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Schermerhorn Exploring Management 4th edition Instructor’s Manual
Copyright © 2014 John Wiley & Sons, Inc. 7-1
CHAPTER 7
Strategy and Strategic Management
Insights and hard work deliver results
Chapter 7 Overview
Each Chapter contains several inset features designed to assist the student reader in applying
the concepts to relevant examples. Management Live illustrates how popular movies
demonstrate management concepts in the chapter. Role Models features a management
professional that illustrates key chapter concepts in a novel, visionary or inspirational way.
Explore Yourself refers students to self assessment activities relevant to concepts in the
chapter. Ethics Check profiles examples of ethical issues in management. Manager's Library
features books that illustrate current events or trends relevant to chapter concepts. Facts to
Consider introduces research or trends that may be used for class discussion in the classroom
or online for distance learning.
Chapter Seven provides a definition of strategy and a review of strategic management and
insights. The chapter explores various levels of strategies, including those for growth, in use
at most organizations. Considerable attention is then devoted to both corporate-level and
business-level strategy formulation. Divestiture and restructuring strategies, used primarily
when an organization runs into difficulties, are reviewed. A brief discussion of firms
pursuing global strategies, cooperative and partnership strategies, and e-business strategies
follows.
This chapter focuses on strategic management and the role that strategy plays in achieving
competitive advantage and maximum organizational performance. The chapter begins by
defining the key terms and concepts in strategic management and describing the strategic
management process. Emphasis is placed on strategy formulation and strategy
implementation. The importance of strategic management for gaining a competitive
advantage is also discussed. This is followed by a discussion of the different levels of
strategies used by an organization. Considerable attention is then devoted to both corporate-
level and business-level strategy formulation. The chapter’s focus then shifts to the process of
strategy implementation, with emphasis being placed on common strategic planning failures
that hinder strategy implementation and the importance and role of strategic leadership.
Next is a review of how managers formulate and implement strategies to accomplish long-
term goals and competitive advantage. The steps of the strategic management process are
defined, along with an explanation of strategy formulation as the basis of organization’s
mission and objectives. A SWOT analysis, tool to analyze company and industry strategy and
competitiveness, details an organization’s internal strengths and weaknesses and external
opportunities and threats is explored further.
Porter’s competitive strategies model and tools to understand the competition position of a
company and challenges within its industry are reviewed. Last is a discussion of strategic
leadership to ensure strategy implementation and control.

Chapter 7 Takeaway Questions
• Takeaway 7.1 What Types of Strategies Are Used by Organizations?
• Takeaway 7.2 How Do Managers Formulate and Implement Strategies?
Chapter 7 Objectives
• To define and explain strategy as a comprehensive plan to achieve competitive
advantage.
• To categorize and explain corporate, business, and functional strategies used within
organizations.
• To understand how organizations expand and the types of growth strategies utilized.
• To explain strategies organizations employ when they run into performance
difficulties.
• To explain the importance of global growth opportunities and ways organizations can
pursue globalization strategies for further growth.
• To explain how cooperative strategies and further cooperation among organizations
create new areas of mutual interest.
• To explain how companies use the internet or e-business strategies for competitive
advantage.
• To decipher between web-based business models.
• To explain how an organization’s mission and objectives becomes a basis for its
strategy formulation.
• To define and explore how a SWOT analysis is used to examine an organization’s
strengths and weaknesses as a basis for developing strategies.
• To review Michael Porter’s models as useful tools in understanding the competitive
position of a company and the challenges within an industry.
• To explain Porter’s competitive strategies model.
• To understand how companies operating multiple businesses selling many different
products utilize a portfolio planning strategic approach.
• To explain the Boston Consulting Group or BCG Matrix.
• To explain the importance of strategic leadership and how to implement strategies.
• To list the responsibilities of a strategic leader.
Chapter 7 Lecture Outline:
• Takeaway 7.1 What Types of Strategies Are Used By Organizations?
o Strategy is a comprehensive plan for achieving competitive advantage
o Organizations use corporate, business, and functional strategies
o Growth strategies focus on expansion.
o Restructuring and divestiture strategies focus on consolidation
o Global strategies focus on international business initiatives
o Cooperative strategies focus on alliances and partnerships
o E-business strategies focus on using the Internet for business success.
• Takeaway 7.2 How Do Managers Formulate and Implement Strategies?
o The strategic management process formulates and implements strategies
o Strategy formulation begins with the organization’s mission and objectives

o SWOT analysis identifies strengths, weaknesses, opportunities, and threats
o Porter’s five forces model examines industry attractiveness
o Porter’s competitive strategies model identifies business or product strategies.
o Portfolio planning examines strategies across multiple businesses or products
o Strategic leadership ensures strategy implementation and control
Chapter 7 Supporting Materials
Figures
• Figure 7.1: What Are the Steps in the Strategic Management Process?
• Figure 7.2: What Does SWOT Analysis Try to Discover?
• Figure 7.3: What Is Porter’s Five Forces Model of Industry Attractiveness?
• Figure 7.4: What are Strategic Options in Porter’s Competitive Strategies Model?
• Figure 7.5: Why is the BCG Matrix Useful in Strategic Planning?
Thematic Boxes and More
• Management Live: Critical Thinking and Tron: Legacy
• Role Models: Wendy Kopp Tackles the Culture of Low Achievement
• Ethics Check: Life and Death at an Outsourcing Factory
• Facts to Consider: Disposable Workers Are Indispensible to Business Profits
• Manager’s Library: Rebooting Work Transform How Your Work in the Age of
Entrepreneurship by Maynard Webb
• Explore Yourself: Critical Thinking
• Tips to Remember: Key Operating Objectives of Organizations
• Find Inspiration: Climbing High With Patagonia, Inc.
• Table 7.1 Web-Based Business Models
Applications
• TestPrep 7 Multiple-Choice Questions
• Skill Building Portfolio
o Self-Assessment 7: Handling Facts and Inferences
o Class Exercise 7: Strategic Scenarios
o Team Project 7: Contrasting Strategies
o Hot Topic: Pro and Con Debate: How about a “double Irish” with a “Dutch
sandwich”?
• Case Snapshot: Dunkin’ Donuts – Growth Feeds a Sweet Tooth
• Sidebar case: Jamba Juice Blends for Fruitful Growth
Chapter Outline:
Takeaway 7.1: What Types of Strategies Are Used by Organizations?
• Strategy is a comprehensive plan for achieving competitive advantage
✓ A strategy is a comprehensive action plan that identifies long-term direction for
an organization and guides resource utilization to accomplish its goals
✓ “Best guess” about what to do to be successful in the face of rivalry and changing
conditions
✓ Strategic intent is a unifying target or goal

✓ Competitive advantage is an “edge” or method of operations that allows an
organization to outperform rivals
➢ Sustainable Competitive Advantage is a way of operating that is difficult to
imitate
• Organizations use corporate, business and functional strategies
✓ Corporate strategy provides direction and guides resource allocations as a whole
✓ Business strategy provides direction and guides resource allocations for an
individual unit or division within a larger enterprise
✓ Functional strategy guides activities to implement strategies at a detail or
specific operations level
➢ Such as Marketing, Finance, Manufacturing, Marketing, and Human
Resources
• Growth strategies focus on expansion
✓ Growth strategies are those designed to increase the size of current operations
➢ Concentration strategies focus on an existing business area
➢ Diversification strategies focus on entering new business areas
o Related – similar or complementary business areas
o Unrelated – entirely new business areas
o Vertical integration - acquire suppliers (backward) or customers
(forward)
• Role Models: Wendy KoppTackles the Culture of Low Achievement
In an undergraduate thesis at Princeton University, Wendy Kopp, founder of Teach for
America, proposed the creation of her nonprofit. Her strategy included “eliminating
education inequities,” by providing excellent education for kids in low-income
communities. Her goal: to help children growing up in poverty beat the culture of low
achievement. In “What’s the Lesson Here,” students can discuss Kopp’s vision for social
change and the lessons for organizations on the link between vision and strategy. Lastly,
the question of how a leader of a business can gain high levels of employee commitment
to a strategy.
• Restructuring and divestiture strategies focus on consolidation
✓ A retrenchment strategy seeks to correct weaknesses by making radical changes
to current ways of operating
➢ Liquidation – when a business closes and sells is assets to pay creditors
✓ A restructuring strategy seeks to correct weaknesses by reducing the scale or
mix of operations
➢ Chapter 11 bankruptcy - protects an organization from creditors as it re-
organizes in an attempt to restore solvency.
✓ Downsizing seeks to decrease the size of operations
✓ Divestiture sells off parts of the organization to refocus attention on core business
areas
• Explore Yourself: Critical Thinking
Critical thinking is a “must-have” for success in strategic management. It enables you to
perceive problems, hone in on their more essential aspects, gather and interpret useful
information, and make good decisions in complex conditions. Unfortunately, critical
thinking can become blurred without the luxury of full information for analysis,
common in today’s work environment with its many uncertainties.

Encourage students to take the self-assessment on “Handling Facts and Interferences” in
the Skill Building Portfolio. Consider asking students about whether they are able to
distinguish “facts” from “interferences” when answering questions.
• Global strategies focus on international business initiatives
✓ Globalization strategy adopts standardized products and advertising for
worldwide use
➢ Gillette razors
✓ Multidomestic strategy customizes products and advertising to meet local
cultural needs
➢ Proctor & Gamble consumer products
✓ Transnational strategy seeks efficiencies of global operations with attention to
local markets
➢ Ford, Sony
• Ethics Check: Life and Death at an Outsourcing Factory
➢ The sight of netting outside the dormitories of Foxconn factories is sobering when
you learn that it was installed to prevent suicides of workers who lose hope and
jump off the dormitory roof. What responsibility do employers have to make sure
workers not only have safe working conditions, but work that has meaning with a
sense of accomplishment and hope of a better future? What responsibility do U.S
companies such as Apple, Dell and HP have to make sure Foxconn remedies
conditions that lead workers to suicide? How about us as consumers? Do we have
a responsibility? Would you alter your consumption habits?
• Cooperation Strategies focus on alliances and partnerships
✓ Strategic alliances - two or more organizations create a partnership to pursue an
area of mutual interest or strengthen competitive advantage.
➢ Airlines often create strategic alliances with foreign airlines to facilitate
easier foreign travel ticketing for travelers and create a competitive
advantage for the airlines.
➢ Supplier alliances - suppliers have preferred relationships with others in
the supply chain to facilitate smooth flow of supplies.
➢ Distribution alliances - firms cooperate for product/service sales and
distribution.
✓ Co-opetition - competitors share information or technology with the intent of
creating a larger market for both
✓ IBM and Red Hat cooperate on some aspects of Linux development
• E-business strategies focus on using the internet to gain competitive advantage
➢ B2B – business to business; uses web portals and IT to link organizations
vertically in supply chains
✓ B2C – business to customers; uses web portals and IT to link
organizations with customers
✓ Social media strategy -social media is used to engage customers and
other external groups
✓ Crowdsourcing - social media strategy that becomes an interactive idea
exchange with customers.
Table 7.1 summarizes the types of web-based business models

✓ Advertising model
✓ Brokerage model
✓ Community model
✓ Freemium model
✓ Infomediary model
✓ Merchant model
✓ Referral model
✓ Subscription model
• Manager’s Library: Rebooting Work: Transform How You Work in the Age of
Entrepreneurship by Maynard Webb
The book is a practical guide to navigating the new era of what many call
the “entrepreneurial workplace.” Described is the decline of age-old face-
to-face workplace mentoring relationships between senior managers and
their juniors. Reasons include technology, shorter, more temporary work
contracts, flatter organizations resulting in fewer middle-level managers.
Although mentoring has gone by the wayside, the author’s message is to
find and access mentors on your own.
The “Reflect and React: questions ask: Does the notion of entrepreneurial
workplace seem to describe the career settings ahead for you? How about
the mentoring strategy? If you don’t have a mentor, and your employer
isn’t helpful in finding you one, how can you get yourself one? Can
mentoring work as well online as face-to-face?
7.1 Questions for discussion Suggested Answers
1) With things changing so fast today, is it really possible for a business to achieve
“sustainable” competitive advantage?
It is much more difficult to sustain an advantage today, with the speed of change
and technology. However, companies can create a sustainable culture than allows a
sustainable advantage through ongoing commitments to innovation and continuous
improvement. Examples are Apple, 3M, Proctor and Gamble, Toyota, and many
other companies.
2) Why is growth such a popular business strategy?
Growth is popular because so many owners and investors desire growth in their
returns on capital. Additionally, American culture in particular is growth-oriented
compared to other cultures.
3) Is it good news or bad news for investors when a business announces that it is
restructuring?
Usually restructuring plans are treated as “good news” for investors. The reason
for this is that such plans are usually developed when a company is experiencing
financial difficulties or sales are slowing, etc. The restructuring plan sends a signal
to the market and investors that management is addressing issues and has a plan in
place for improving results.

Takeaway 7.2 How Do Managers Formulate and Implement Strategies?
• The strategic management process formulates and implements strategies
✓ Strategic management is the process of formulating and implementing strategies
to accomplish long-term goals and sustain competitive advantage
✓ Strategy formulation is the process of creating strategies
✓ Strategy implementation is the process of putting strategies into action
• See Figure 7.1 for a description of the steps in the management process
✓ Review current situation
✓ Analyze organization and external environment
✓ Develop new strategies
✓ Implement strategies
✓ Evaluate results
• Strategy formulation begins with the organization's mission and objectives
✓ Mission is the organization’s reason for existence or purpose
✓ Operating objectives are specific short-term results that organizations try to
achieve
• SWOT analysis examines strengths, weaknesses, opportunities, and threats
✓ SWOT analysis is a tool used in strategic planning to determine the current status
of the organization
➢ Internal assessment of the organizational strengths and weaknesses
➢ External assessment of environmental opportunities and threats
✓ See Figure 7.2 for a depiction of SWOT analysis
➢ Internal Assessment of the Organization includes its: strengths and
weaknesses
➢ External assessment of the organization includes its: weaknesses,
opportunities, and threats
✓ Core competency is a special strength that gives and organization a competitive
advantage
DISCUSSION TOPIC
To prompt a lively discussion, engage the students in a SWOT analysis of your college or
university. They will typically have a lot of opinions ⎯ some quite insightful ⎯ about the
strengths and weakness of the institution. They are likely to be less well informed about the
opportunities and threats that exist in your institution’s external environment.
This activity provides students with a real-life application of SWOT analysis that will help
them to better understand how to use this analytical tool.
• Tips to Remember : Key Operating Objectives of Organizations
• Profits
• Cost efficiency
• Market share
• Product quality

• Talented workforce
• Innovation
• Social responsibility
• Sustainability
• Porter’s five forces model examines industry attractiveness
✓ Figure 7.3 illustrates the five forces model which include competitors, new
entrants, suppliers, customers and substitutes
➢ Bargaining power of suppliers
➢ Bargaining power of customers
➢ Threat of new entrants to industry
➢ Threat of substitute products
✓ Unattractive industry – intense rivalry, easy entry, substitute products, powerful
suppliers and customers
✓ Attractive industry – low rivalry, barriers to entry, few or no substitute products,
weak supplier and customer power
• Porter’s competitive strategies model examines business or product strategies
✓ A differentiation strategy seeks competitive advantage seeks competitive
advantage through uniqueness
✓ A cost leadership strategy seeks competitive advantage through operating with
lower costs than competitors
✓ A focused differentiation strategy seeks competitive advantage through
concentration on one special market segment and offering a unique product to that
segment’s customers
✓ A focused cost leadership strategy seeks competitive advantage through
concentration on one special market segment and being the low cost provider to
that market segment’s customers
✓ See Figure 7.4 for a depiction of competitive strategies model in the soft drink
industry
✓ What is the market scope – broad or narrow?
✓ What is the expected source of competitive advantage – lower price or
product uniqueness?
✓ The four combinations of answers result in:
➢ Differentiation
➢ Cost leadership
➢ Focused differentiation
➢ Focused cost leadership strategies
DISCUSSION TOPIC
If you used the Discussion Topic regarding a SWOT analysis of your college or university,
you can continue with that scenario in this Discussion Topic. Have the students discuss which
of Porter’s generic strategies that your college or university uses. Make sure that the students
fully explain their reasoning.
• Portfolio planning examines strategies across multiple businesses or products
✓ Useful for companies that operates a variety of businesses

✓ BCG matrix analysis is a planning tool for such companies
✓ See Figure 7.5 for a depiction of the BCG matrix approach
➢ Stars - high market share in high growth markets
➢ Cash cows - high market share in low growth markets
➢ Question marks - low market share in high growth markets
➢ Dogs - low market share in low growth markets
• Find Inspiration: Climbing High with Patagonia, Inc.
✓ Patagonia is a strategic success story anchored to its mission of: “building the
best product, cause no unnecessary harm, use business to inspire and implement
solutions to the environmental crisis.” Patagonia is one of the first companies to
file papers to become a benefit corporation, which means that its policies will
always “create a material positive impact on society and the environment.”
• Strategic leadership ensures strategy implementation and control
✓ Requires good organization structures and cultures, and the right staffing
✓ Strategic leadership - the capability to inspire people to successfully engage in a
process of continuous change, performance enhancement, and implementation of
organizational strategies
✓ Strategic control - responsibility of top managers to keep in touch with strategy,
how well it is being implemented and if it needs to be changed to be more
effective in accomplishing the mission
✓ A strategic leader has to:
➢ Be a guardian of trade-offs
➢ Create a sense of urgency
➢ Make sure that everyone understands the strategy
➢ Be a teacher
➢ Be a great communicator
DISCUSSION TOPIC
Ask students to pick an industry and find examples of companies that seem to be using
strategic control as opposed to those who are not. Discuss these in light of the corporate
bailouts being sought by corporations vs. those who are not.
✓ Facts to Consider: Disposable Workers Are Indispensible to Business
Profits
➢ Northwestern University economist, Robert Gordon, proclaims that we are
now in the era of disposable workers. Businesses seem enamored with the idea
of hiring less full-timers and more part-time or temporary workers that can be
added and let go according to demand, or on a “pay-as-needed approach.” The
“Your Thoughts” section poses questions about whether the switch to more
disposable workers is a good long-term strategy for businesses and other
organizations and the downsides to remaining employees. Discuss with
students how this trend may impact them and whether it is something they
have factored into their career plan.
✓ Strategic Leadership Responsibilities:
➢ A strategic leader has to be the guardian of trade-offs
➢ A strategic leader needs to create a sense of urgency
➢ A strategic leader must make sure that everyone understands the strategy
➢ A strategic leader must be a teacher

7.2 Questions for discussion Suggested Answers
1) Can an organization have a good strategy but a poor sense of mission?
Yes, a strategy answers the question “how” we will succeed; the mission says
“what” the purpose of the organization is. If a company has a poorly written
mission statement that allows for a “jack of all trades” business definition, the
company may attempt to become a conglomerate and fail, or perform with
mediocrity, even though the strategies in each separate business/ market may be
sound. On the other hand, a company may see its mission as very narrowly defined
and miss out on opportunities for growth or adaptation.
2) Would a monopoly receive a perfect score for industry attractiveness in Porter’s five
forces model?
Monopolies would be very close and may receive a perfect score. The only area
where this may be less than perfect is the power of suppliers. Even a monopoly must
rely on suppliers. Unless the monopoly happens to also be the sole customer for the
supplier’s products (unlikely for most resources), then that aspect would make the
“score” less than perfect.
3) Does the BCG Matrix oversimplify a complex strategic management problem?
Yes, the BCG matrix oversimplifies strategic positions and strategic planning. It
offers a “formula” approach and may lead to abandoning a business that may yield
very high returns if management attention is focused on the business in question.
Very few companies use the BCG matrix; it was popular in the 1970’s when
conglomerates were in vogue.
Teaching Notes
In this section, ideas, exercises, and assignments are provided to assist you in integrating the
concepts in Exploring Management for your students, especially the special features of the
text.
Management Live: Critical Thinking and Tron: Legacy
Tron: Legacy creates a virtual world within a video game with few instructions. You don't
have to wander very far off that premise to draw a strong parallel between a lawless
cyberworld and the global environment managers operate in today. Managers need strong
strategic skills to compete in a confusing global economy with the goal of survival.
Critical thinking is mentioned as the most important skill, allowing us to accumulate relevant
information, prioritize goals, and develop strategies for success. Students can gain critical
thinking skills through case studies provided in the book, but only if they go beyond finding
the right vocabulary. They need to thoroughly apply the concepts and develop a winning
strategy.
Facts to Consider:
Disposable Workers Are Becoming Indispensible to Business Profits
Northwestern University economist, Robert Gordon, proclaims that we are now in the era of
disposable workers. Businesses seem enamored with the idea of hiring less full-timers and

more part-time or temporary workers that can be added and let go according to demand, or on
a “pay-as-needed approach.” The “Your Thoughts” section poses questions about whether the
switch to more disposable workers is a good long-term strategy for businesses and other
organizations and the downsides to remaining employees. Discuss with students how this
trend may impact them and whether it is something they have factored into their career plan.
Role Models: Wendy Kopp Tackles the Culture of Low Achievement
In an undergraduate thesis at Princeton University, Wendy Kopp, founder of Teach for
America, proposed the creation of her nonprofit. Her strategy included “eliminating
education inequities,” by providing excellent education for kids in low-income communities.
Her goal: to help children growing up in poverty beat the culture of low achievement.
In “What’s the Lesson Here,” students can discuss Kopp’s vision for social change and the
lessons for organizations on the link between vision and strategy. Lastly, the question of how
a leader of a business can gain high levels of employee commitment to a strategy.
Find Inspiration: Climbing High with Patagonia
Patagonia is a strategic success story anchored to its mission of: “building the best product,
cause no unnecessary harm, use business to inspire and implement solutions to the
environmental crisis.” Patagonia is one of the first companies to file papers to become a
benefit corporation, which means that its policies will always “create a material positive
impact on society and the environment.”
Manager's Library: Rebooting Work: Transform How You Work in the Age
of Entrepreneurship by Maynard Webb
The book is a practical guide to navigating the new era of what many call the “entrepreneurial
workplace.” Described is the decline of age-old face-to-face workplace mentoring
relationships between senior managers and their juniors. Reasons include technology, shorter,
more temporary work contracts, flatter organizations resulting in fewer middle-level
managers. Although mentoring has gone by the wayside, the author’s message is to find and
access mentors on your own.
The “Reflect and React: questions ask: Does the notion of entrepreneurial workplace seem to
describe the career settings ahead for you? How about the mentoring strategy? If you don’t
have a mentor, and your employer isn’t helpful in finding you
Ethics Check: Life and Death at an Outsourcing Factory
The sight of netting outside the dormitories of Foxconn factories is sobering when you learn
that it was installed to prevent suicides of workers who lose hope and jump off the dormitory
roof. What responsibility do employers have to make sure workers not only have safe
working conditions, but work that has meaning with a sense of accomplishment and hope of a
better future? What responsibility do U.S companies such as Apple, Dell and HP have to
make sure Foxconn remedies conditions that lead workers to suicide? How about us as
consumers? Do we have a responsibility? Would you alter your consumption habits?

one, how can you get yourself one? Can mentoring work as well online as face-to-face?
Explore Yourself: Critical Thinking
Critical thinking is a “must-have” for success in strategic management. It enables you to
perceive problems, hone in on their more essential aspects, gather and interpret useful
information, and make good decisions in complex conditions. Unfortunately, critical thinking
can become blurred without the luxury of full information for analysis, common in today’s
work environment with its many uncertainties.
The assessment for this Chapter is entitled “Facts and inferences”. The assessment tool is
intended to help students assess their ability to distinguish facts from inferences, an important
trait for a manager participating in the planning process.
For extended learning, students may discuss how perception of facts and inferences influence
strategic management. For example, what role does personal perception of facts influence the
establishment of mission or a SWOT analysis?
Hot Topic: Pro and Con Debate: How about a “double Irish” with a
“Dutch sandwich”?
No, it’s not a drink and a sandwich we’re talking about. It’s a global business strategy used to
reduce corporate income taxes in America. Ireland offers corporations that put offices and
plants there a 12.5% corporate tax rate. That compares with the standards 40% rate due at
home. If you set up two Irish companies and arrange to funnel foreign earnings through them
– the double Irish move – you pay the lesser tax bill. When it comes to managing a global
business, it requires crucial knowledge of tax laws, which vary widely from country to
country. Ask students if they would be able to execute a double Irish with a Dutch sandwich.
Career Situation: What Would You Do?
A neighborhood business association has this set of members: coffee shop, bookstore,
drugstore, dress shop, hardware store, and bicycle shop. The owners of these businesses are
interested in how they might “cooperate” for better success. As a business consultant to the
association, what would you propose as possible strategic alliances that would join sets of
these businesses together for mutual gain?
For some years now, you’ve owned a small specialty bookshop in a college town. You sell
some textbooks but mainly cater to a broader customer base. The store always stocks the
latest fiction, nonfiction, and children’s books. Recent numbers show a steep decline in sales,
including books that would normally be considered best sellers. You suspect this is because
of the growing popularity of e-books and e-readers such as the Amazon Kindle and Barnes &
Noble Nook. Some of your friends say it’s time to close up because your market is dying. Is it
hopeless or is there a business strategy that might save you?
Skill Building Portfolio
Terms to Define:

B2B business strategy
B2C business strategy
BCG Matrix
Business strategy
Chapter 11 bankruptcy
Competitive advantage
Concentration
Co-opetition
Core competencies
Corporate strategy
Cost leadership strategy
Crowdsourcing
Differentiation strategy
Diversification
Divestiture
Downsizing
E-business strategy
Focused cost leadership strategy
Focused differentiation strategy
Functional strategy
Globalization strategy
Growth strategy
Liquidation
Mission
Operating objectives
Restructuring
Retrenchment strategy
Social media strategy
Strategic alliance
Strategic control
Strategic intent
Strategic leadership
Strategic management
Strategy
Strategy formulation
Strategy implementation
Sustainable competitive advantage
SWOT analysis
Transnational firm
Vertical integration

TestPrep 7: Multiple-Choice Questions
1. Which is the best question to ask when starting the strategic management process?
(a)“What is our mission?”
(b)“How well are we currently doing?”
(c)“How can we get where we want to be?”
(d)“Why aren’t we doing better?”
2. The ability of a firm to consistently outperform its rivals is called ___________
(a)vertical integration
(b)competitive advantage
(c)strategic intent
(d)core competency
3. General Electric is a complex conglomerate that owns many firms operating in very
different industries. The strategies pursued for each of these units within GE would best
be called __________level strategies.
(a)corporate
(b)business
(c)functional
(d)transnational
4. An organization that is downsizing by cutting staff to reduce costs can be described as
pursuing a _________strategy.
(a)liquidation
(b)divestiture
(c)retrenchment
(d)stability
5. When you buy music downloads online, the firm selling them to you is engaging in which
type of e-business strategy?
(a)B2C
(b)B2B
(c)infomediary
(d)crowdsourcing
6. The alliances that link together firms in supply chain management relationships are examples
of how businesses try to use ____________strategies.
(a)B2C
(b)growth
(c)cooperation
(d)concentration
7. Among the global strategies that international businesses might pursue, the
_________strategy most directly tries to tailor products to fit local needs and cultures in

different countries.
(a)concentration
(b)globalization
(c)transnational
(d)multidomestic
8. If Google’s top management were to announce that the firm was going to buy Federal
Express, this would indicate a growth strategy of .____________
(a)diversification
(b)concentration
(c)horizontal integration
(d)vertical integration
9. ___________are special strengths that an organization has or does exceptionally well and
that help it outperform competitors.
(a)Core competencies
(b)Strategies
(c)Alliances
(d)Operating objectives
10. A ________in the BCG Matrix would have a high market share in a low-growth market.
(a)dog
(b)cash cow
(c)question mark
(d)star
11. In Porter’s five forces model, which of the following conditions is most favorable from the
standpoint of industry attractiveness?
(a)many competitive rivals
(b)many substitute products
(c)low bargaining power of suppliers
(d)few barriers to entry
12. The two questions asked by Porter to identify the correct competitive strategy for a business
or product line are: 1—What is the market scope?
2—What is the __________ ?
(a)market share
(b)source of competitive advantage
(c)core competency
(d)industry attractiveness
13. When Coke and Pepsi spend millions on ads trying to convince customers that their products
are unique, they are pursuing a ______________strategy.
(a)transnational

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CHAPTER XXV.
After the wedding party had returned home, the Vivian family met
to talk over the gift that Prince Charley had made Lady Vivian of the
mortgage of Geron’s property. The mother did not feel justified in
giving it to Geron, as had been the idea at first. He had risked losing
it once and now she thought it her duty to come to an understanding
with him. If he would deed the property to her, she would secure for
him shares that would keep him during his life, by turning the
property over to the society. He could then help his boys to secure
their necessary shares as they grew to manhood, besides giving them
the advantages of the society. This he was willing to do, so the affair
was settled.

CHAPTER XXVI.
Twenty-five years had passed. Tom Vivian was governor of the
state and his son was in charge of the first Colony which had become
a large town, or groups of towns, rather, for the many industries had
settlements in different localities. Human beings had become as
valuable as property, and when one part of land was built up another
had been selected.
“This is the era of happy reunions and grand old age,” said Tom
Vivian to a friend as they shook hands one evening. “Everywhere we
go it is the same and all seem to have good health. Certainly a
contented mind is more than half the cause.”
“You remember, Tom,” replied his friend, “that twenty years ago
we could not take up a daily paper without reading about suicides
and murders. In these days we rarely hear of such a thing, for instead
of enduring misery, we are curing it by reasonable methods. Poverty
which was in most cases the cause, is now only a memory. Do you
know, Tom, for what you are admired the most of all?”
“Well, no, I can’t say that I do.”
“It has been the largeness of your mind in seeing the little things
that went towards the building up of the system of this society. Take
the apartments, houses, or hotels that are arranged so as to give
those of small means as much comfort as those of large money
interests. The houses having every provision made for comfort show
clearly what a keen eye you had on the domestic situation.”
“You forget it was not always I who thought out all these
improvements. It has oftener been the men and women who occupy
them. They all wanted front rooms, so I called them together and
with their aid and suggestions we adopted the method of
constructing the buildings that way.”

“I consider,” continued his friend, “that one of the greatest
improvements you have made is the one that enables us to keep our
families together. For, after we secured a suite of rooms in the
apartment hotel, my wife had no further care in the housekeeping for
she objects to keeping help. Our children were young when we
started and the kindergarten boarding apartment took them in. It
was a great comfort to know that when we wanted them with us my
wife, instead of being tired out, had plenty of time and felt fresh and
rested so as to be able to enjoy them. Now that our family has been
reared with less expense than we could have done in the old way, I
have been able to secure sufficient shares to start every one of the
children with a separate suite of rooms when they are married. As
circumstances demanded we changed our apartments so as to be
near each other. I have found it much more satisfactory than it would
have been to have left any wealth I have accumulated or of insuring
my life, leaving them thousands of dollars of which any one could
have robbed them. What a comfort it is to be assured that they have a
home and employment as long as they will need it and an allowance
or pension for their remaining days.
“I met an old acquaintance the other day who hadn’t been able to
see along the lines as we did years ago. Now he has no standing or
titles in the country. You see he couldn’t grasp the situation and
ideas. The old ways were good enough for him. I see your sister, Mrs.
Shuman, has at last taken an apartment.”
“Yes,” replied Tom, “the Shumans were glad to come and had they
done so before money depreciated as it necessarily had to do before
the new order of things, they would have been better off. Why, he
even blamed me for his losses. I didn’t quarrel with him on account
of my sister, but I wrote in the next issue of our paper an article
describing his position, then I saw that he got it. You know he was a
very wealthy man at one time. Well, he came in one day and told my
sister that he had made thirty thousand dollars through wheat
advancing that he had bought on a margin. My sister said to him, ‘All
that money on a margin and you never saw the wheat? Well, I think
that was wonderful.’
“‘Yes,’ he replied, ‘you see, money makes money. When a man has
it and the rest of the people have not, why it is easy as rolling off a
log. A friend gave me a tip.’

“‘Lear, tell me how that sort of thing is done. How do these people
know that wheat and all these commodities are going up? And, then,
how can they control such an immense amount of money in their
exchanges? How is it possible for people to make such a large
amount of money just through a few cents profit on the bushel?’ she
said.
“‘Oh, I can’t explain all that to you now. I just hurried home to give
you your third of it all. I was afraid I might be tempted to invest it in
something else and lose it, for it is a gamble. I believe in a man giving
his wife her third while he is alive, then both can enjoy it.’
“After he had gone back to the bank Libra sat down to think it all
over. She had everything that she actually needed, but she would like
the diamonds he had spoken of a few days before. Well, she could
have them now and she believed she would get them; they would add
so much to her appearance. She had just decided this point when
Scoris called to see her. Of course she told her of Lear’s generosity,
then asked what she would do if any one gave her such a splendid
gift.
“‘Do with it?’ exclaimed Scoris. ‘Why, I should secure shares in the
society as soon as I could get to the treasurer’s office to attend to it.’
“‘Why, Scoris, I never thought of that,’ she answered. ‘I have a
good mind to do it, or at least half of it. Supposing I send it to Tom
and ask him to arrange it for me. I can sell it,’ she said in a hesitating
way, ‘at any time I like, can’t I?’
“‘Yes, to the members,’ Scoris said, ‘but I hope you never will, for if
anything happened to Lear you would be provided for.’
“‘Oh, come now, Scoris,’ she replied, ‘I don’t have to provide for my
future, my husband will take care of that, but I would like to take
some shares in the society. I don’t know anything about business and
don’t know which is right, he or Lear. Of course, if Tom is right, my
husband is wrong, so we won’t talk about it. I can do as I like with
this money, so I will do this. I often feel ashamed to hear people talk
about the success he is making and not to be able to tell them
something about it myself.’
“‘All right,’ Scoris had said, and that was how they happened to
have shares. When her husband sank all they had in trying to bolster
up his failing fortune years after, he was amazed to find that those

shares provided him with a home and was even the means of helping
him to gain a position in the bank after he had learned its different
methods.
“Libra became interested in the society after she had made an
investment in it and often asked questions that showed she was
thinking.
“She asked me one day what was meant by margins on the price of
wheat. I told her that all over the wheat belts of the country the
railroads had immense elevators that the farmers could store their
grain in them free from charge. This saved the farmers the expense
of storage houses; they, of course, made use of the railroads. The
railroads control it and possession is nine points in the law. ‘You see,
Libra,’ I explained, ‘the controlling element, which is the money
power, keep themselves in touch with each other. The railroads are a
part of that power. So is the stock exchange where the price of the
grain is fixed. Then the price is telegraphed to the different points
where the elevators are situated and the dealers announce the price
to the farmers. If they have to sell at any price to straighten out their
indebtedness at the stores or for hired men who help them to seed
and then thresh and get it in, as many do, they will sell at the first
chance; they can’t help themselves. The dealer will own it now who is
living on any profits he can get out of it and he is usually a bright,
sharp man. He in turn holds it for the city dealers; all have to risk
something for each tries to get all they can. Now remember, it may
never have left that elevator where it was stored in the first place by
the farmer, still, all these men have a profit out of it. Now, your
husband bought at a certain price and he sold his margin or profit to
someone else. He couldn’t sell the wheat for he never had it, nor did
he ever intend to get it. He had the money to invest and he was
assured that he could make that amount out of it, or, in other words,
he held or “cornered it” for a few hours or days, and that is perhaps
what he did.’
“Then she asked, ‘But how do they get the money?’ I answered,
‘From the banks and insurance companies usually; of course, that is
only one way. There are many others.’
“‘But how is it that the banks and insurance companies get all
those millions that rich people can control?’
“‘They come from the savings of the industrious classes.’

“‘Don’t the banks and insurance companies risk more than they
have a right to in loaning that money?’
“‘No,’ I said, ‘they secure it by mortgages or in some other legal
way.’
“She studied for a moment, then said:
“‘After all I don’t see how some people know when prices are going
up.’
“I answered, ‘If you had all the wheat under your control and had
money enough to keep it there, you would soon know for the people
would pay any price to get it. A cent or two extra on bread when
millions are consumed each day amounts to a large sum of money,’ I
told her.
“‘Why, of course,’ she answered, ‘I see now.’
“‘I don’t think it is honest,’ she said after a while.
“‘Well, no,’ I answered, ‘that is why I started this society, so that
the people could protect themselves from the money power.’”

CHAPTER XXVII.
The Honorable Thomas Vivian first started the Wealth Producing
and Distributing Society when but a young man, and though he is
only middle aged now, he is more honored than any other man in the
country. Hundreds have formed societies as he did, still all looked up
to him as their head and superior. The latter he objected to, for he
claimed that every locality should place their best managers at the
head and then conduct the business so that those who excelled could
have the credit of their own ability.
It only takes four or five years to show what kind of people are at
the head of any enterprise, then after each separate colony has
proved its standing, it should be recognized by the older branches,
always in business and honors also. It had been proved a wonderful
incentive to the good morals and honesty of the society, to confer
titles and whole neighborhoods were known by their prevailing
sentiments, even if they were peculiar regarding their ideas. If one
branch found that another was not truthful and honest as a whole
society, they declined to do business with them, or look upon their
titled members as their equals, therefore all aimed to be worthy of
the highest honors, each in their own locality.
It gave women a better title than Miss or Mrs., for marriages were
not always a mark of honor in those days. Then, besides, women did
not lose their identity as they did before in marriage. It was
considered that titles were a step higher for them. Each man and
woman was known by their own merits and if the names were
changed it was a combination of both names, or they kept their own;
or if they wished to keep the old custom it was no one’s business. Still
the wife was the Hon. Mary, etc.
No society could regulate these things, but all right-living people
lived so as to be an honor to the cause, continually keeping the

greatest good to the largest number in view.
Again we find the Vivian family assembled to honor their mother’s
birthday. The grand-children with their husbands and wives make up
a good-sized crowd by themselves, but they cannot outdo their
parents’ enthusiasm in making this the happiest birthday the mother
and grandmother has had in years, and here we leave them to enjoy
the fruit of their labors.
THE END OF FIRST STORY.

THE WEALTH PRODUCING AND
DISTRIBUTING SOCIETY.
We, the members of this society, consider life, liberty, and
happiness sacred beyond all other earthly considerations.
Therefore we protect life, we liberate human beings from the
bondage that money holds over them, we make it possible for them
to secure homes and a pension that never can be taken away from
them as long as they live.
In securing this much for them we believe that we are laying the
foundation for their happiness.
Each member, as they sign their names promising to keep the laws
and rules of the society, must remember that they are binding
themselves to protect the life, liberty and happiness of all members.
As the society holds all wealth in trust for the members its laws are
enforced to protect their interests.
Each member is expected to know the value of wealth in
comparison with money. They must recognize that money is only a
medium of exchange and that the shares of the society represent
their wealth earned by labor, and that the society is the only source
in which labor can be protected sufficiently to ensure homes and a
pension.
In joining the society all must agree to the following rules and
regulations and in no wise can any become members without doing
so:
I hereby promise to keep all rules laid down by the wealth
producing and wealth distributing society.
In using the society’s property in the pursuance of labor or
pleasure, its waterways or conveyances, or anything in connection
with said society, I promise to protect it from law suits or any other

unnecessary expense or trouble. I take my own risk as to accidents
and will in no wise injure the said society by appealing to the law of
the country.
I hereby agree to take the society’s shares, scrip, produce, or other
commodities in exchange for my labor or money expended in shares,
and will in no case exact coin from said society.
I hereby take oath that all money I place with the society is legally
mine.
I also agree to give up to the society my shares either bought with
money or labor in case of any law suit brought against me. I do this
to protect said society.
I agree to abide by the decision of the officers in charge of the
society in all cases of disagreement.
I promise that I will not employ those outside of the society to
perform any labor for me if I can find what I need in the society and
that whenever possible I will buy from the members of the society.
Any member breaking these rules also agrees to forfeit all claim on
said society. Members may sell their shares to other members, but
cannot withdraw them from the society, because each share
represents the strength in the society’s structure, in the same way as
the bricks in the wall of a building. If bricks were taken out of the
building it would soon fall. The same with the shares; they must
remain intact because the money and labor that these shares
represent was used to build the members’ home, to ensure
employment and a pension when too old to labor.
Each member pays $1.00 per year for general expenses, then
agrees to buy at least one permanent share each year at $12.00 per
share. Permanent shares represent all buildings on the land
belonging to the Colony as well as improvements. When a member
has sufficient permanent shares to entitle him to live in an apartment
building or hotel he is exempt from paying taxes or rent, and when
he has sufficient consumable shares to justify the society in awarding
him a pension he will be independent for life.
All money and labor is invested in permanent shares to buy
materials, to build factories, hotels, apartment houses, land or
machinery that will be permanent, fruit trees, etc. Members who had
homes of their own could buy sufficient consumable shares to ensure

them an income. Then as many permanent shares as would be
required to allow them to live in an apartment house. It wouldn’t
exempt them from paying the regular $1.00 per year for general
expenses except in cases where the whole amount had been paid to
insure them an income for life.
Scrip was issued with the consent of the officers in charge and only
issued to the amount of their security. The signature of the president,
secretary and cashier was necessary to make it legal.
It was issued for the purpose of exchange among members. It paid
for any kind of labor done for the society, the president having power
to issue sufficient to satisfy the demand of its members.
One benefit of scrip is that it cannot be stolen nor can it be issued
by any one except those appointed by the society and it must be for
value received.
As nearly all members lived in the city and were paid in coin for
their labor in the beginning of the Colony, money was as plentiful as
scrip and could always be exchanged. This society having its central
Colony within thirty miles of the city, made it easier to exchange
either its scrip or produce. The city members had money to buy
either shares or produce. The manager of the Colony having the land
secured by the membership fee each year could secure all labor by
issuing scrip. He could buy from the farmers in large quantities at
wholesale the first year or until he was able to grow the food that the
members needed; he could then sell to them in exchange for the scrip
he issued for their labor, at retail market prices if he employed them.
If he sold to the city members they would have money to pay; this
money he could use to buy from outside dealers such articles as the
Colony could not produce at first.
Special apartments were used for the aged. They were quiet and
restful. No children were allowed in the buildings. There were several
parlors where they could meet each other when socially inclined, but
their own rooms were private. In the beginning of the society some of
these old people contributed the best of their furniture towards
fitting up these parlors. The society bought them, allowing their
value to go on their shares, besides they contributed their tables and
chairs for the dining room. Elevators were used on all the floors so as
to make it easy for them to go up and down. Separate sections were
used for lone men and women. The men’s parlors were fitted up so

they could smoke or rest, read, or talk and make themselves
comfortable in their own way, only men were allowed in them. The
women’s apartments were separated from the men’s by those used by
the aged married couples, the married people using those situated in
the center.
As the buildings were built the length of the street, this was an easy
matter. The public dining room was all in one, but each family or
group of friends used tables by themselves. Their own homes and
freedom to live as they wished was the object the majority had in
view.
In some instances young married people also used apartments in
these buildings if they had no children.
One large public parlor for both men and women was on the lower
floor and was used at first for entertainments. All the parlors were
furnished with good, comfortable chairs, rugs, pictures, draperies,
etc., not necessarily new, but in as good order. The main object being
to have them homelike and cozy.
The society was able to reach a larger number by practicing these
economies and it helped these old members to dispose of their things
when they first joined the society. Five hundred dollars enabled one
person to secure one room and a small pension for life after they
were sixty-five years of age with all privileges allowed in the
apartment buildings. This did not include their board, but gave them
more freedom in their choice of food and besides they could use the
scrip issued for clothing or any purpose. They could cook their own
food if they wished or buy it already cooked.
As the aged had no social homes provided for them the society
found it could supply that difficulty by accepting members over 65
years of age for not less than $300. This amount would allow them
one room, heat, light and their laundry done, or where two occupied
one room it was $500 for their lifetime. This included their board.
They were expected to find their own furniture, bedding, etc., and
attend to their own rooms and wait upon themselves unless they
were ill. After their demise if any means was left it went to the
society.
Five hundred dollars was the lowest sum accepted where a pension
was granted, and that only secured a small room. One thousand

dollars secured a larger and better room and a larger pension. The
age of the person made a difference also and these figures are only
given to indicate possibilities that would suit all kinds of people. The
apartments were also arranged so that the people could be classified.
They could change their apartments if they wished also. This low
amount is stated to encourage those of small means and help all to
secure homes.
The society’s apartment hotels were built to accommodate not only
wealthy people but those of refinement, who had only a small
amount of money. Small rooms could be found in all the buildings as
well as large. They were built in different localities to suit the habits
and tastes of all. The main idea being to secure the people against
fraud and robbery by the failing of so many insurance companies,
banks, and mortgages or where their savings had been placed, and to
secure all from poverty, from the infant to the aged person.
Men and women who had been accustomed to give a percentage of
their wages each week in times of strikes, found that it was as easy to
pay the same amount into the society for shares, for the money that
secured shares was not lost even though the depositor failed to keep
it up. It was safer than in a bank also and drew a better interest even
than if it was on a mortgage. The small amount accepted (twenty-five
cents per week) brought it within the reach of all industrious people.
The advantage of free burial in case of death, besides their being able
to sell the whole amount of shares in case of sickness, or disaster,
was appreciated. The money so invested could not be lost to the
depositor, because it was either invested in land, buildings, or other
valuable properties that secured it. Never before in history had the
people’s savings been so perfectly secured to them; no matter how
large or small the amount. People gave up their life insurances and
when they lived in the Colony even their fire insurance, because the
society was sufficient assurance for everything connected with their
lives. Those who were saving money to buy homes invested it in
permanent shares because the shares earned for them $1.20 each
year, per share, which amounted to $6.00 each single share in five
years. In this way two shares bought one more in five years with its
interest alone. (As it had to stand five years before being added to the
principal it did not earn compound interest.) Those who wished to
secure homes within a limited time and whose income was small

could do so with less money than in any other way. For they could
secure shares entitling them to use one room or as many as they
could afford. Inexpensive apartment houses were built first so as to
meet the demand of the majority who would be employed. The
members lived in the apartments and paid rent for them when they
couldn’t pay for them in shares; but if they lived there five years that
rent was allowed on the shares.
Apartment houses were built instead of cottages, for many
reasons. They were cooler in summer, and could be heated better
and with less expense in winter. They also afforded protection to lone
women, as night and day watchmen kept guard in the halls.
Some apartments had small kitchens so as to meet the demands of
all the people, but many used the public ones, for each could have
their own stoves, etc., and the persons in charge kept them clean.
The majority, however, bought their food already cooked or left their
orders each day with the cooks in charge. All apartments had large
windows and porches. They were built the length of the street, the
streets being shorter than usual, so as to make the gates that opened
into the houses on the ground floor convenient to go through with
the steam wagons or automobiles.
This track was used to bring everything into the building, the main
doors being kept in better order by this method. The kitchens and
dining-rooms were on the lower floor or basement as they were
called and were on one side of the track, the other side being used for
store rooms. This arrangement kept everything unsightly (such as
many back dooryards are) from the gaze of the curious and enabled
the apartment windows to face the street with its flowers and trees
on each side in summer.
They were built facing east and west, so that all occupying them
could benefit by the sun’s rays and yet be protected from the intense
heat in summer from the south side, or from the severe cold in
winter on the north side.
The public parlors and library were at the end of each upper floor.
The inexpensive apartment houses were built not only to last for ages
but to give comfortable homes to its inmates. They were built plainly
but of material that gave them a superior appearance. As the society
owned the buildings, the members could secure better apartments as
they increased their shares, or as soon as a better grade was built.

Apartment hotels were built in modern style to accommodate those
of large means and who wished to secure their money by investing it
in the society’s shares. Money so invested proved to be absolutely
safe besides returning a better interest, and whether a small amount
or large it came to the member (without any annoyance or delay)
either weekly, monthly or quarterly.
All members had to be truthful and honest in their dealings or they
could not receive titles. Only titled members had votes on the
regulations and rules pertaining to the society.
Members were allowed $100 on their shares for every new
member they presented if the member thus secured remained in the
society two years and paid all dues.
This percentage was added towards the purchasing of shares for
the member who presented the new member.
Many members secured shares in this way that helped them
eventually to have homes that they could never have in any other
way.
Members could build tent houses for summer use by paying rent
for the land.
Members who lived on the land controlled by the society had the
benefit of free burial when they lived in the Colony two years, and
had paid for two shares (these shares were used to partly pay the
expense, the society paying the balance); this was only done when
the members were buried in the Colony’s burying ground or
cemetery.
All members who intended leaving their shares after their demise
to any one except to the society had to make a will to that effect, or
the society claimed the right to use the value of such shares for the
benefit of the aged members who were unable to provide all they
required. All shares left with the society by members who dropped
out and did not sell them was used for the same purposes in five
years after the last payment was made.
When any member left children or any one dependent upon them
they were expected to secure their shares to them, and if the children
were young the society held said shares until the children became
members entitling them to the privileges, or it used the amount for
their care until they were old enough to work. In such cases the

society or some member adopted the children and became
responsible for them.
Many children were adopted by the society when their mothers
had been left destitute. These children were provided for by a special
fund for that purpose. It took care of them until they were old
enough to provide for themselves, but they were then bound to
return to the fund a percentage of their earnings each day to keep up
the same advantages for other children situated as they had been.
Children adopted by the society were not taken away from their
parents as they were from private persons, for the parent could live
in the Colony, but the society could compel the children to live in the
Colony until they had repaid it for any expense incurred in their
childhood.
All young people who were employed by the society left a
percentage of their earnings to be used for present necessities for
either the aged or children, then they were exempt to the amount as
well as the interest that would accrue from buying consumable
shares, for the rising generation could do the same for them in their
old age. This was one of the greatest advantages in the society, after
the first generation of children were grown, for by that time the
society knew the average expense of supporting each member.
The amount each member had to pay was so small that a large
number invested their savings in factories. The stock was five dollars.
That gave all a chance to invest. The poor man or woman who had
their savings in the bank or those who lived on the investment of
money, all had a chance to secure better interest. You see there was
no risk. The market was already secured. Every member was
interested.
Every dollar’s worth sold had to be by a member appointed by the
President and approved by the members. For ten per cent on every
dollar’s worth had to be allowed the society for securing the market.
Ten per cent had to be allowed the member who bought from them
also, but was not paid them in coin but added to the shares. That
made it cheaper to them than advertising. The company had to
employ the society’s members. Factories were started in the city, but
only remained there until they were built in the Colony.
A committee of members could build a factory on the land secured
by the society free from ground rent if it could be done without their

going in debt, for no materials unpaid for could be brought upon the
society’s land. This rule was made to prevent law suits that would
endanger the society.
These members were allowed to make all they could out of it,
within the rules, for a certain number of years, but had to sell to the
society when the time was up, at the cost price of labor and
materials, etc.
One or more people would take up the different branches and were
given the exclusive right to sell to the society as long as they kept
within the rules. The rules were that a member was to receive ten per
cent on every dollar’s worth of goods they bought. This percentage
was to be added to their shares. All goods to be sold at a price
regulated by a committee of members and those who were investing
in the enterprise. Dry goods of all kinds were represented, hardware,
crockery, etc. A general overseer was appointed to see that a right
percentage was paid to the society for securing the customers.
Three men started a hat factory, for both men and women’s hats.
They were given the exclusive right to manufacture them as long as
they kept within the rules of the society.
Two women started the millinery department. Four others
dressmaking. Three men did tailoring, others took charge of the shoe
department, all using their own capital, each group paying their
share of the rent. Every line of business was represented that the
members required.
It gave all a chance to invest their savings. As each business
venture enlarged so that more partners were required to run it, the
society took charge of it. In every instance those who started the
business and had brought it to that point, were given charge of it at a
percentage that paid them more than it would to keep on alone. The
society had to pay cash for everything that it controlled; so did the
members when they sold under the society’s patronage. If there was
no debt there was no danger of the society being wrecked.
In all the large department stores several salesmen and
saleswomen saw the advantage to themselves in co-operation with
the society and soon such stores were started in the cities. They
realized their benefits and determined to secure homes and pensions
without delay. Each department was represented by those that

understood the business. The money that had been kept in the banks
was withdrawn and the days of small beginnings had returned once
more.
It was a satisfaction that no one could become rich from their labor
except those who were co-operative with them. The people lived
more simply, the chief aim being to live honorable, truthful lives; to
gain titles that showed friends and strangers who and what they were
was worth more to them than all the flash and make-believes that
had contented them in days gone by.
The society found it cheaper to make good roads with the labor of
crowded-out men than to use the old system of cars. Automobile cars
that carried coal and grain, as well as every kind of produce, spoke
loud and plainly as to the price they were going to pay those
magnates of commerce.
Wealth beyond what each could use was only foolishness. It was
almost as bad as giving their labor away. They received honors when
they donated wealth to the society for the benefit of little children,
invalids, or the aged. Young people were given extra advantages who
cheerfully helped those who belonged to them and who were unable
to do all for themselves, but no member was allowed to support
another if that other was better able to work for themselves than the
one who was doing it. The society gave employment to all healthy
men and women who were members and paid their dues. All being
consumers, they helped to keep the scrip in circulation. In the
beginning of the society many city members sent their aged parents
to the colony to live. It gave them a chance to do light work when
they were able, and their permanent shares could be added to those
members at the old peoples’ death.
Those who held highest rank were always given the best offices.
They also controlled the councils, because they gained their titles for
honesty and truthfulness first, then for special services to the society,
bravery in times of danger, self-denial in giving up their wealth for
the love of the people. Merit, not money, ruled. Often those who held
the highest titles saw that someone besides themselves were better
fitted for the duties that naturally came to them. In those cases the
best person was appointed of either sex. No one could hold an
important office that had not received a title, nor could they in any
way be placed over members who had proved themselves superior.

The object of giving titles was to place the best members in control.
Money had ruled so long and so unjustly that it was necessary to
place the members in positions that they would be honored for their
integrity. So the custom was established at the beginning of the
society. All knew what to expect when they joined and could not
complain if they saw a certain class preferred to themselves. No
person’s honesty was taken as a matter of course. The business of all
concerned had to be constantly under the supervision of committees
formed each month to audit the accounts, receive complaints, and
settle disputes. It is a well-known fact the world over that some
people are always in trouble. That kind know nothing else and they
must be weeded out of the association, otherwise they will cause a
dissatisfaction that no power can stop if let run on. They are like a
small fire that can be controlled in the beginning. Compel such
people to sell their shares if reasoning fails to bring them to their
senses. The greatest good to the largest number must always prevail.
There is nothing so contagious as unreasoning discontent among a
mixed people.
Patience is necessary in all walks in life, but was never needed
more than in becoming accustomed to the new forms of government.
So many would forget and fall back to the old ways at first, and those
who were careless were nearly always jealous of the persevering
members who surpassed them.
The scale of wages was the same as union men and women
received in factories outside of the society, even if the hours were less
per day, excepting in cases of piece work that was done by old or
infirm people, who only worked as they were able at any time.
The pensions paid to members for the first ten years were
according to dividends earned in the factories, etc., in which their
money or labor was invested. After ten years it was increased, but at
no time could it be decreased.
Ten per cent each year was paid for interest on these shares until
the pension was paid, but had to be left to accumulate with the
society until then. When a member begins to draw a pension the
amount will have to be according to the number of shares and the
age of the members when the first allowance is paid. When a
pensioner begins to draw his pension at forty-five years of age, it will
be less than if they did not draw it till they were fifty-five or sixty

years of age, for the amount of shares will have to be divided so that
they will last at least until the member is seventy-five years old.
This does not mean that the pension will cease at that age, for it
will be paid as long as the member lives.
To protect itself the society had to make rules to pay pensions,
according to the members’ shares, but it was found by practice that
such large amounts were donated for this purpose that their shares
were much larger than their personal shares represented.
This rule had to be made during the first generation, but after the
first generation of children had the advantage of being provided with
homes and an education in childhood, and regular employment in
mature years, the society was able to pension them at forty-five years
of age, because it had the whole benefit of their labors until that time.
In winter we had the machinery so arranged that it could either run
the weaving of cotton or the different kinds of materials just by
adjusting a certain lever of machinery. In this way we kept men and
women employed all the time, securing at least eight hours a day to
all who needed it. At night the white materials were woven when
practical and night workers were given shorter hours with the same
pay as the day workers. In this way all were secured steady
employment, for the same was done with every kind of factory work.
In the summer a large percentage of these people were given
different employment. Some went to the wheat fields, others to the
cotton plantations, for the steam carriages made it possible, or the
fruit farms, etc. The first few years it was necessary to work just as
many hours in the society as out of it; as soon as all the exchanges
were complete the hours were shortened, and those who were not
able to work so long each day, even at the first, were given less to do,
for the society never was a money scheme but a protection to labor.
At the same time those who only worked three or four hours a day
got that much less for their labor. It had to be that way at first or idle
people would have shirked their responsibilities. This put a stop to
overproduction in all lines of goods. All had a large field of
employment to choose from and nearly all were satisfied, at least all
were better satisfied than they had been before they joined the
society.
At the end of five years the society owned the first land that it had
built upon and all the industries on it, besides. Then dividends were

granted to members, either in permanent or consumable shares,
according to the amount they had at the time. The society holding
the right to keep in its possession sufficient money or script to
increase the standing wealth. The dividends were secured to the first
members at this time to reward them for trusting its management
and giving the society its impetus. It showed the value of small
beginnings and taught a lesson in co-operation among the members
in the most practical way.
THE END OF THE RULES.

THE PLANET VENUS.
SECOND STORY.
CHAPTER I.
A gentleman and his wife were sitting in their study. He was
reading; she was doing some fancy work. In a few moments their son
came in, and seeing his father occupied, took a seat by the window to
wait until his father was through.
These people were titled, or, rather, the father and mother were.
The elderly gentleman was a lord and his wife a princess. They had
both received their titles for their grand and faithful work in helping
to restore order to the country in which they belonged. Their name
was a combination of both their names, Just and Ring, consequently
he was Lord Justring and she was Princess Justring. She could not
raise him to her title, nor could he change hers, even had they
desired it. Their two children were therefore known as the Justrings,
they had received the title Honorable, and their parents wished them
to gain greater titles which was the custom of the country. Their
motto was: “The world is better for my living in it,” for when any one
did a great self-sacrificing act, it always added to their title in some
way.
In a few moments Lord Justring looked up to see what it was that
his son wanted.
The young man approaching, said:
“The study of worlds may be a very interesting subject, but, father,
I am positively sick of it. There is nothing in it to reward you for all
your trouble, that I can see. Take the planet Earth, for example. The
missionaries have not made one beneficial change in the condition of

the masses from what they were twenty-five years ago. The fact that
we are able to hear as well as see them, I admit, is something to our
credit, but what good is it to them? I thought after we had perfected
those last instruments that we would be able to make them catch the
ideas we are trying to convey to them.”
“Your life can only be perfected by the good you do for the more
ignorant worlds. You must be patient; but why are you discouraged?”
“Because the ones I wish to reach and help don’t catch the
messages. Instead of helping them I have found that we are actually
helping the wealthy people to see their advantage, for they are the
only ones who have been able to make use of the suggestions. This
wealth, in turn, is being used to cement all the closer the bond of
servitude and those who toil are in a worse plight today than in any
time during the Earth’s history. Since I have taken up this work, I
have no peace of mind and I cannot enjoy life.
“It is a fearful thing to see millions upon millions of people toiling
to sustain life, even in times of peace, besides knowing that those
who work the hardest have the least for their labor, while the cry of
those who are starving because they have no work to do, is
unbearable. Then the unnecessary wars all brought about to enrich
those in power and keep the ignorant dependent.”
“Why, my son, that is the reason that we who live on the older
planets form these societies to reach the younger ones; the planet
Herschel has caught the messages sent to them. That should be
encouraging.”
“Yes, it is, but only a few in comparison with the multitude of
worlds after all.”

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