Directors’ Continuum,” Copyright © 1994 by Wheelen and Hunger Associates. Reprinted
by permission.
FIGURE 3–1
Responsibilities Discretionary
■ Social responsibility and managerial ethics are exam-
Social
of Business
Ethical
Responsibilities ined in detail in terms of how they affect strategic decision
Economic Legal
making. They include the process of stakeholder analysis
SOURCE: Suggested by Archie Carroll in A. B. Carroll, “A Three Dimensional Conceptual Model of Corporate
Performance,” Academy of Management Review (October 1979), pp. 497–505; A. B. Carroll, “Managing Ethically
and the concept of social capital. (Chapter 3)
with Global Stakeholders: A Present and Future Challenge,” Academy of Management Executive (May 2004),
pp. 114–120; and A. B. Carroll, “The Pyramid of Corporate Social Responsibility: Toward the Moral Management of
Organizational Stakeholders,” Business Horizons (July–August 1991), pp. 39–48.
xxvi PREFACE
■ Equal emphasis is placed on environmental scanning of the societal 128 PAR T 2 Scanning the Environment
approximately 75,000 Nanos a year. Although Tata Motors had intended to initially sell
environment as well as on the task environment. Topics include fore- the people’s car in India and then offer it in other developing markets, management has
really retrenched and the Nano looks to be based in India for a long time to come.
SOURCES: S. Philip, “Chairman Tata Seeks to Salvage World’s Cheapest Nano Car,” Bloomberg (August 21,
2012), (www.bloomberg.com/news/2012-08-21/chairman-tata-seeks-to-salvage-world-s-cheapest-nan-car-
casting and Miles and Snow’s typology in addition to competitive html); A. K. Mishra, “Tata’s Nano:Fire!” Forbes (May 21, 2010), (www.forbes.com/2010/05/20/forbes-india-
wheels-of-fire-tata-motors.html); D. Welch and N. Lakshman, “My Other Car Is a Tata,” Business Week
(January 14, 2008), pp. 33–34.
intelligence techniques and Porter’s industry analysis. (Chapter 4) A Resource-Based Approach to Organizational Analysis
Scanning and analyzing the external environment for opportunities and threats is necessary
for the firm to be able to understand its competitive environment and its place in that envi-
■ Core and distinctive competencies are examined within the ronment; however, it is not enough to provide an organization with a competitive advantage.
Once this external examination has been completed, the attention must turn to look within the
corporation itself to identify internal strategic factors—critical strengths and weaknesses that
framework of the resource-based view of the firm. (Chapter 5)

are likely to determine whether a firm will be able to take advantage of opportunities while
avoiding threats. This internal scanning, often referred to as organizational analysis, is con-
cerned with identifying, developing, and taking advantage of an organization’s resources and
competencies.
■ Organizational analysis includes material on business models, CORE AND DISTINCTIVE COMPETENCIES
Resources are an organization’s assets and are thus the basic building blocks of the organi-
supply chain management, and corporate reputation. (Chapter 5) zation. They include tangible assets (such as its plant, equipment, finances, and location),
human assets (the number of employees, their skills, and motivation), and intangible as-
sets (such as its technology [patents and copyrights], culture, and reputation).1 Capabilities
refer to a corporation’s ability to exploit its resources. They consist of business processes
and routines that manage the interaction among resources to turn inputs into outputs. For
■ Internal and external strategic factors are emphasized through the example, a company’s marketing capability can be based on the interaction among its mar-
keting specialists, distribution channels, and salespeople. A capability is functionally based
and is resident in a particular function. Thus, there are marketing capabilities, manufacturing
capabilities, and human resource management capabilities. When these capabilities are con-
use of specially designed EFAS, IFAS, and SFAS tables. stantly being changed and reconfigured to make them more adaptive to an uncertain environ-
ment, they are called dynamic capabilities.2 A competency is a cross-functional integration
and coordination of capabilities. For example, a competency in new product development
in one division of a corporation may be the consequence of integrating information systems
(Chapters 4, 5, and 6) capabilities, marketing capabilities, R&D capabilities, and production capabilities within
the division. A core competency is a collection of competencies that crosses divisional
boundaries, is widespread within the corporation, and is something that the corporation can
do exceedingly well. Thus, new product development is a core competency if it goes beyond
one division.3 For example, a core competency of Avon Products is its expertise in door-
■ Functional strategies are examined in light of outsourcing. to-door selling. FedEx has a core competency in its application of information technology
to all its operations. A company must continually reinvest in a core competency or risk its
becoming a core rigidity or deficiency—that is, a strength that over time matures and may
become a weakness.4 Although it is typically not an asset in the accounting sense, a core
(Chapter 8) competency is a very valuable resource—it does not “wear out” with use. In general, the
■ Two chapters deal with issues in strat-

CHAPTER 9 Learning Objectives egy implementation, such as orga-
strategy After reading this chapter, you should be able to:
■ Develop programs, budgets, and proce- ■ Construct matrix and network structures nizational and job design, as well as
implementation: ■
■
dures to implement strategic change
Understand the importance of achieving
synergy during strategy implementation
List the stages of corporate development
■
to support flexible and nimble organiza-
tional strategies
Decide when and if programs such as
reengineering, Six Sigma, and job rede- strategy-manager fit, action planning,
organizing for Action ■
and the structure that characterizes each
stage
Identify the blocks to changing from one
stage to another
■
sign are appropriate methods of strategy
implementation
Understand the centralization versus
decentralization issue in multinational corporate culture, and international
corporations
strategic alliances. (Chapters 9 and 10)

Environmental Strategy Strategy Evaluation
Gathering Developing
For nearly five decades, Wal-Mart’s “everyday low prices” and low-cost position
A separate chapter on evaluation and

Putting Strategy Monitoring
■
Information Long-range Plans into Action Performance had enabled it to rapidly grow to dominate North America’s retailing landscape.
By 2012, however, its U.S. division generated only 2.2% growth in its same-store
External Mission
sales even as the recession was fading. Target, Macy’s, Kohl’s Costco, GAP, Kroger,
Natural Reason for
control explains the importance of

existence
Objectives
Environment: and even The Home Depot were all growing faster than Wal-Mart. At about the same time,
Resources and What
climate results
l to Strategies Microsoft, whose software had grown to dominate personal computers worldwide, saw its
accomplish
h
Societal by when Plan to revenue growth over the five-year period from 2007 to 2012 slow to just 6.6%. The company’s
hi the
he Policies
measurement and in-

objectives Broad Programs stock price had been virtually flat since 2002, an indication that investors no longer perceived
Task guidelines
id li and Tactics
Environment: for decision Microsoft as a growth company. What had happened to these two successful companies? Was
Budgets
d d to
needed this an isolated phenomenon? What could be done, if anything, to reinvigorate these giants?
accomplishh
a plan Cost of the
Internal Procedures A research study by Matthew Olson, Derek van Bever, and Seth Verry attempts to provide
centives to organiza-
programs
Structure: Sequence Performance an answer. After analyzing the experiences of 500 successful companies over a 50-year period,
off steps
do the job Actual results
they found that 87% of the firms had suffered one or more serious declines in sales and profits.
Culture:
Beliefs, expectations, This included a diverse set of corporations, such as Levi Strauss, 3M, Apple, Bank One, Caterpillar,
tional performance.
values
Resources:
Assets, skills,
competencies,
knowledge
CHAPTER 10 Daimler-Benz, Toys“R”Us, and Volvo. After years of prolonged growth in sales and profits,
revenue growth at each of these firms suddenly stopped and even turned negative! Olson, van
Learning Objectives
Bever, and Verry called these long-term reversals in company growth stall points. On average,

strategy corporations lost 74% of their market capitalization in the decade surrounding a growth stall.
After
Even though the CEO and other members of top management were typically reading
replaced,
46% of the firms were able to return to moderate or high growth within the
onlythis
decade. When
■ Understand
chapter, you should be able to:
the link between strategy and ■

(Chapter 11)
Assess and manage the corporate culture’s
MyManagementLab®
Improve Your Grade!
implementation: slow growth was allowed to persist for more than 10 years, the delay was usuallystaffing
of this group was able to return to moderate or high growth.
fatal. Only
■
strategy
At Levi Strauss & Company, for example, sales topped US$7 billion in 1996—extending
7%
decisions
Match the appropriate manager to the
■ Understand how to implement an effec-

■
fit with a new strategy
Formulate effective action plans when
MBO and TQM are determined to
be appropriate methods of strategy
Staffing and Directing

Over 10 million students improved their results using the Pearson MyLabs.Visit mymanagement.com growth that had more than doubled over the previous decade. From that high-water mark,
tive downsizing program implementation
for simulations, tutorials, and end-of-chapter problems.
■ Discuss important issues in effectively
244 staffing and directing
245 international
expansion
Environmental Strategy Strategy Evaluation Costco: Leading from the Front

Gathering Developing Putting Strategy Monitoring
Costco was founded in 1983 upon several simple foundations, such as marking
Information Long-range Plans into Action Performance
everything up by no more than 15% (ever), paying and treating employees well,
External Mission
and providing a more upscale experience in the warehouse retail world. Today, the
Reason for
company is the largest (by sales) in the industry despite having fewer store locations
Natural Objectives
Environment: existence
than its rival Sam’s Club. In 2011, the company racked up sales of US$93 billion and had more
Resources and What
climate results
l to Strategies than 60 million members who pay for the privilege of shopping there.
accomplishh
Societal by when Plan to
hi the
he Policies One of the most stunning elements of the Costco success story is the way it has handled
objectives Broad Programs the staffing and leading elements of the business. Employees at the company make an average
Task guidelines
id li and Tactics
Environment: for decision salary of US$20.89/hour and 88% of employees receive health care benefits even though half
d d to
needed Budgets
accomplishh
are part-time employees. During the recession that hit the globe from 2008–2011, the company
a plan Cost of the Procedures
Internal programs had no layoffs. This has meant that the company enjoys some of the lowest turnover in an in-
Structure: Sequence Performance dustry plagued by turnover. Employees at Costco know what they are doing and actively help
off steps
Culture: do the job Actual results customers.
Beliefs, expectations,
values
Interestingly, the staffing model morphs into leading with the approach that the company
Resources: takes to executive compensation. The former CEO and co-founder of Costco had a salary of
Assets, skills,
competencies, only US$325,000/year and his total compensation package was US$2.2 million when the aver-
knowledge
age for Fortune 500 CEOs in 2012 was US$9.6 million. The senior management team is similarly
compensated, leading to an “all in for the good of the company” approach to the business.
In addition to leading with salary, the CEO made it a part of his yearly effort to visit all
560 stores in nine countries. This visible leading-from-the-front approach caught employees off
guard when he would repeatedly jump in and work at the stores: cleaning, stocking, giving
MyManagementLab® out food, and working the food court. In fact, the company has held tightly to the idea that a
Improve Your Grade! hot dog and soda should cost a patron no more than US$1.50. That was the price in 1985 when
Over 10 million students improved their results using the Pearson MyLabs.Visit mymanagementlab.com they opened their first hotdog stand in a store, and it is the price today. Costco sells more than
for simulations, tutorials, and end-of-chapter problems. 90 million hotdogs a year.
274 275
■ Suggestions for in-depth case analysis provide a complete listing of financial ra-
tios, recommendations for oral and written analysis, and ideas for further research.
(Chapter 12)
PREFACE xxvii
■ The strategic audit worksheet is based on the Analysis
time-tested strategic audit and is designed to help stu- Strategic Audit Heading
I. Current Situation
(+) Factors (−) Factors Comments
dents organize and structure daily case preparation A. Past Corporate Performance Indexes
B. Strategic Posture:
Current Mission
in a brief period of time. The worksheet works Current Objectives

Current Strategies
Current Policies
exceedingly well for checking the level of daily stu- SWOT Analysis Begins:
II. Corporate Governance
dent case preparation—especially for open class dis-

A. Board of Directors
B. Top Management
III. External Environment (EFAS):
cussions of cases. (Chapter 12) Opportunities and Threats (SWOT)

A. Natural Environment
B. Societal Environment
C. Task Environment (Industry Analysis)
IV. Internal Environment (IFAS):
Strengths and Weaknesses (SWOT)
A. Corporate Structure
B. Corporate Culture
C. Corporate Resources
1. Marketing
2. Finance
3. Research and Development
4. Operations and Logistics
5. Human Resources
6. Information Technology
V. Analysis of Strategic Factors (SFAS)
A. Key Internal and External
Strategic Factors (SWOT)
B. Review of Mission and Objectives
SWOT Analysis Ends. Recommendation Begins:
VI. Alternatives and Recommendations
A. Strategic Alternatives—pros and cons
B. Recommended Strategy
VII. Implementation
VIII. Evaluation and Control
NOTE: See the complete Strategic Audit on pages 34–41. It lists the pages in the book that discuss each of the eight
headings.
SOURCE: T. L. Wheelen and J. D. Hunger, “Strategic Audit Worksheet.” Copyright © 1985, 1986, 1987, 1988, 1989,
2005, and 2009 by T. L. Wheelen. Copyright © 1989, 2005, and 2009 by Wheelen and Hunger Associates. Revised
1991, 1994, and 1997. Reprinted by permission. Additional copies available for classroom use in Part D of the Case
Instructor’s Manual and on the Prentice Hall Web site (www.prenhall.com/wheelen).
End of Chapter SUMMARY

Every day, about 17 truckloads of used diesel engines and other parts are dumped at a re-
ceiving facility at Caterpillar’s remanufacturing plant in Corinth, Mississippi. The filthy iron
engines are then broken down by two workers, who manually hammer and drill for half a day
until they have taken every bolt off the engine and put each component into its own bin. The
engines are then cleaned and remade at half of the cost of a new engine and sold for a tidy
profit. This system works at Caterpillar because, as a general rule, 70% of the cost to build
something new is in the materials and 30% is in the labor. Remanufacturing simply starts the
■ An experiential exercise focusing on the
manufacturing process over again with materials that are essentially free and which already
contain most of the energy costs needed to make them. The would-be discards become fodder material covered in each chapter helps the
for the next product, eliminating waste, and cutting costs. Caterpillar’s management was so
impressed by the remanufacturing operation that they made the business a separate division reader apply strategic concepts to an actual
in 2005. The unit earned more than US$1 billion in sales in 2005 and in 2012 employed more
than 8500 workers in 16 countries.
Caterpillar’s remanufacturing unit was successful not only because of its capability of
situation.
wringing productivity out of materials and labor, but also because it designed its products for
reuse. Before they are built new, remanufactured products must be designed for disassembly.
In order to achieve this, Caterpillar asks its designers to check a “Reman” box on Caterpillar’s
product development checklist. The company also needs to know where its products are being
used in order to take them back—known as the art of reverse logistics. This is achieved by
Caterpillar’s excellent relationship with its dealers throughout the world, as well as through fi-
nancial incentives. For example, when a customer orders a crankshaft, that customer is offered
a remanufactured one for half the cost of a new one—assuming the customer turns in the old
k h ft t C t ill Th d t l h ld b b ilt f f ith littl d
■ A list of key terms and the pages

in which they are discussed let End of Chapter SU M MA R Y
the reader keep track of important Strategy implementation is where “the rubber hits the road.” Environmental scanning and
strategy formulation are crucial to strategic management but are only the beginning of the
concepts as they are introduced in process. The failure to carry a strategic plan into the day-to-day operations of the workplace is
a major reason why strategic planning often fails to achieve its objectives. It is discouraging to
note that in one study nearly 70% of the strategic plans were never successfully implemented.84
each chapter. For a strategy to be successfully implemented, it must be made action-oriented. This is
done through a series of programs that are funded through specific budgets and contain new
detailed procedures. This is what Sergio Marchionne did when he implemented a turnaround
strategy as the new Fiat Group CEO in 2004. He attacked the lethargic, bureaucratic system
by flattening Fiat’s structure and giving younger managers a larger amount of authority and
responsibility. He and other managers worked to reduce the number of auto platforms from
19 to six by 2012. The time from the completion of the design process to new car production
was cut from 26 to 18 months. By 2008, the Fiat auto unit was again profitable. Marchionne
reintroduced Fiat to the United States market in 2012 after a 27-year absence.85
This chapter explains how jobs and organizational units can be designed to support a
change in strategy. We will continue with staffing and directing issues in strategy implementa-
tion in the next chapter.
MyManagementLab®
Go to mymanagementlab.com to complete the problems marked with this icon.
KEY TERMS
budget (p. 251) network structure (p. 262) stages of corporate development
cellular/modular organization (p. 263) organizational life cycle (p. 258) (p. 255)
geographic-area structure (p. 269) procedure (p. 252) stages of international development
job design (p. 265) product-group structure (p. 269) (p. 267)
matrix of change (p. xx) program (p. 248) strategy implementation (p. 246)
matrix structure (p. 260) reengineering(p. 263) structure follows strategy (p. 253)
multinational corporation (MNC) Six Sigma (p. 264) synergy (p. 252)
(p. 266) virtual organization (p. 262)
xxviii PREFACE
■ Learning objectives begin each chapter.

■ Timely, well-researched, and class-tested cases deal with interesting companies and
industries. Many of the cases are about well-known, publicly held corporations—ideal
subjects for further research by students wishing to “update” the cases.
Both the text and the cases have been class-tested in strategy courses and revised based
on feedback from students and instructors. The first 11 chapters are organized around a
strategic management model that begins each chapter and provides a structure for both con-
tent and case analysis. We emphasize those concepts that have proven to be most useful in
understanding strategic decision making and in conducting case analysis. Our goal was to
make the text as comprehensive as possible without getting bogged down in any one area.
Extensive endnote references are provided for those who wish to learn more about any par-
ticular topic. All cases are about actual organizations. The firms range in size from large,
established multinationals to small, entrepreneurial ventures, and cover a broad variety of
issues. As an aid to case analysis, we propose the strategic audit as an analytical technique.
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■ Suggestions for Teaching Strategic Management: These include various teaching meth-
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management. A standardized format is provided for each case:
1. Case Abstract
2. Case Issues and Subjects
3. Steps Covered in the Strategic Decision-Making Process
PREFACE xxix
4. Case Objectives
5. Suggested Classroom Approaches
6. Discussion Questions
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Acknowledgments
We would like to thank the many people at Pearson who helped make this edition possible.
We are especially grateful to our senior project manager, Karalyn Holland, who managed to
keep everything on an even keel. We also would like to thank Stephanie Wall, Sarah Holle,
Norine Strang, Judy Leale, Estelle Simpson, Michael Joyce, Michael McGee, Bernard Ollila,
Erin Gardner, and Brooks Hill-Whilton and everyone at Pearson who guided the book through
xxx PREFACE
the production and marketing processes. Special thanks to Dave Ostrow at Pearson for his
hard work in the trenches.
We are very thankful to Paul D. Maxwell, St. Thomas University, Miami, FL; Terry J.
Schindler, University of Indianapolis; Anne Walsh, La Salle University; Angelo Camillo,
Woodbury University; Jeannine L Scherenberg, Rockford College; William Reisel, St. John’s
University; Ronaldo Parente, Florida International University; Roxana Wright, Plymouth
State University; J. Barry Dickinson, Holy Family University; Theodore E Davis, Jr., PhD,
SUNY College at Buffalo; Manzoor Chowdhury, Lincoln University; David Olson, California
State University at Bakersfield; and Janis Dietz, University of La Verne for their constructive
criticism of the 14th edition.
We are especially thankful to the many students who tried out the cases we chose to
include in this book. Their comments helped us find any flaws in the cases before the book
went to the printer.
We also offer a big thanks to the many case authors who have provided us with excel-
lent cases for the 14th edition of this book. We consider many of these case authors to be our
friends. A special thanks to you!! The adage is true: The path to greatness is through others.
Alan Hoffman would like to thank the following colleagues for their valuable
insight, support, and feedback during the writing process: Janet Forte, Kathy Connolly, Robert
Frisch, Barbara Gottfried, Bonnie Kornman, Gail Goldman, Janyce Lee, Raj Sisodia, Ken
Kornman, Donna Gallo, Jeff Shuman, Linda Edelman, Anna Forte, Emily Murphy, Tatiana
Manolova, Michael Montalbano, Goli Eshghi, Marie Rock, Deb Kennedy, Linda Bee, Alex
Zampieron, Alyssa Goldman, Jill Brown, Natalia Gold, Jayne Pollack, Aileen Cordette,
Andrea Harding, Martha Bailey, Lew Sudarsky, Ed Ottensmeyer, Tim Stearns, Gloria Larson,
Christopher Forte, Sam Vitali, Michael Page, Chip Wiggins, Vicki Lafarge, Dorothy Feldmann,
Duncan Spelman, Josh Senn, Gary Cordette, Bob Cronin, Joe Goldman, Ed Harding, Anne
Nelson, Tao Yue, Dianne Bevelander, Rick Vitali, Catherine Usoff, Beverley Earle, and
William Wiggins. Special thanks to Joyce Vincelette, Kathryn Wheelen, Patricia Ryan, Jim
Schwartz and Pamela Goldberg.
Lastly, to the many strategy instructors and students who have relayed to us their thoughts
about teaching the strategy course: We have tried to respond to your problems and concerns as
best we could by providing a comprehensive yet usable text coupled with recent and complex
cases. To you, the people who work hard in the strategy trenches, we acknowledge our debt.
This book is yours.
T. L. W.
Saint Petersburg, Florida
J. D. H.
St. Joseph, Minnesota
A. N. H.
Waltham, Massachusetts
C. E. B.
Charlotte, North Carolina
About the Authors
Thomas L. Wheelen, May 30, 1935 – December 24, 2011. DBA, MBA, BS Cum Laude
(George Washington University, Babson College, and Boston College, respectively), College,
MBA (1961); Boston College, BS cum laude (1957). Teaching Experience: Visiting Professor—
Trinity College—University of Dublin (Fall 1999); University of South Florida—Professor of
Strategic Management (1983–2008); University of Virginia - McIntire School of Commerce;
Ralph A. Beeton Professor of Free Enterprise (1981–1985); Professor (1974–1981); Associate
Professor (1971–1974); and Assistant Professor (1968–1971); Visiting Professor—University of
Arizona (1979–1980 and Northeastern University (Summer 1975, 1977, and 1979). Academic,
Industry and Military Experience: University of Virginia College of Continuing Education:
(1) Coordinator for Business Education (1978–1983, 1971–1976)—approved all undergradu-
ate courses offered at seven Regional Centers and approved faculty; (2) Liaison Faculty and
Consultant to the National Academy of the FBI Academy (1972–1983) and; (3) developed,
sold, and conducted over 200 seminars for local, state, and national governments, and compa-
nies for the McIntire School of Commerce and Continuing Education. General Electric Com-
pany - various management positions (1961–1965); U.S. Navy Supply Corps (SC)—Lt. (SC)
USNR—assistant supply officer aboard nuclear support tender (1957–1960). Publications:
(1) Monograph, An Assessment of Undergraduate Business Education in the United States
(with J. D. Hunger), 1980; (2) Books: 60 books published; 14 books translated into eight lan-
guages (Arabic, Bahasa-Indonesian, Chinese, Chinese Simplified, Greek, Italian, Japanese,
Portuguese, and Thai); (3) Books—co-author with J. D. Hunger—five active books: Strategic
Management and Business Policy, 10th edition (2006); Cases in Strategic Management and
Business Policy, 10th edition (2006); Concepts in Strategic Management and Business Policy,
10th edition (2006); Strategic Management and Business Policy, 10th edition; International
Edition (2006); and Essentials of Strategic Management, 3rd edition (2003); (4) Co-editor:
Developments in Information Systems (1974) and Collective Bargaining in the Public Sector
(1977); and (5) Co-developer of software—STrategic Financial ANalyzer (ST. FAN) (1993,
1990, 1989—different versions); (6) Articles—authored over 40 articles that have appeared
in such journals as the Journal of Management, Business Quarterly, Personnel Journal, SAM
Advanced Management Journal, Journal of Retailing, International Journal of Management,
and the Handbook of Business Strategy; (6) Cases—have about 280 cases appearing in over
83 text and case books, as well as the Business Case Journal, Journal of Management Case
Studies, International Journal of Case Studies and Research, and the Case Research Journal.
Awards: (1) Fellow elected by the Society for Advancement of Management in 2002; (2) Fel-
low elected by the North American Case Research Association in 2000; (3) Fellow elected by
the Text and Academic Authors Association in 2000; (4) the 1999 Phil Carroll Advancement of
Management Award in Strategic Management from the Society for Advancement of Manage-
ment; (5) 1999 McGuffey Award for Excellence and Longevity for Strategic Management and
Business Policy, 6th edition, from the Text and Academic Authors Association; (6) 1996/97
Teaching Incentive Program Award for teaching undergraduate strategic management;
(7) Fulbright, 1996–1997, to Ireland but had to turn it down; (8) Endowed Chair, Ralph A.
Beeton Professor, at University of Virginia (1981–1985); (9) a Sesquicentennial Associateship
research grant from the Center for Advanced Studies at the University of Virginia, 1979–1980;
(10) Small Business Administration (Small Business Institute), supervised undergraduate
team that won District, Regional III, and Honorable Mention Awards; and (11) awards for
xxxi
xxxii ABOUT T H E A U T H OR S
two articles. Associations: Dr. Wheelen served on the Board of Directors of the Adhia Mutual
Fund, the Society for Advancement of Management, and on the Editorial Board and as Asso-
ciate Editor of SAM Advanced Management Journal. He served on the Board of Directors of
Lazer Surgical Software Inc. and the Southern Management Association, and on the Editorial
Boards of the Journal of Management and Journal of Management Case Studies, the Journal
of Retail Banking, the Case Research Journal, and the Business Case Journal. He was Vice
President of Strategic Management for the Society for the Advancement of Management, and
President of the North American Case Research Association. Dr. Wheelen was a member of
the Academy of Management, Beta Gamma Sigma, the Southern Management Association,
the North American Case Research Association, the Society for Advancement of Management,
the Society for Case Research, the Strategic Management Association, and the World Associa-
tion for Case Method Research and Application. He has been listed in Who’s Who in Finance
and Industry, Who’s Who in the South and Southwest, and Who’s Who in American Education.
J. David Hunger, Ph.D. (Ohio State University), is currently Strategic Management Scholar
in Residence at Saint John’s University in Minnesota. He is also Professor Emeritus at Iowa
State University where he taught for 23 years. He previously taught at George Mason Univer-
sity, the University of Virginia, and Baldwin-Wallace College. He worked in brand manage-
ment at Procter & Gamble Company, as a selling supervisor at Lazarus Department Store, and
served as a Captain in U.S. Army Military Intelligence. He has been active as a consultant
and trainer to business corporations, as well as to state and federal government agencies. He
has written numerous articles and cases that have appeared in the Academy of Management
Journal, International Journal of Management, Human Resource Management, Journal of
Business Strategies, Case Research Journal, Business Case Journal, Handbook of Business
Strategy, Journal of Management Case Studies, Annual Advances in Business Cases, Journal
of Retail Banking, SAM Advanced Management Journal, and Journal of Management, among
others. Dr. Hunger is a member of the Academy of Management, the North American Case Re-
search Association, the Society for Case Research, the North American Management Society,
the Textbook and Academic Authors Association, and the Strategic Management Society. He
is past-President of the North American Case Research Association, the Society for Case
Research, and the Iowa State University Press Board of Directors. He also served as a Vice
President of the U.S. Association for Small Business and Entrepreneurship. He was Academic
Director of the Pappajohn Center for Entrepreneurship at Iowa State University. He has served
on the editorial review boards of SAM Advanced Management Journal, the Journal of Busi-
ness Strategies, and Journal of Business Research. He has served on the board of directors of
the North American Case Research Association, the Society for Case Research, the Iowa State
University Press, and the North American Management Society. He is co-author with Thomas
L. Wheelen of Strategic Management and Business Policy and Essentials of Strategic Man-
agement plus Concepts in Strategic Management and Business Policy and Cases in Strategic
Management and Business Policy, as well as Strategic Management Cases (PIC: Preferred
Individualized Cases), and a monograph assessing undergraduate business education in the
United States. The 8th edition of Strategic Management and Business Policy received the
McGuffey Award for Excellence and Longevity in 1999 from the Text and Academic Authors
Association. Dr. Hunger received the Best Case Award given by the McGraw-Hill Publishing
Company and the Society for Case Research in 1991 for outstanding case development. He is
listed in various versions of Who’s Who, including Who’s Who in the United States and Who’s
Who in the World. He was also recognized in 1999 by the Iowa State University College of
Business with its Innovation in Teaching Award and was elected a Fellow of the Teaching and
Academic Authors Association and of the North American Case Research Association.
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DANCE ON STILTS AT THE GIRLS’ UNYAGO, NIUCHI
Newala, too, suffers from the distance of its water-supply—at least

the Newala of to-day does; there was once another Newala in a lovely
valley at the foot of the plateau. I visited it and found scarcely a trace
of houses, only a Christian cemetery, with the graves of several
missionaries and their converts, remaining as a monument of its
former glories. But the surroundings are wonderfully beautiful. A
thick grove of splendid mango-trees closes in the weather-worn
crosses and headstones; behind them, combining the useful and the
agreeable, is a whole plantation of lemon-trees covered with ripe
fruit; not the small African kind, but a much larger and also juicier
imported variety, which drops into the hands of the passing traveller,
without calling for any exertion on his part. Old Newala is now under
the jurisdiction of the native pastor, Daudi, at Chingulungulu, who,
as I am on very friendly terms with him, allows me, as a matter of
course, the use of this lemon-grove during my stay at Newala.
FEET MUTILATED BY THE RAVAGES OF THE “JIGGER”
(Sarcopsylla penetrans)
The water-supply of New Newala is in the bottom of the valley,

some 1,600 feet lower down. The way is not only long and fatiguing,
but the water, when we get it, is thoroughly bad. We are suffering not
only from this, but from the fact that the arrangements at Newala are
nothing short of luxurious. We have a separate kitchen—a hut built
against the boma palisade on the right of the baraza, the interior of
which is not visible from our usual position. Our two cooks were not
long in finding this out, and they consequently do—or rather neglect
to do—what they please. In any case they do not seem to be very
particular about the boiling of our drinking-water—at least I can
attribute to no other cause certain attacks of a dysenteric nature,
from which both Knudsen and I have suffered for some time. If a
man like Omari has to be left unwatched for a moment, he is capable
of anything. Besides this complaint, we are inconvenienced by the
state of our nails, which have become as hard as glass, and crack on
the slightest provocation, and I have the additional infliction of
pimples all over me. As if all this were not enough, we have also, for
the last week been waging war against the jigger, who has found his
Eldorado in the hot sand of the Makonde plateau. Our men are seen
all day long—whenever their chronic colds and the dysentery likewise
raging among them permit—occupied in removing this scourge of
Africa from their feet and trying to prevent the disastrous
consequences of its presence. It is quite common to see natives of
this place with one or two toes missing; many have lost all their toes,
or even the whole front part of the foot, so that a well-formed leg
ends in a shapeless stump. These ravages are caused by the female of
Sarcopsylla penetrans, which bores its way under the skin and there
develops an egg-sac the size of a pea. In all books on the subject, it is
stated that one’s attention is called to the presence of this parasite by
an intolerable itching. This agrees very well with my experience, so
far as the softer parts of the sole, the spaces between and under the
toes, and the side of the foot are concerned, but if the creature
penetrates through the harder parts of the heel or ball of the foot, it
may escape even the most careful search till it has reached maturity.
Then there is no time to be lost, if the horrible ulceration, of which
we see cases by the dozen every day, is to be prevented. It is much
easier, by the way, to discover the insect on the white skin of a
European than on that of a native, on which the dark speck scarcely
shows. The four or five jiggers which, in spite of the fact that I
constantly wore high laced boots, chose my feet to settle in, were
taken out for me by the all-accomplished Knudsen, after which I
thought it advisable to wash out the cavities with corrosive
sublimate. The natives have a different sort of disinfectant—they fill
the hole with scraped roots. In a tiny Makua village on the slope of
the plateau south of Newala, we saw an old woman who had filled all
the spaces under her toe-nails with powdered roots by way of
prophylactic treatment. What will be the result, if any, who can say?
The rest of the many trifling ills which trouble our existence are
really more comic than serious. In the absence of anything else to
smoke, Knudsen and I at last opened a box of cigars procured from
the Indian store-keeper at Lindi, and tried them, with the most
distressing results. Whether they contain opium or some other
narcotic, neither of us can say, but after the tenth puff we were both
“off,” three-quarters stupefied and unspeakably wretched. Slowly we
recovered—and what happened next? Half-an-hour later we were
once more smoking these poisonous concoctions—so insatiable is the
craving for tobacco in the tropics.
Even my present attacks of fever scarcely deserve to be taken
seriously. I have had no less than three here at Newala, all of which
have run their course in an incredibly short time. In the early
afternoon, I am busy with my old natives, asking questions and
making notes. The strong midday coffee has stimulated my spirits to
an extraordinary degree, the brain is active and vigorous, and work
progresses rapidly, while a pleasant warmth pervades the whole
body. Suddenly this gives place to a violent chill, forcing me to put on
my overcoat, though it is only half-past three and the afternoon sun
is at its hottest. Now the brain no longer works with such acuteness
and logical precision; more especially does it fail me in trying to
establish the syntax of the difficult Makua language on which I have
ventured, as if I had not enough to do without it. Under the
circumstances it seems advisable to take my temperature, and I do
so, to save trouble, without leaving my seat, and while going on with
my work. On examination, I find it to be 101·48°. My tutors are
abruptly dismissed and my bed set up in the baraza; a few minutes
later I am in it and treating myself internally with hot water and
lemon-juice.
Three hours later, the thermometer marks nearly 104°, and I make
them carry me back into the tent, bed and all, as I am now perspiring
heavily, and exposure to the cold wind just beginning to blow might
mean a fatal chill. I lie still for a little while, and then find, to my
great relief, that the temperature is not rising, but rather falling. This
is about 7.30 p.m. At 8 p.m. I find, to my unbounded astonishment,
that it has fallen below 98·6°, and I feel perfectly well. I read for an
hour or two, and could very well enjoy a smoke, if I had the
wherewithal—Indian cigars being out of the question.
Having no medical training, I am at a loss to account for this state
of things. It is impossible that these transitory attacks of high fever
should be malarial; it seems more probable that they are due to a
kind of sunstroke. On consulting my note-book, I become more and
more inclined to think this is the case, for these attacks regularly
follow extreme fatigue and long exposure to strong sunshine. They at
least have the advantage of being only short interruptions to my
work, as on the following morning I am always quite fresh and fit.
My treasure of a cook is suffering from an enormous hydrocele which
makes it difficult for him to get up, and Moritz is obliged to keep in
the dark on account of his inflamed eyes. Knudsen’s cook, a raw boy
from somewhere in the bush, knows still less of cooking than Omari;
consequently Nils Knudsen himself has been promoted to the vacant
post. Finding that we had come to the end of our supplies, he began
by sending to Chingulungulu for the four sucking-pigs which we had
bought from Matola and temporarily left in his charge; and when
they came up, neatly packed in a large crate, he callously slaughtered
the biggest of them. The first joint we were thoughtless enough to
entrust for roasting to Knudsen’s mshenzi cook, and it was
consequently uneatable; but we made the rest of the animal into a
jelly which we ate with great relish after weeks of underfeeding,
consuming incredible helpings of it at both midday and evening
meals. The only drawback is a certain want of variety in the tinned
vegetables. Dr. Jäger, to whom the Geographical Commission
entrusted the provisioning of the expeditions—mine as well as his
own—because he had more time on his hands than the rest of us,
seems to have laid in a huge stock of Teltow turnips,[46] an article of
food which is all very well for occasional use, but which quickly palls
when set before one every day; and we seem to have no other tins
left. There is no help for it—we must put up with the turnips; but I
am certain that, once I am home again, I shall not touch them for ten
years to come.
Amid all these minor evils, which, after all, go to make up the
genuine flavour of Africa, there is at least one cheering touch:
Knudsen has, with the dexterity of a skilled mechanic, repaired my 9
× 12 cm. camera, at least so far that I can use it with a little care.
How, in the absence of finger-nails, he was able to accomplish such a
ticklish piece of work, having no tool but a clumsy screw-driver for
taking to pieces and putting together again the complicated
mechanism of the instantaneous shutter, is still a mystery to me; but
he did it successfully. The loss of his finger-nails shows him in a light
contrasting curiously enough with the intelligence evinced by the
above operation; though, after all, it is scarcely surprising after his
ten years’ residence in the bush. One day, at Lindi, he had occasion
to wash a dog, which must have been in need of very thorough
cleansing, for the bottle handed to our friend for the purpose had an
extremely strong smell. Having performed his task in the most
conscientious manner, he perceived with some surprise that the dog
did not appear much the better for it, and was further surprised by
finding his own nails ulcerating away in the course of the next few
days. “How was I to know that carbolic acid has to be diluted?” he
mutters indignantly, from time to time, with a troubled gaze at his
mutilated finger-tips.
Since we came to Newala we have been making excursions in all
directions through the surrounding country, in accordance with old
habit, and also because the akida Sefu did not get together the tribal
elders from whom I wanted information so speedily as he had
promised. There is, however, no harm done, as, even if seen only
from the outside, the country and people are interesting enough.
The Makonde plateau is like a large rectangular table rounded off
at the corners. Measured from the Indian Ocean to Newala, it is
about seventy-five miles long, and between the Rovuma and the
Lukuledi it averages fifty miles in breadth, so that its superficial area
is about two-thirds of that of the kingdom of Saxony. The surface,
however, is not level, but uniformly inclined from its south-western
edge to the ocean. From the upper edge, on which Newala lies, the
eye ranges for many miles east and north-east, without encountering
any obstacle, over the Makonde bush. It is a green sea, from which
here and there thick clouds of smoke rise, to show that it, too, is
inhabited by men who carry on their tillage like so many other
primitive peoples, by cutting down and burning the bush, and
manuring with the ashes. Even in the radiant light of a tropical day
such a fire is a grand sight.
Much less effective is the impression produced just now by the
great western plain as seen from the edge of the plateau. As often as
time permits, I stroll along this edge, sometimes in one direction,
sometimes in another, in the hope of finding the air clear enough to
let me enjoy the view; but I have always been disappointed.
Wherever one looks, clouds of smoke rise from the burning bush,
and the air is full of smoke and vapour. It is a pity, for under more
favourable circumstances the panorama of the whole country up to
the distant Majeje hills must be truly magnificent. It is of little use
taking photographs now, and an outline sketch gives a very poor idea
of the scenery. In one of these excursions I went out of my way to
make a personal attempt on the Makonde bush. The present edge of
the plateau is the result of a far-reaching process of destruction
through erosion and denudation. The Makonde strata are
everywhere cut into by ravines, which, though short, are hundreds of
yards in depth. In consequence of the loose stratification of these
beds, not only are the walls of these ravines nearly vertical, but their
upper end is closed by an equally steep escarpment, so that the
western edge of the Makonde plateau is hemmed in by a series of
deep, basin-like valleys. In order to get from one side of such a ravine
to the other, I cut my way through the bush with a dozen of my men.
It was a very open part, with more grass than scrub, but even so the
short stretch of less than two hundred yards was very hard work; at
the end of it the men’s calicoes were in rags and they themselves
bleeding from hundreds of scratches, while even our strong khaki
suits had not escaped scatheless.
NATIVE PATH THROUGH THE MAKONDE BUSH, NEAR

MAHUTA
I see increasing reason to believe that the view formed some time
back as to the origin of the Makonde bush is the correct one. I have
no doubt that it is not a natural product, but the result of human
occupation. Those parts of the high country where man—as a very
slight amount of practice enables the eye to perceive at once—has not
yet penetrated with axe and hoe, are still occupied by a splendid
timber forest quite able to sustain a comparison with our mixed
forests in Germany. But wherever man has once built his hut or tilled
his field, this horrible bush springs up. Every phase of this process
may be seen in the course of a couple of hours’ walk along the main
road. From the bush to right or left, one hears the sound of the axe—
not from one spot only, but from several directions at once. A few
steps further on, we can see what is taking place. The brush has been
cut down and piled up in heaps to the height of a yard or more,
between which the trunks of the large trees stand up like the last
pillars of a magnificent ruined building. These, too, present a
melancholy spectacle: the destructive Makonde have ringed them—
cut a broad strip of bark all round to ensure their dying off—and also
piled up pyramids of brush round them. Father and son, mother and
son-in-law, are chopping away perseveringly in the background—too
busy, almost, to look round at the white stranger, who usually excites
so much interest. If you pass by the same place a week later, the piles
of brushwood have disappeared and a thick layer of ashes has taken
the place of the green forest. The large trees stretch their
smouldering trunks and branches in dumb accusation to heaven—if
they have not already fallen and been more or less reduced to ashes,
perhaps only showing as a white stripe on the dark ground.
This work of destruction is carried out by the Makonde alike on the
virgin forest and on the bush which has sprung up on sites already
cultivated and deserted. In the second case they are saved the trouble
of burning the large trees, these being entirely absent in the
secondary bush.
After burning this piece of forest ground and loosening it with the
hoe, the native sows his corn and plants his vegetables. All over the
country, he goes in for bed-culture, which requires, and, in fact,
receives, the most careful attention. Weeds are nowhere tolerated in
the south of German East Africa. The crops may fail on the plains,
where droughts are frequent, but never on the plateau with its
abundant rains and heavy dews. Its fortunate inhabitants even have
the satisfaction of seeing the proud Wayao and Wamakua working
for them as labourers, driven by hunger to serve where they were
accustomed to rule.
But the light, sandy soil is soon exhausted, and would yield no
harvest the second year if cultivated twice running. This fact has
been familiar to the native for ages; consequently he provides in
time, and, while his crop is growing, prepares the next plot with axe
and firebrand. Next year he plants this with his various crops and
lets the first piece lie fallow. For a short time it remains waste and
desolate; then nature steps in to repair the destruction wrought by
man; a thousand new growths spring out of the exhausted soil, and
even the old stumps put forth fresh shoots. Next year the new growth
is up to one’s knees, and in a few years more it is that terrible,
impenetrable bush, which maintains its position till the black
occupier of the land has made the round of all the available sites and
come back to his starting point.
The Makonde are, body and soul, so to speak, one with this bush.
According to my Yao informants, indeed, their name means nothing
else but “bush people.” Their own tradition says that they have been
settled up here for a very long time, but to my surprise they laid great
stress on an original immigration. Their old homes were in the
south-east, near Mikindani and the mouth of the Rovuma, whence
their peaceful forefathers were driven by the continual raids of the
Sakalavas from Madagascar and the warlike Shirazis[47] of the coast,
to take refuge on the almost inaccessible plateau. I have studied
African ethnology for twenty years, but the fact that changes of
population in this apparently quiet and peaceable corner of the earth
could have been occasioned by outside enterprises taking place on
the high seas, was completely new to me. It is, no doubt, however,
correct.
The charming tribal legend of the Makonde—besides informing us
of other interesting matters—explains why they have to live in the
thickest of the bush and a long way from the edge of the plateau,
instead of making their permanent homes beside the purling brooks
and springs of the low country.
“The place where the tribe originated is Mahuta, on the southern
side of the plateau towards the Rovuma, where of old time there was
nothing but thick bush. Out of this bush came a man who never
washed himself or shaved his head, and who ate and drank but little.
He went out and made a human figure from the wood of a tree
growing in the open country, which he took home to his abode in the
bush and there set it upright. In the night this image came to life and
was a woman. The man and woman went down together to the
Rovuma to wash themselves. Here the woman gave birth to a still-
born child. They left that place and passed over the high land into the
valley of the Mbemkuru, where the woman had another child, which
was also born dead. Then they returned to the high bush country of
Mahuta, where the third child was born, which lived and grew up. In
course of time, the couple had many more children, and called
themselves Wamatanda. These were the ancestral stock of the
Makonde, also called Wamakonde,[48] i.e., aborigines. Their
forefather, the man from the bush, gave his children the command to
bury their dead upright, in memory of the mother of their race who
was cut out of wood and awoke to life when standing upright. He also
warned them against settling in the valleys and near large streams,
for sickness and death dwelt there. They were to make it a rule to
have their huts at least an hour’s walk from the nearest watering-
place; then their children would thrive and escape illness.”
The explanation of the name Makonde given by my informants is
somewhat different from that contained in the above legend, which I
extract from a little book (small, but packed with information), by
Pater Adams, entitled Lindi und sein Hinterland. Otherwise, my
results agree exactly with the statements of the legend. Washing?
Hapana—there is no such thing. Why should they do so? As it is, the
supply of water scarcely suffices for cooking and drinking; other
people do not wash, so why should the Makonde distinguish himself
by such needless eccentricity? As for shaving the head, the short,
woolly crop scarcely needs it,[49] so the second ancestral precept is
likewise easy enough to follow. Beyond this, however, there is
nothing ridiculous in the ancestor’s advice. I have obtained from
various local artists a fairly large number of figures carved in wood,
ranging from fifteen to twenty-three inches in height, and
representing women belonging to the great group of the Mavia,
Makonde, and Matambwe tribes. The carving is remarkably well
done and renders the female type with great accuracy, especially the
keloid ornamentation, to be described later on. As to the object and
meaning of their works the sculptors either could or (more probably)
would tell me nothing, and I was forced to content myself with the
scanty information vouchsafed by one man, who said that the figures
were merely intended to represent the nembo—the artificial
deformations of pelele, ear-discs, and keloids. The legend recorded
by Pater Adams places these figures in a new light. They must surely
be more than mere dolls; and we may even venture to assume that
they are—though the majority of present-day Makonde are probably
unaware of the fact—representations of the tribal ancestress.
The references in the legend to the descent from Mahuta to the
Rovuma, and to a journey across the highlands into the Mbekuru
valley, undoubtedly indicate the previous history of the tribe, the
travels of the ancestral pair typifying the migrations of their
descendants. The descent to the neighbouring Rovuma valley, with
its extraordinary fertility and great abundance of game, is intelligible
at a glance—but the crossing of the Lukuledi depression, the ascent
to the Rondo Plateau and the descent to the Mbemkuru, also lie
within the bounds of probability, for all these districts have exactly
the same character as the extreme south. Now, however, comes a
point of especial interest for our bacteriological age. The primitive
Makonde did not enjoy their lives in the marshy river-valleys.
Disease raged among them, and many died. It was only after they
had returned to their original home near Mahuta, that the health
conditions of these people improved. We are very apt to think of the
African as a stupid person whose ignorance of nature is only equalled
by his fear of it, and who looks on all mishaps as caused by evil
spirits and malignant natural powers. It is much more correct to
assume in this case that the people very early learnt to distinguish
districts infested with malaria from those where it is absent.
This knowledge is crystallized in the
ancestral warning against settling in the
valleys and near the great waters, the
dwelling-places of disease and death. At the
same time, for security against the hostile
Mavia south of the Rovuma, it was enacted
that every settlement must be not less than a
certain distance from the southern edge of the
plateau. Such in fact is their mode of life at the
present day. It is not such a bad one, and
certainly they are both safer and more
comfortable than the Makua, the recent
intruders from the south, who have made USUAL METHOD OF
good their footing on the western edge of the CLOSING HUT-DOOR
plateau, extending over a fairly wide belt of
country. Neither Makua nor Makonde show in their dwellings
anything of the size and comeliness of the Yao houses in the plain,
especially at Masasi, Chingulungulu and Zuza’s. Jumbe Chauro, a
Makonde hamlet not far from Newala, on the road to Mahuta, is the
most important settlement of the tribe I have yet seen, and has fairly
spacious huts. But how slovenly is their construction compared with
the palatial residences of the elephant-hunters living in the plain.
The roofs are still more untidy than in the general run of huts during
the dry season, the walls show here and there the scanty beginnings
or the lamentable remains of the mud plastering, and the interior is a
veritable dog-kennel; dirt, dust and disorder everywhere. A few huts
only show any attempt at division into rooms, and this consists
merely of very roughly-made bamboo partitions. In one point alone
have I noticed any indication of progress—in the method of fastening
the door. Houses all over the south are secured in a simple but
ingenious manner. The door consists of a set of stout pieces of wood
or bamboo, tied with bark-string to two cross-pieces, and moving in
two grooves round one of the door-posts, so as to open inwards. If
the owner wishes to leave home, he takes two logs as thick as a man’s
upper arm and about a yard long. One of these is placed obliquely
against the middle of the door from the inside, so as to form an angle
of from 60° to 75° with the ground. He then places the second piece
horizontally across the first, pressing it downward with all his might.
It is kept in place by two strong posts planted in the ground a few
inches inside the door. This fastening is absolutely safe, but of course
cannot be applied to both doors at once, otherwise how could the
owner leave or enter his house? I have not yet succeeded in finding
out how the back door is fastened.
MAKONDE LOCK AND KEY AT JUMBE CHAURO

This is the general way of closing a house. The Makonde at Jumbe
Chauro, however, have a much more complicated, solid and original
one. Here, too, the door is as already described, except that there is
only one post on the inside, standing by itself about six inches from
one side of the doorway. Opposite this post is a hole in the wall just
large enough to admit a man’s arm. The door is closed inside by a
large wooden bolt passing through a hole in this post and pressing
with its free end against the door. The other end has three holes into
which fit three pegs running in vertical grooves inside the post. The
door is opened with a wooden key about a foot long, somewhat
curved and sloped off at the butt; the other end has three pegs
corresponding to the holes, in the bolt, so that, when it is thrust
through the hole in the wall and inserted into the rectangular
opening in the post, the pegs can be lifted and the bolt drawn out.[50]
MODE OF INSERTING THE KEY
With no small pride first one householder and then a second

showed me on the spot the action of this greatest invention of the
Makonde Highlands. To both with an admiring exclamation of
“Vizuri sana!” (“Very fine!”). I expressed the wish to take back these
marvels with me to Ulaya, to show the Wazungu what clever fellows
the Makonde are. Scarcely five minutes after my return to camp at
Newala, the two men came up sweating under the weight of two
heavy logs which they laid down at my feet, handing over at the same
time the keys of the fallen fortress. Arguing, logically enough, that if
the key was wanted, the lock would be wanted with it, they had taken
their axes and chopped down the posts—as it never occurred to them
to dig them out of the ground and so bring them intact. Thus I have
two badly damaged specimens, and the owners, instead of praise,
come in for a blowing-up.
The Makua huts in the environs of Newala are especially
miserable; their more than slovenly construction reminds one of the
temporary erections of the Makua at Hatia’s, though the people here
have not been concerned in a war. It must therefore be due to
congenital idleness, or else to the absence of a powerful chief. Even
the baraza at Mlipa’s, a short hour’s walk south-east of Newala,
shares in this general neglect. While public buildings in this country
are usually looked after more or less carefully, this is in evident
danger of being blown over by the first strong easterly gale. The only
attractive object in this whole district is the grave of the late chief
Mlipa. I visited it in the morning, while the sun was still trying with
partial success to break through the rolling mists, and the circular
grove of tall euphorbias, which, with a broken pot, is all that marks
the old king’s resting-place, impressed one with a touch of pathos.
Even my very materially-minded carriers seemed to feel something
of the sort, for instead of their usual ribald songs, they chanted
solemnly, as we marched on through the dense green of the Makonde
bush:—
“We shall arrive with the great master; we stand in a row and have
no fear about getting our food and our money from the Serkali (the
Government). We are not afraid; we are going along with the great
master, the lion; we are going down to the coast and back.”
With regard to the characteristic features of the various tribes here
on the western edge of the plateau, I can arrive at no other
conclusion than the one already come to in the plain, viz., that it is
impossible for anyone but a trained anthropologist to assign any
given individual at once to his proper tribe. In fact, I think that even
an anthropological specialist, after the most careful examination,
might find it a difficult task to decide. The whole congeries of peoples
collected in the region bounded on the west by the great Central
African rift, Tanganyika and Nyasa, and on the east by the Indian
Ocean, are closely related to each other—some of their languages are
only distinguished from one another as dialects of the same speech,
and no doubt all the tribes present the same shape of skull and
structure of skeleton. Thus, surely, there can be no very striking
differences in outward appearance.
Even did such exist, I should have no time
to concern myself with them, for day after day,
I have to see or hear, as the case may be—in
any case to grasp and record—an
extraordinary number of ethnographic
phenomena. I am almost disposed to think it
fortunate that some departments of inquiry, at
least, are barred by external circumstances.
Chief among these is the subject of iron-
working. We are apt to think of Africa as a
country where iron ore is everywhere, so to
speak, to be picked up by the roadside, and
where it would be quite surprising if the
inhabitants had not learnt to smelt the
material ready to their hand. In fact, the
knowledge of this art ranges all over the
continent, from the Kabyles in the north to the
Kafirs in the south. Here between the Rovuma
and the Lukuledi the conditions are not so
favourable. According to the statements of the
Makonde, neither ironstone nor any other
form of iron ore is known to them. They have
not therefore advanced to the art of smelting
the metal, but have hitherto bought all their
THE ANCESTRESS OF
THE MAKONDE
iron implements from neighbouring tribes.
Even in the plain the inhabitants are not much
better off. Only one man now living is said to
understand the art of smelting iron. This old fundi lives close to
Huwe, that isolated, steep-sided block of granite which rises out of
the green solitude between Masasi and Chingulungulu, and whose
jagged and splintered top meets the traveller’s eye everywhere. While
still at Masasi I wished to see this man at work, but was told that,
frightened by the rising, he had retired across the Rovuma, though
he would soon return. All subsequent inquiries as to whether the
fundi had come back met with the genuine African answer, “Bado”
(“Not yet”).
BRAZIER
Some consolation was afforded me by a brassfounder, whom I

came across in the bush near Akundonde’s. This man is the favourite
of women, and therefore no doubt of the gods; he welds the glittering
brass rods purchased at the coast into those massive, heavy rings
which, on the wrists and ankles of the local fair ones, continually give
me fresh food for admiration. Like every decent master-craftsman he
had all his tools with him, consisting of a pair of bellows, three
crucibles and a hammer—nothing more, apparently. He was quite
willing to show his skill, and in a twinkling had fixed his bellows on
the ground. They are simply two goat-skins, taken off whole, the four
legs being closed by knots, while the upper opening, intended to
admit the air, is kept stretched by two pieces of wood. At the lower
end of the skin a smaller opening is left into which a wooden tube is
stuck. The fundi has quickly borrowed a heap of wood-embers from
the nearest hut; he then fixes the free ends of the two tubes into an
earthen pipe, and clamps them to the ground by means of a bent
piece of wood. Now he fills one of his small clay crucibles, the dross
on which shows that they have been long in use, with the yellow
material, places it in the midst of the embers, which, at present are
only faintly glimmering, and begins his work. In quick alternation
the smith’s two hands move up and down with the open ends of the
bellows; as he raises his hand he holds the slit wide open, so as to let
the air enter the skin bag unhindered. In pressing it down he closes
the bag, and the air puffs through the bamboo tube and clay pipe into
the fire, which quickly burns up. The smith, however, does not keep
on with this work, but beckons to another man, who relieves him at
the bellows, while he takes some more tools out of a large skin pouch
carried on his back. I look on in wonder as, with a smooth round
stick about the thickness of a finger, he bores a few vertical holes into
the clean sand of the soil. This should not be difficult, yet the man
seems to be taking great pains over it. Then he fastens down to the
ground, with a couple of wooden clamps, a neat little trough made by
splitting a joint of bamboo in half, so that the ends are closed by the
two knots. At last the yellow metal has attained the right consistency,
and the fundi lifts the crucible from the fire by means of two sticks
split at the end to serve as tongs. A short swift turn to the left—a
tilting of the crucible—and the molten brass, hissing and giving forth
clouds of smoke, flows first into the bamboo mould and then into the
holes in the ground.
The technique of this backwoods craftsman may not be very far
advanced, but it cannot be denied that he knows how to obtain an
adequate result by the simplest means. The ladies of highest rank in
this country—that is to say, those who can afford it, wear two kinds
of these massive brass rings, one cylindrical, the other semicircular
in section. The latter are cast in the most ingenious way in the
bamboo mould, the former in the circular hole in the sand. It is quite
a simple matter for the fundi to fit these bars to the limbs of his fair
customers; with a few light strokes of his hammer he bends the
pliable brass round arm or ankle without further inconvenience to
the wearer.
SHAPING THE POT
SMOOTHING WITH MAIZE-COB
CUTTING THE EDGE

FINISHING THE BOTTOM
LAST SMOOTHING BEFORE

BURNING
FIRING THE BRUSH-PILE

LIGHTING THE FARTHER SIDE OF
THE PILE
TURNING THE RED-HOT VESSEL
NYASA WOMAN MAKING POTS AT MASASI

Pottery is an art which must always and everywhere excite the
interest of the student, just because it is so intimately connected with
the development of human culture, and because its relics are one of
the principal factors in the reconstruction of our own condition in
prehistoric times. I shall always remember with pleasure the two or
three afternoons at Masasi when Salim Matola’s mother, a slightly-
built, graceful, pleasant-looking woman, explained to me with
touching patience, by means of concrete illustrations, the ceramic art
of her people. The only implements for this primitive process were a
lump of clay in her left hand, and in the right a calabash containing
the following valuables: the fragment of a maize-cob stripped of all
its grains, a smooth, oval pebble, about the size of a pigeon’s egg, a
few chips of gourd-shell, a bamboo splinter about the length of one’s
hand, a small shell, and a bunch of some herb resembling spinach.
Nothing more. The woman scraped with the
shell a round, shallow hole in the soft, fine
sand of the soil, and, when an active young
girl had filled the calabash with water for her,
she began to knead the clay. As if by magic it
gradually assumed the shape of a rough but
already well-shaped vessel, which only wanted
a little touching up with the instruments
before mentioned. I looked out with the
MAKUA WOMAN closest attention for any indication of the use
MAKING A POT. of the potter’s wheel, in however rudimentary
SHOWS THE a form, but no—hapana (there is none). The
BEGINNINGS OF THE embryo pot stood firmly in its little
POTTER’S WHEEL
depression, and the woman walked round it in
a stooping posture, whether she was removing
small stones or similar foreign bodies with the maize-cob, smoothing
the inner or outer surface with the splinter of bamboo, or later, after
letting it dry for a day, pricking in the ornamentation with a pointed
bit of gourd-shell, or working out the bottom, or cutting the edge
with a sharp bamboo knife, or giving the last touches to the finished
vessel. This occupation of the women is infinitely toilsome, but it is
without doubt an accurate reproduction of the process in use among
our ancestors of the Neolithic and Bronze ages.
There is no doubt that the invention of pottery, an item in human
progress whose importance cannot be over-estimated, is due to
women. Rough, coarse and unfeeling, the men of the horde range
over the countryside. When the united cunning of the hunters has
succeeded in killing the game; not one of them thinks of carrying
home the spoil. A bright fire, kindled by a vigorous wielding of the
drill, is crackling beside them; the animal has been cleaned and cut
up secundum artem, and, after a slight singeing, will soon disappear
under their sharp teeth; no one all this time giving a single thought
to wife or child.
To what shifts, on the other hand, the primitive wife, and still more
the primitive mother, was put! Not even prehistoric stomachs could
endure an unvarying diet of raw food. Something or other suggested
the beneficial effect of hot water on the majority of approved but
indigestible dishes. Perhaps a neighbour had tried holding the hard
roots or tubers over the fire in a calabash filled with water—or maybe
an ostrich-egg-shell, or a hastily improvised vessel of bark. They
became much softer and more palatable than they had previously
been; but, unfortunately, the vessel could not stand the fire and got
charred on the outside. That can be remedied, thought our
ancestress, and plastered a layer of wet clay round a similar vessel.
This is an improvement; the cooking utensil remains uninjured, but
the heat of the fire has shrunk it, so that it is loose in its shell. The
next step is to detach it, so, with a firm grip and a jerk, shell and
kernel are separated, and pottery is invented. Perhaps, however, the
discovery which led to an intelligent use of the burnt-clay shell, was
made in a slightly different way. Ostrich-eggs and calabashes are not
to be found in every part of the world, but everywhere mankind has
arrived at the art of making baskets out of pliant materials, such as
bark, bast, strips of palm-leaf, supple twigs, etc. Our inventor has no
water-tight vessel provided by nature. “Never mind, let us line the
basket with clay.” This answers the purpose, but alas! the basket gets
burnt over the blazing fire, the woman watches the process of
cooking with increasing uneasiness, fearing a leak, but no leak
appears. The food, done to a turn, is eaten with peculiar relish; and
the cooking-vessel is examined, half in curiosity, half in satisfaction
at the result. The plastic clay is now hard as stone, and at the same
time looks exceedingly well, for the neat plaiting of the burnt basket
is traced all over it in a pretty pattern. Thus, simultaneously with
pottery, its ornamentation was invented.
Primitive woman has another claim to respect. It was the man,
roving abroad, who invented the art of producing fire at will, but the
woman, unable to imitate him in this, has been a Vestal from the
earliest times. Nothing gives so much trouble as the keeping alight of
the smouldering brand, and, above all, when all the men are absent
from the camp. Heavy rain-clouds gather, already the first large
drops are falling, the first gusts of the storm rage over the plain. The
little flame, a greater anxiety to the woman than her own children,
flickers unsteadily in the blast. What is to be done? A sudden thought
occurs to her, and in an instant she has constructed a primitive hut
out of strips of bark, to protect the flame against rain and wind.
This, or something very like it, was the way in which the principle
of the house was discovered; and even the most hardened misogynist
cannot fairly refuse a woman the credit of it. The protection of the
hearth-fire from the weather is the germ from which the human
dwelling was evolved. Men had little, if any share, in this forward
step, and that only at a late stage. Even at the present day, the
plastering of the housewall with clay and the manufacture of pottery
are exclusively the women’s business. These are two very significant
survivals. Our European kitchen-garden, too, is originally a woman’s
invention, and the hoe, the primitive instrument of agriculture, is,
characteristically enough, still used in this department. But the
noblest achievement which we owe to the other sex is unquestionably
the art of cookery. Roasting alone—the oldest process—is one for
which men took the hint (a very obvious one) from nature. It must
have been suggested by the scorched carcase of some animal
overtaken by the destructive forest-fires. But boiling—the process of
improving organic substances by the help of water heated to boiling-
point—is a much later discovery. It is so recent that it has not even
yet penetrated to all parts of the world. The Polynesians understand
how to steam food, that is, to cook it, neatly wrapped in leaves, in a
hole in the earth between hot stones, the air being excluded, and
(sometimes) a few drops of water sprinkled on the stones; but they
do not understand boiling.
To come back from this digression, we find that the slender Nyasa
woman has, after once more carefully examining the finished pot,
put it aside in the shade to dry. On the following day she sends me
word by her son, Salim Matola, who is always on hand, that she is
going to do the burning, and, on coming out of my house, I find her
already hard at work. She has spread on the ground a layer of very
dry sticks, about as thick as one’s thumb, has laid the pot (now of a
yellowish-grey colour) on them, and is piling brushwood round it.
My faithful Pesa mbili, the mnyampara, who has been standing by,
most obligingly, with a lighted stick, now hands it to her. Both of
them, blowing steadily, light the pile on the lee side, and, when the
flame begins to catch, on the weather side also. Soon the whole is in a
blaze, but the dry fuel is quickly consumed and the fire dies down, so
that we see the red-hot vessel rising from the ashes. The woman
turns it continually with a long stick, sometimes one way and
sometimes another, so that it may be evenly heated all over. In
twenty minutes she rolls it out of the ash-heap, takes up the bundle
of spinach, which has been lying for two days in a jar of water, and
sprinkles the red-hot clay with it. The places where the drops fall are
marked by black spots on the uniform reddish-brown surface. With a
sigh of relief, and with visible satisfaction, the woman rises to an
erect position; she is standing just in a line between me and the fire,
from which a cloud of smoke is just rising: I press the ball of my
camera, the shutter clicks—the apotheosis is achieved! Like a
priestess, representative of her inventive sex, the graceful woman
stands: at her feet the hearth-fire she has given us beside her the
invention she has devised for us, in the background the home she has
built for us.
At Newala, also, I have had the manufacture of pottery carried on
in my presence. Technically the process is better than that already
described, for here we find the beginnings of the potter’s wheel,
which does not seem to exist in the plains; at least I have seen
nothing of the sort. The artist, a frightfully stupid Makua woman, did
not make a depression in the ground to receive the pot she was about
to shape, but used instead a large potsherd. Otherwise, she went to
work in much the same way as Salim’s mother, except that she saved
herself the trouble of walking round and round her work by squatting
at her ease and letting the pot and potsherd rotate round her; this is
surely the first step towards a machine. But it does not follow that
the pot was improved by the process. It is true that it was beautifully
rounded and presented a very creditable appearance when finished,
but the numerous large and small vessels which I have seen, and, in
part, collected, in the “less advanced” districts, are no less so. We
moderns imagine that instruments of precision are necessary to
produce excellent results. Go to the prehistoric collections of our
museums and look at the pots, urns and bowls of our ancestors in the
dim ages of the past, and you will at once perceive your error.
MAKING LONGITUDINAL CUT IN
BARK
DRAWING THE BARK OFF THE LOG
REMOVING THE OUTER BARK

BEATING THE BARK
WORKING THE BARK-CLOTH AFTER BEATING, TO MAKE IT

SOFT
MANUFACTURE OF BARK-CLOTH AT NEWALA

To-day, nearly the whole population of German East Africa is
clothed in imported calico. This was not always the case; even now in
some parts of the north dressed skins are still the prevailing wear,
and in the north-western districts—east and north of Lake
Tanganyika—lies a zone where bark-cloth has not yet been
superseded. Probably not many generations have passed since such
bark fabrics and kilts of skins were the only clothing even in the
south. Even to-day, large quantities of this bright-red or drab
material are still to be found; but if we wish to see it, we must look in
the granaries and on the drying stages inside the native huts, where
it serves less ambitious uses as wrappings for those seeds and fruits
which require to be packed with special care. The salt produced at
Masasi, too, is packed for transport to a distance in large sheets of
bark-cloth. Wherever I found it in any degree possible, I studied the
process of making this cloth. The native requisitioned for the
purpose arrived, carrying a log between two and three yards long and
as thick as his thigh, and nothing else except a curiously-shaped
mallet and the usual long, sharp and pointed knife which all men and
boys wear in a belt at their backs without a sheath—horribile dictu!
[51]
Silently he squats down before me, and with two rapid cuts has
drawn a couple of circles round the log some two yards apart, and
slits the bark lengthwise between them with the point of his knife.
With evident care, he then scrapes off the outer rind all round the
log, so that in a quarter of an hour the inner red layer of the bark
shows up brightly-coloured between the two untouched ends. With
some trouble and much caution, he now loosens the bark at one end,
and opens the cylinder. He then stands up, takes hold of the free
edge with both hands, and turning it inside out, slowly but steadily
pulls it off in one piece. Now comes the troublesome work of
scraping all superfluous particles of outer bark from the outside of
the long, narrow piece of material, while the inner side is carefully
scrutinised for defective spots. At last it is ready for beating. Having
signalled to a friend, who immediately places a bowl of water beside
him, the artificer damps his sheet of bark all over, seizes his mallet,
lays one end of the stuff on the smoothest spot of the log, and
hammers away slowly but continuously. “Very simple!” I think to
myself. “Why, I could do that, too!”—but I am forced to change my
opinions a little later on; for the beating is quite an art, if the fabric is
not to be beaten to pieces. To prevent the breaking of the fibres, the
stuff is several times folded across, so as to interpose several
thicknesses between the mallet and the block. At last the required
state is reached, and the fundi seizes the sheet, still folded, by both
ends, and wrings it out, or calls an assistant to take one end while he
holds the other. The cloth produced in this way is not nearly so fine
and uniform in texture as the famous Uganda bark-cloth, but it is
quite soft, and, above all, cheap.
Now, too, I examine the mallet. My craftsman has been using the
simpler but better form of this implement, a conical block of some
hard wood, its base—the striking surface—being scored across and
across with more or less deeply-cut grooves, and the handle stuck
into a hole in the middle. The other and earlier form of mallet is
shaped in the same way, but the head is fastened by an ingenious
network of bark strips into the split bamboo serving as a handle. The
observation so often made, that ancient customs persist longest in
connection with religious ceremonies and in the life of children, here
finds confirmation. As we shall soon see, bark-cloth is still worn
during the unyago,[52] having been prepared with special solemn
ceremonies; and many a mother, if she has no other garment handy,
will still put her little one into a kilt of bark-cloth, which, after all,
looks better, besides being more in keeping with its African
surroundings, than the ridiculous bit of print from Ulaya.
MAKUA WOMEN

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eTextbook 978-0133126143 Strategic

Management and Business Policy:

PART TWO Scanning the Environment 89

PART THREE Strategy Formulation 161

PART FOUR Strategy Implementation and Control 243

PART FIVE Introduction to Case Analysis 331

PART SIX Cases in Strategic Management 1-1

PART ONE Introduction to Strategic Management and Business Policy 1

CHAPTER 1 Basic Concepts of Strategic Management 2

CHAPTER 2 Corporate Governance 40

Nomination and Election of Board Members 52

CHAPTER 3 Social Responsibility and Ethics in Strategic Management 68

PART TWO Scanning the Environment 89

CHAPTER 4 Environmental Scanning and Industry Analysis 90

Sustainability Issue: GREEN SUPERCARS 94

CHAPTER 5 Internal Scanning: Organizational Analysis 126

Global Issue: MANAGING CORPORATE CULTURE FOR GLOBAL COMPETITIVE

Strategic Marketing Issues 140

PART THREE Strategy Formulation 161

CHAPTER 6 Strategy Formulation: Situation Analysis and Business Strategy 162

CHAPTER 7 Strategy Formulation: Corporate Strategy 184

International Entry Options for Horizontal Growth 192

Stability Strategies 197

CHAPTER 8 Strategy Formulation: Functional Strategy and Strategic Choice 214

PART FOUR Strategy Implementation and Control 243

CHAPTER 9 Strategy Implementation: Organizing for Action 244

What Must Be Done? 248

CHAPTER 10 Strategy Implementation: Staffing and Directing 274

End of Chapter Summary 296

CHAPTER 11 Evaluation and Control 302

PART FIVE Introduction to Case Analysis 331

CHAPTER 12 Suggestions for Case Analysis 332

End of Chapter Summary 343

PART SIX Cases in Strategic Management 1-1

SECTION A Corporate Governance: Executive Leadership

CASE 2 The Wallace Group 2-1

SECTION B Business Ethics

CASE 4 The Audit 4-1

SECTION C Corporate Social Responsibility

SECTION D International Issues in Strategic Management

CASE 7 Guajilote Cooperativo Forestal, Honduras 7-1

SECTION E General Issues in Strategic Management

INDUSTRY ONE: INTERNET COMPANIES

CASE 9 Amazon.com, Inc.: Retailing Giant to High-Tech Player? 9-1

INDUSTRY TWO: ENTERTAINMENT AND LEISURE

CASE 12 Netflix Inc.: The 2011 Rebranding/Price Increase Debacle 12-1

CASE 13 Carnival Corporation & plc (2010) 13-1

CASE 14 Zynga, Inc. (2011): Whose Turn Is It? 14-1

INDUSTRY THREE: FOOD AND BEVERAGE

CASE 16 Panera Bread Company (2010): Still Rising Fortunes? 16-1

CASE 17 Whole Foods Market (2010): How to Grow in an Increasingly

CASE 18 Burger King (Mini Case) 18-1

CASE 19 Church & Dwight: Time to Rethink the Portfolio? 19-1

INDUSTRY FOUR: APPAREL

CASE 21 TOMS Shoes (Mini Case) 21-1

INDUSTRY FIVE: SPECIALTY RETAILING

CASE 25 iRobot: Finding the Right Market Mix? 25-1

CASE 27 Delta Air Lines (2012): Navigating an Uncertain Environment 27-1

CASE 28 TomTom: New Competition Everywhere! 28-1

INDUSTRY SEVEN: MANUFACTURING

CASE 30 AB Electrolux: Challenging Times in the Appliance Industry 30-1

INDUSTRY EIGHT: INFORMATION TECHNOLOGY

CASE 33 Logitech (Mini Case) 33-1

SPECIAL DEDICATION TO TOM WHEELEN