Management A Faith Based Perspective

1st Edition Cafferky Solutions Manual

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 CHAPTER 7: Strategic Thinking

Suggested Bible verses to introduce class periods for this Chapter

Select the version of the Bible that you prefer.

1 Chronicles 12:32 And of the sons of Issachar, men who understood the times, with
knowledge of what Israel should do, their chiefs were two hundred; and all their kinsmen
were at their command.

Proverbs 11:24 There is one who scatters, yet increases all the more, And there is one
who withholds what is justly due, but it results only in want. 25 The generous man will be
prosperous, And he who waters will himself be watered. 26 He who withholds grain, the
people will curse him, But blessing will be on the head of him who sells it.

Proverbs 14:8 The wisdom of the prudent is to understand his way, But the folly of fools
is deceit.

Proverbs 21:5 The plans of the diligent lead surely to advantage, But everyone who is
hasty comes surely to poverty.

Ecclesiastes 7:19 Wisdom strengthens a wise man more than ten rulers who are in a city.
Front-loading Activity
Consider using one of the In-class Exercises at the end of the chapter as a means to introduce
the essential question that follows.

Suggested Essential Question to Explore in this Chapter

Introduce the chapter by presenting one of the following questions (or a similar question):
1. To what degree to personal values influence strategic decisions?
2. Why might a Christian manager approach strategic decisions differently than
someone else?

As you conclude the lectures and class discussions of the material in the chapter, return to the
essential question. Divide the class into small groups and ask the groups to propose possible
answers to the essential question. Then ask students to put in their own words an essential
question which embraces the major learning point from this chapter from their perspective.
Alternatively, in follow up to the class period emphasis on the material, engage in an online
threaded discussion or blog exploring the essential question ideas of the students.
LEARNING OBJECTIVES
• Understand how personal values directly influence strategic decisions.
• Describe how a faith perspective can guide the strategic decision maker.
• Understand the strategic thinking process and content that are used to analyze a given
situation to make strategic decisions.
• Describe the common patterns of strategic decision making across industries.
• Understand selected tension points that strategic managers face during the strategic thinking
process.
Teaching Notes and Engagement
Activities
1. Toyota’s Assumptions
Ask: Where is the US automobile
industry right now in terms of the
assumptions that leaders seem to be
making?
Aptera Motors, mentioned in the text, has gone
out of business. Point out that small up-start
automobile companies such as Aptera Motors
have a difficult time entering an industry
dominated by firms that have huge economies of
scale, fully developed networks of strategic
partners, well-oiled supply chains, and fully-
developed dealer networks.
Point out the seemingly increased interest in
electric vehicles and hybrid vehicles. Show
examples of companies that have developed
these options.
Ask:
• What assumptions are auto
makers using when they develop
a pure electric vehicle?
• Which of these assumptions
might be correct?
• Which assumptions might be
incorrect?
2. Who Cares about Strategic Thinking?
Remember that as the instructor you may fully
understand the importance of a topic like
strategic planning. Some students will not
automatically see this. Instructors must spend
some time “selling” students on the reasons why
a particular subject is covered. This is the section
to do this.
Supplement what the students read in this
section by sharing your own experience in
strategic planning or implementation.
Chapter Key Idea Outline
a. Toyota executives assumed that consumer
demand for gas guzzling vehicles would
continue in spite of the slow but steady
increase in gas prices.
b.Then in 2008, gasoline prices increased
dramatically to over $4 per gallon. In spite of
its leading market share in the American auto
market, sales of its new full-sized pickups and
SUVs declined dramatically.
c. The basis of Toyota executives’ assumptions
regarding demand and price elasticity—
customer responsiveness to changes in price—
was transformed within a few months. As a
result, executives were forced to re-examine
their assumptions.
d.Perhaps we should not be too quick to
criticize strategy executives at Toyota.
e. Given Toyota’s experience, several strategic
questions give company executives reason to
evaluate their strategic decisions:
• Should assumptions about the American
market for full-size trucks and SUVs be
revised?
• How much emphasis should incumbents
(current automobile manufacturers) place
on alternative fuel vehicles?
• How are microeconomic influences, such
as price elasticity of demand, changing?
a. Organizations hire managers to help them
make strategic decisions and then implement
their strategic plans. Keeping broad purposes
in focus, managers also shape the day-today
activities for implementing strategic decisions
and communicating with strategic decision
makers about adjustments to strategy.
b.Some managers in every organization must
take responsibility for the decisions that affect
their entire company.
Invite students to examine Exhibit 7-1
and ask:
1. Which “tasks” do you feel well
equipped to handle?
2. What attitudes and skills do
managers might need to
accomplish each task?
It may not be immediately clear how personal
values impact planning. Invite students to
consider how each of the following values might
lead to different strategic planning outcomes:
• valuing stability more than valuing
change
• seeking to maximize shareholder wealth
more than social responsibility
• prizing cost control more than market
innovation
Remind students that as we do in each chapter of
this book, we begin by reviewing the biblical
record and present some of the big issues where
strategic thinking is related to values.
Ask:
⚫ How would you explain the
connection between values and
the strategic decisions that are
made?
At first students may not see the connection
between faith and strategic planning. Certainly
wise environmental stewardship is partly the
c. Even though most strategic decisions are
made by the top-level leaders, mid-level
managers get involved in strategic thinking,
too. See Exhibit 7-1.
d.Frontline supervisors and team members are
the key linkages between ideas and day-to-day
ability to actually make things happen.
3. The Management Pyramid and Strategic
Thinking.
a. Making strategic decisions and then taking
actions to implement strategy are the most
visible dimensions of a manager’s work. But,
leaders can accomplish these and other
strategic actions only as they spend a great
amount of time thinking about the issues.
b.Here, as with managerial effort everywhere in
the organization, the work of a manager is
largely mental and emotional work.
Underneath the action and thinking on
strategic issues lie the personal values and
character of the manager, as illustrated in
Exhibit 7-2.
c. There is no better illustration of the
connection between being–thinking–action
than strategic management. For example,
when US Airways CEO Doug Parker faced
the downturn in the economy.
d.Strategic managers bring their entire being to
strategy tasks and processes.
e. For the Christian manager the foundation of
this model is being and becoming in terms of
biblical values.
4. Faith Perspective on Strategic Thinking.
a. It is in the creation account where we see
the first suggestions related to strategic
outgrowth of faith. However, challenge students
to consider other possible connections. For
instance:
• Being conscious of the future as
celebration of being made in God’s
image
• Planning is embraced in both the Old
and New Testaments
Also, the connection between our faith and our
planning activities could raise some interesting
questions:
Ask: Would you expect, all other
things being equal, for Christians to
be better at planning than non-
Christians?
Ask: What unique perspectives might
you expect Christians to bring to the
planning process?
Encourage students to be critical thinkers in
every arena of management. Asking the right
questions is the essential start in formulating
right answers.
Draw a matrix that includes the critical
success factor categories mentioned by
Moses.
Let’s assume that the spies were neither
delusional nor purposefully deceptive.
Ask: What might explain the
differences in the reports of the 10
and the 2?
These are good guidelines for ANY
thinking. The original Strategic Thinker is
God himself.
b. The Bible highlights several persons as
having the gift of strategic thinking to
guide organizations. These include notable
strategic thinkers such as Abraham, Jacob,
Moses, Joseph, David, Solomon, Daniel,
Nehemiah, Jesus, and Paul.
c. Members of the tribe of Issachar were
known as having the ability to see the big
picture. When he needed to consolidate the
national defensive force, David turned to
the men of Issachar for strategic advice.
d. Environmental Analysis. An example of
strategic analysis that leads to a strategic
decision is recorded in Numbers 13 when
Moses sends spies throughout the land to
scan the environment.
i. Moses identifies several critical success
factors that would influence what and
how Israel would approach the problem
of conquest in Canaan:
• Strength of the Canaanite peoples:
strong or weak
• Number of people in the land: many or
few
• Resources of the land: good or bad for
supporting inhabitants and trade, rich
or poor for growing crops, and whether
plenty of trees were available
• Nature of Canaanite defenses: mobile
camps or permanent fortresses
planner. Some interesting questions
could help students not pass over these
as “obvious:”
• Why might a leader not listen to
the counsel of others? Are their
occasions when ignoring the
counsel of others could be the
right thing to do?
• Some people will not be
committed to the adopted plan –
are they always wrong? Can you
think of reasons when resisting a
plan might be the right thing to
do?
Ask: How might the value sets of the
following leaders impact their views of
planning:
• A small start-up company
founder vs. a leader of a large
established company?
• A non-profit higher education
President vs. a President of a
for-profit university like
Phoenix?
• A leader of a financial services
company vs. a leader of a
manufacturing firm?
Ask students to take this discussion
more deeply by considering these
questions:
• What is the “larger picture”
Christian leaders are to keep in
mind as they plan?
• How might a Christian factor
in God’s will into their
strategic planning decisions?
e. The Wisdom literature of the Bible contains
instructions for the top-level leader who
carries the responsibility to make the
decisions that affect the entire organization.
Making decisions should not be entered
into on a whim. Yet knowing what to do for
the future requires wisdom. Wisdom is a
gift that is given by God through those who
have experience. In the Bible sometimes
leaders listen to others for counsel, and at
other times we find them in prayer asking
God for guidance.
f. Issues from Religious Faith.
i. Viewing strategic thinking from the
perspective of religious faith raises
several issues for consideration.
ii. What follows is an example of how
strategic thinking for a Christian might
be different from that of other leaders.
First, some Christians will see the idea
of being a strategic leader in the context
of the leader’s relationship to God and in
the context of a Christian worldview.
This raises the question of how the
Christian should relate to the whole idea
of trying to achieve competitive
advantage over other companies.
iii. Exhibit 7-3 outlines four Christian
viewpoints about competition. One view
is that some persons of faith are troubled
by the prospect of attempting to gain
extreme competitive advantage over
competitors. In a second view,
Christians accept competition as a
positive force as long as it does not
result in pride or making business so

The “creation commission” has been subject to
much discussion among Christians.
Invite students to consider the following
contrasting questions:
• Creation as a resource to be
exploited vs. creation as a
resource to be preserved?
• Making creation serve man vs.
man living in harmony with
creation?
Here are some intriguing faith-planning
questions for students:
• If God knows everything about
the future, why not just ask
Him what to do and wait for
His answer?
• Sometimes Paul was told
where to go (the Macedonian
“call”), and at other times he
seems to have made his own
plans – what does this tell us
about faith-based planning?
• Which is more important in
faith-based planning: sincere
prayer or accurate
predictions?
Students should be encouraged to do more than
agree or disagree with one of the four
competition positions. The “issue” of
competition has individual, interpersonal and
institutional implications.
Ask:
• Should we see competitiveness
as an admirable individual
goal or a destructive personal
trait?
• Should we encourage or
discourage competition
between two employees?
important that it eclipses a relationship
with God. A third group of Christians
views competitive advantage as a
necessary part of doing business that is
neither inherently bad nor good. The
fourth group of Christians views
competitive advantage as a dimension of
the marketplace that needs to be
reformed.
iv. These four views raise fundamental
questions for the Christian business
leader to consider. If competition is bad,
how can the Christian really avoid it? If
competition is good, how can the
Christian resist temptations to pride and
idolatry? If competition is an
opportunity to demonstrate God’s glory,
just how does the Christian do that? If
the Christian is to live in tension
coexisting with competition, how can the
Christian be in the world of the
marketplace but not embrace the
negative dimensions of the market?
v. The second way that strategic thinking
might differ for Christian leaders is that
decisions regarding the mission
(purpose) of the organization and the
executive’s vision for the organization’s
future depend to a large degree on the
guiding moral values of decision makers.
vi. A third difference is the issue of forming
long-term strategic alliances. Values are
important in strategic thinking regardless
of a person’s religious beliefs.
vii. A fourth issue is that the setting in which
the religious believer works may
influence how prominently religious
values affect strategic (and other)
decisions.
viii. A fifth difference is how the person of
faith approaches the entire strategic
management process through the eyes of
faith.
ix. A sixth difference is that Christian
leaders evaluate the success of the
organization in achieving its strategic
 • Should an organization seek to
be more, or less, aggressively
competitive in its market?
Each of these questions can lead to student
discussions, papers and electronic blackboard
dialogues.
Stress to students that ALL mission statements
carry values. They assert that some one or more
future outcomes are to be prized and sought.
A term that is used in some settings is
“Business as Mission” (BAM). The
intersection of business and mission can
take many forms. A good exercise is to
evaluate the potential strengths and
weaknesses of each of these forms.
g. Deciding how to integrate Christian faith in
Ask:
Why NOT do this? Is raising prices
always exploitive?
The argument here for students is that
strategic decisions are ALWAYS value-
driven. Some important issues can be
raised for discussion:
• By what means can people with
diverse perspectives achieve a
reasonable consensus about
common values?
• How can we determine whether
goals in terms of the organizational
mission.
the work of business is a seventh strategic
issue. There are several possibilities:
• Business and Christian mission are kept
as separate activities.
• Business exists for the financial support
of Christian mission activities.
• Business exists as a platform for
mission as work is a means to channel
mission throughout the world.
• The business organization is a setting in
which mission can be carried out on
behalf of employees with the goal of
leading them to a relationship with
Jesus Christ.
• Business is mission where for-profit
business activities minister to spiritual,
social, and economic needs carried out
in a cross-cultural setting, either
domestic or international.
 some values are “good” (and to
be encouraged), and some are
“bad” (and to be discouraged)?
• If there are good, but competing
values, how do we decide which to
pursue and which to delay?
4. Strategic Thinking.
Due to the recent death of Steve Jobs at Apple,
much has been made about how his values
influenced the strategic posture of Apple – and
how his successor’s values might or might not
track his values. Have students examine some
recent discussions of Apple’s future and how
values of Apple’s leaders might influence that
future.
Encourage students to carefully consider some
of the key ideas here:
• Linking the present and the future
• linking competencies to competition
• linking the parts of the organization to
the whole
• linking continuity to change
Ask: What are the advantages and
disadvantages of (a) formal,
sequential strategic thinking vs. (b)
emergent, informal and, even, chaotic
strategic thinking?
The last concept described is the broadest
view encompassing all but the first
possibility.
h. Finally, another implication for a faith-
perspective is that some Christians may
choose not to exploit low price elasticity of
demand by raising prices or cutting back on
quality.
i. Some in the marketplace extol the virtues
of aggressive competition in which the
rules of the game involve downward
pressures on morals to achieve upward
pressure on profit. But in the process, some
organizations get hurt.
j. The proponents of so-called hardball
strategy describe the “hardball manifesto”
as a complete concentration on competitive
advantage. Winners at the hardball become
disciplined and toughened to deal with the
hard realities of competitive marketplaces.
a. For an organization to succeed in achieving
its goals, it must follow a pattern of
integrated commitments and actions across
the firm that help everyone stay focused.
b. Strategic thinking begins by attempting to
make sense of the internal and external
environment of the organization. From this
sense-making process, one or more issues
or problems emerge. Exhibit 7-4 shows it
as a linear, sequential process. In reality
any of the steps in the process can occur at
any time the situation requires.
c. Strategic Thinking and Values. Strategic
decisions, those that make a difference for
the whole of a company, cannot be made in
isolation from all the other decisions the
company is making.
i. These decisions also cannot be made in
isolation from the personal values of the
decision makers.
ii. In this way strategic thinking is
consistent with the intent of the
Management Pyramid model presented

Ask: What might be some of the
challenges of strategy formulation (for
instance, time, information, quantity
and quality of resources)?
Ask: Do you think strategy
formulation would be easier or more
challenging …
… for a nonprofit vs. a for-profit
organization?
… for a service business a
manufacturing business?
… for a small organizations vs. a large
organization?
Ask:
• If “Most of the time strategic
decisions involve making only
minor adjustments to previous
strategic choices,” why might this
be the case?
• What factors might lead an
organization to make major
changes?
Ask students to consider these questions
related to Exhibit 7-5:
• What different skills might
formulation vs. implementation
activities call for?
• What is the difference between
divergent vs. convergent thinking?
• Which is more important – the
big picture or the details?
• Are there different tradeoffs in
the formulation vs.
implementation phases?
Ask: How might a leader think
through the following tradeoffs:
• Increasing dividend payouts vs.
increasing employee pay?
in this book: Strategic thinking begins
with who you are.
iii. Personal values heavily influence what
strategic decision makers want to do in
spite of what the organization might do.
Although we like to think of strategic
decision making as purely a logical,
rational process, values bias logic and
judgment.
iv. Members of an executive team likely
will have differences of opinion
regarding which information to analyze
and the types of strategic actions to
consider. At times these discussions can
become “heated” as the decision
makers attempt to help each other
clarify their thinking.
v. Ironically, strategic planning
discussions and debates rarely are
directly about values that are at the root
of the discussions. Even so, values
always drive the discussions.
d. Strategic Thinking Process. Strategic
thinking is a constant process of thinking
about the present and the future, the
internal capabilities and the external
situation, the specific products and the core
competencies that are embedded in the
ability to make and sell these products,
specific issues that require decisions, and
the organization as a whole.
i. Ultimately, the thinking process
involves either affirming previous
decisions made by organizational
leaders or making decisions that alter
the future of the organization.
ii. In some organizations strategic thinking
is sequential and planned. Top-level
executives use formal data analysis and
formal planning meetings. First, data is
analyzed. Next decisions are made, and
then implementation is carried out.
iii. The reality for many leaders is that in
some organizations strategic thinking is
emergent, less formal, and at times even
 • Moving jobs overseas vs. keeping
jobs in the U.S.?
• Spending more for “green
energy” vs. spending more on
marketing programs?
While it is true that there is no “single right
way” to manage the strategic planning process,
urge students to identify some characteristics
that would be true for ANY effective planning
process (for instance, the frank exchange of
ideas among a strategic planning team, firm data
whenever possible, etc.).
Ask: What are possible sweet spots the
following kinds of organizations might
develop:
• An ice cream shop?
• A Christian university?
• A convenience store?
Students should be encouraged to apply the
hedgehog concept to their academic lives. Have
them discuss their answers to the following
questions:
• How deeply passionate are you
about your choice of major? Is
chaotic.
iv. Strategy formulation is the continual
process of analyzing the marketplace
and the organization and then making
one or more decisions that affect the
company as a whole.
v. Strategy implementation is the process
of carrying out the strategic decisions
that are made. In practice, strategic
formulation is sometimes difficult to
distinguish from strategy
implementation. See Exhibit 7-5.
vi. Strategic leaders find that planning for
the organization as a whole once a year
is not how strategic decisions actually
are made in practice throughout the
year.
vii. Strategic issues emerge from the
implementation of strategic plans, from
the actions of suppliers, lawmakers, and
regulators, and from the actions of
competitors trying to gain an advantage
in the market.
viii. Strategic planning processes differ from
company to company and situation to
situation.
ix. Regardless of where in the process it
occurs, strategic thinking always leads
to decisions. This involves wrestling
with tensions and trade-offs.
x. Companies cannot do it all and expect
to have an advantage over competitors.
This principle of making trade-offs
affects nonprofit organizations just as
much as it does for-profit companies.
e. Strategic Thinking Content. The
traditional way to think about the big issues
that an organization faces is to think in
terms of two key influences: (a) what is
happening outside the organization in the
marketplace and industry, and (b) what is
happening inside the organization in terms
of its key personnel and resources needed
to accomplish the organization’s mission.
 there any other major you
could be more passionate
about?
• Do you desire to, and believe
you can be, the “best in the
world” in your present major?
• Will working in the field of
your present major provide
your required economic
success?
Ask the following questions related to
Exhibit 7-6:
• What happens if the arena of
our deep passion is not where
we can be best in the world”?
• What if what we are best at has
a low expected economic
return?
• If my passions point to a field
where we can only be
“average,” what should we do?
Ask:
• Which is more important:
▪ Process?
▪ Content?
• What part of the process do you
find most attractive? Why?
Market structure can change over time.
Invite students to go deeper by asking
them to:
f. Market structure and dynamics. In the
1. Make a case that the four
market structures discussed in
the text represent a “natural
business path” that occurs in
most industries.
2. Discuss what role government
could or should play in
fostering economic growth in
each of these market
structures.
i. Using the insights gained from this
analysis executives attempt to refine
their thinking so that they can help their
organization find the “sweet spot”
where what the company does best and
what the company can make money
doing meets what the company’s
managers are passionate about. This is
sometimes called the hedgehog
concept. See Exhibit 7-6.
ii. People often confuse the two terms
strategy and tactics. Strategy is what
orients the entire organization toward
the pursuit of its mission or a big goal;
strategy guides tactical day-to-day
decision making and action. Tactics are
the visible day-to-day activities, tasks,
and maneuvers that need to get done to
accomplish the mission or achieve the
goal in a changing market. See Exhibit
7-7.
iii. Exhibit 7-8 gives additional examples
of how these two ideas of strategy and
tactics are different and yet
interdependent.
for-profit sector the microeconomic
structure of the market plays an influential
role in the organization’s ability to achieve
strong economic performance.
i. Here we think of the traditional patterns
of market structure such as monopoly,
oligopoly, monopolistic competition,
and perfect competition. See Exhibit 7-
9 for more information.
ii. Strategic decision makers think about
Exhibit 7-10 displays a “six forces” model, a not only the current structure of the
version of a model well known in the strategy market but also how it might be
field.
changing for the future.
Ask students to apply the model to the
following scenarios:
1. Indicate one response to each
g. Industry structure and industry forces.
force that a local garden shop
Several forces affect the profitability of
could take to successfully
every industry and because of this the
respond to each force.
attractiveness of the industry for investors.
2. Which of the six forces of
i. The higher the intensity of the rivalry,
competitive pressure might be
the lower profits will tend to become.
of most importance to a:
ii. The bargaining power of suppliers
a. nonprofit hospital
affects not only your profitability but
b. a state-wide chain of
the profitability of the industry as a
pawn shops
whole.
c. a national grocery chain
iii. The bargaining power of buyers also
3. Apply this model to your
affects industry profitability.
college. Discuss at least one
iv. New competitors entering the industry
example of each force
also tend to drive down economic
profits for all firms.
v. The presence of substitutes both inside
and outside the industry also may have
Ask: What are the most essential
a downward pressure on profits. But
driving forces for change in:
substitutes can also bring opportunities.
• women’s and men’s fashions
See Exhibit 7-10.
• office supplies vi. A force that can counteract the
• college-level textbook influence of substitutes and create
publishing opportunity is the presence of
complementary products and services.
What complements have in common is
that they provide something that
customers need to get full value from
It is both provocative and useful to ask students
to assess their own core competencies … those
the products they buy. See Exhibit 7-
resources, capabilities and skills that can give 11.
them a competitive edge in seeking employment
after graduation.
h. Driving forces for change. Some of the
more common forces that drive strategic
change include government regulations and
legislation; invention of new technology
Ask: Use Exhibit 7-13 to briefly map
that changes how products are
out the business model for the
manufactured, distributed, or used by
following:
customers; the development of specific
• tax preparation services technology standards for the whole
• chiropractic offices industry; and changing consumer
• sugar refineries

i. Core competencies. A core competency is
Here are some “depth producing” insights into
SWOT Analysis:
1. A strength may also be a weakness. For
instance, having employees who have a
lot of tenure (a strength) may also mean
we fail to have new employees with
new perspectives (a weakness).
2. Asserting that something is an
opportunity (or a threat) is a judgment,
not a statement of fact. For instance,
inflation may be a “threat” to lenders
but an opportunity for borrowers.
preferences that are shaped by culture.
the combination of resources and
capabilities that allow a firm to grow in the
future by making new products or selling
its products to new customers. A resource
is something a business has, such as
sophisticated equipment, a patent, access to
raw materials, or a great location. A
capability is what the organization does
exceptionally well (compared with
competitors) with its resources, such as the
knowledge and skills to use resources. See
Exhibit 7-12.
i. What reveals whether a competence is
“core”? The identifying marks of a core
competence are:
• Customer Value.
• Competitor Differentiation. New
Products, New Markets.
• Difficult to Imitate.
ii. Organizational structure.
Harmonizing work effort requires
structure to the organization, so
organizational structure, and whether
changes are needed to it, becomes an
important consideration for executives
when they are making strategic choices.
iii. Assets. The current property, facilities,
and equipment will play an important
role in strategy implementation.
iv. Financial performance of the
business model. We sometimes refer to
the revenue stream and expense
structure as the business model. The
business model is first of all a story that
describes how the enterprise as a whole
works and the key assumptions that
support the story. The business model
also contains financial estimates that
describe the way the organization will
add cash to investors as a result of the
operations of the revenue stream and

5. Strategic Decisions and Actions. While strategic
Challenge students to discuss:
1. How can we know which
conditions favor one strategy
over another?
2. What are the possible
downside risks with each
strategy?
3. How might we “transform”
these strategies into a
nonprofit setting?
expense structure. See Exhibit 7-13.
j. SWOT Analysis. As the executive team
thinks about the situation outside and inside
the organization, it is natural for leaders to
make judgments about the state of affairs as
they understand it.
i. Major issues will have emerged. This
thinking leads the SWOT analysis.
SWOT stands for Strengths,
Weaknesses, Opportunities, and Threats
(See Exhibit 7-14).
ii. An evaluation of the internal situation
of the company will reveal favorable
strengths and unfavorable weaknesses.
Strengths and weaknesses can arise in
terms of core competencies,
organizational structure, assets,
financial performance, and key
personnel.
iii. Similarly, an evaluation of the external
marketplace will reveal favorable
opportunities and unfavorable threats.
See Exhibit 7-15.
iv. The SWOT analysis is not something
that strategic decision makers do only
every 2 or 3 years during a strategic
planning meeting. Instead, it is a
continual process of thinking about
internal and external issues that the
organization must address in order to be
successful.
thinking never stops for top-level managers, it
leads to making decisions and taking actions that,
when implemented, become the major
commitments of resources, people, and activities
needed to achieve organizational goals.
a. Strategy Formulation. Strategic thinking
leads either to reaffirming previous
strategic choices or to making new choices
that affect the future of the entire
organization. From a broad perspective, the
types of strategic choices that executives

b. Igor Ansoff identified four basic patterns of
To encourage students to see approaches
to strategy formulation in a holistic way
ask: What capabilities must a
company have to implement each of
these strategies?
For example, a “low cost leadership” strategy is
not simply maintaining a low price.
Have students create a contrast table, contrasting
strategy for nonprofits vs. profit making
organizations.
This is a good opportunity to remind students
that any organization must earn more money
than it spends. Nonprofits must build a business
model that offers a convincing case of how
funds will be generated on a continuing basis.
Ask:
⚫ What dimension of strategic
thinking are you attracted to the
most? Why?
⚫ Which elements of process and
content are the most interesting?
Why?
make fall into common patterns.
strategic growth opportunities open to a
business. Each of the patterns represents a
different combination of emphasis on
products and markets or product lines and
the mission the company has with each of
the major markets it serves.
i. When the company leaders choose to
continue selling more of their existing
products to the current market (doing
more of the same), they are choosing
the market penetration strategy. Of
the four choices, this strategic choice
usually represents the lowest risk. See
Exhibit 7-16.
ii. When a firm chooses to adapt its
current products to a new mission (by
making some modifications to its
products), it is using a market
development strategy.
iii. A product development strategy is
when the company creates new
products and attempts to sell these to its
current customers, thereby continuing
to enhance its ability to achieve its
current mission.
iv. When a firm chooses to sell new
products in completely new markets, its
strategic choice is diversification.
Unrelated diversification carries the
highest risk because the company is
venturing into new territory for
products and customer groups to serve.
v. An example of Ansoff’s model is Green
Mountain Coffee Roasters, a company
that began as a house brand in a small
café in Waitsfield, Vermont, in 1981.
vi. Strategic choices cannot be reduced to a
simple recipe that when followed will
automatically bring success. Every
market and every industry is different.
It is the pattern of commonalities that
Michael Porter’s model offers when
you consider the core issues at stake in
both market and industry structure.

Limiting missions in nonprofit organizations is
sometimes called limiting mission-creep. There
is a tendency for all nonprofits to broaden their
focus beyond their original missions. Have
students develop a set of questions that should
c. Michael Porter’s work:
i. Some companies attempt to serve a
broad marketplace and many customer
segments with products designed for
many segments. Other firms choose to
serve a more narrow set of customers.
ii. Another pattern emerges when we
consider the economic position options
available to companies. Some
companies in a given industry attempt
to produce at a lower cost per unit than
their competitors. We sometimes call
this low-cost leadership.
iii. A differentiation strategy is based on
providing a product that offers
distinctive features or benefits that are
qualitatively different from other
companies and that customers demand.
This is sometimes called benefit
leadership.
iv. The ability of any particular firm to
successfully emphasize a position of
differentiation depends on the price
elasticity of demand. See Exhibit 7-17.
v. Some companies attempt to get the
benefits of a low-cost strategy mixed
with the benefits of a differentiation
strategy. This is sometimes called the
best-cost strategy.
d. Another approach is the transaction
strategy, in which the firm attempts to
improve the ability of the company and its
customers to complete transactions with
fewer resources.
e. Synergy, whether achieved within a
company or between different businesses
owned by a larger corporation, occurs when
the value of two or more revenue-
producing units working together is greater
than it would be if these units worked
independent of each other.
f. Strategy and Nonprofit Organizations.
i. The process of strategic decision making
in a nonprofit organization can be
be asked when facing a proposal for extending
an NPO’s services or outreach.
ii. Mission is the key force and the primary
iii. In the nonprofit the business model is
different from that in the for-profit world
because of some key differences
between the two settings. For nonprofits
the value they create in the form of
services is often intangible and difficult
to measure. While for-profits must
consider customers and their
preferences, this type of knowledge may
be less influential in the nonprofit
organization where mission is more
prominent.
influence for integration in the nonprofit
while economic incentives is a much
stronger force for integration in the for-
profit world.
continually strained. Pressures for
operating revenue do not subside as the
organization becomes prosperous. The
reason is that as prosperity occurs,
decision makers expand programs and
services making the expense structure
increase. This, in turn, places more
pressure on the need to generate more
operating revenue.

g. The Gap Between Formulation and

Implementation. On the average
Draw an example of the “hockey stick” companies achieve roughly two-thirds
chart: of the financial performance that they
hope to achieve by implementing their
strategy. See Exhibit 7-18.
i. One of the reasons for this gap is that
companies rarely track their actual
performance against specific
expectations outlined in their
strategic plans. When executives do
track their firm’s performance
Reality against the projected performance, a
Prediction pattern emerges that is called the
venetian blind or hockey stick
charts.
ii. Some financial forecasts are
unreliable.
iii. Some business units that are failing to

Remind students that these tensions are not
necessarily emotional tension but rather
cognitive tensions where decision makers must
keep in their minds competing goals and
interests.
Ask:
Which of these tensions have you felt
as a student, and how have you
produce long-run wealth for
investors receive capital expense
allocations while other value-
creating business units are starved
for capital.
iv. Factors that can influence the gap
between projections and actual
performance include: Inadequate
resources allocated or available,
Poorly communicated strategy,
Actions required to execute strategy
not clearly defined, Unclear
accountabilities, Organizational
silos and organizational culture
blocking execution, Inadequate
performance monitoring,
Inadequate consequences or
rewards for failure or success, Poor
senior leadership, Uncommitted
leadership, Unapproved strategy,
Other obstacles.
v. Researchers propose several factors
that can repair the gap between
performance and projection. First,
keep the strategy simple. Second,
debate the marketplace
assumptions, but not the numbers in
the forecasts. To improve the
chances that the truth about the
market will be revealed during
strategic planning, keep financial
forecasting separate from where
assumptions are hammered out—
assign these to two separate teams.
Third, use a rigorous framework for
analysis. Fourth, clearly identify
priorities.
6. Paradoxes of Strategic Thinking. The whole
process of strategy can be thought of as the
process of mentally embracing many tensions:
intuition versus logical analysis, ambiguity versus
precision, focusing on specifics versus being
flexible, and the big picture versus the little
details.
a. Formulate strategic decisions—
handled these (encourage students to
talk about their successes and
failures)?
Which of these tensions do you feel
best prepared to handle today – and
which do you feel less able to handle –
and why?
What can you be doing as a student to
prepare yourself to deal with these
managerial tensions?
implement decisions. This is perhaps the
fundamental tension that all strategic
managers face. Mentally they must
continually be thinking about and refining
their understanding of what the company
must do and what the company is now
doing.
b. Risk taking—constancy. Many top-level
leaders find that their company’s situation
calls for risk taking. At the same time, these
leaders must maintain some level of
constancy.
c. Top-down—bottom-up. Senior leaders
must assimilate all the information coming
from all directions and then communicate
top-down the strategic decisions that are
made. Top-down visioning, however,
works against the bottom-up
communication by the frontline workers
who know the day-to-day difficulties of
implementing strategy.
d. Concentrate—diversify. If a company
concentrates its resources on just a few
products and services, it can become
exceptional at producing. But this limits its
ability to spread its risks. If a company
attempts to diversify too broadly, it will
become more difficult to become very good
at any particular product.

Answers to Discussion Questions

When presenting these discussion questions during a class period, you may find that students are
hesitant to speak up in the context of the whole classroom. If this occurs, divide students into
small groups of three to five persons per group. Ask them to discuss the question in their small
group first. After three or four minutes of small group discussion, ask students to report what
they heard in their small group. Restructuring the classroom in this way usually increases the
participation and active engagement.

Some of these questions do not have a “right” answer.” These questions are not meant to have
students just parrot back what the textbook says. Remind students that the questions are meant to
be catalysts for them to think deeply and creatively about the textbook material, and then to
encourage them to respond thoughtfully and creatively to the issues the question is addressing.
Remind that simple “yes” or “no” answers are not what you are looking for and that it is as
important WHY a student believes something as it is WHAT they believe.
This being said, we are able to discern between effective and ineffective responses by the
following criteria:
 Does the response reflect and accurate understanding of what the textbook said (definition of
terms especially)?
 (For written answers) Is the response well written (spelling, grammar)?
 Does the response reflect an understanding of the primary intent of the question?
 Does the response properly address workplace concerns versus being too vague and/or
unapplied?
 Does the response clearly discuss both WHAT the student believes and WHY they believe
that?

1. Can a Christian be faithful to principles of Scripture and at the same time attempt
to create a monopoly in which consumers are more vulnerable? Under what
conditions would a Christian attempt to increase the company’s pricing power over
consumers, for example, moving toward a monopoly position in the market?

At first glance students may feel an impulse to argue against “monopolistic” moves that “make consumers
more vulnerable.” Thus, encourage students to make a case for BOTH sides of the argument. For instance,
students should recognize that consumers are not the only stakeholders involved – Christian managers must
also look out for the welfare of investors. In addition, they might think about the fact that “trying” for a
monopoly is not illegal nor inevitable. Assuming no government intervention, a monopoly occurs when
customers find a company’s offerings superior to any others available. At any rate, have students argue
both FOR and AGAINST the proposition in this question.

2. Are there some industries that a Christian business owner would choose not to
invest in because of the nature of the products being sold or because of the
commonly accepted practices that require the believer to compromise religious
beliefs?

Student answers must begin with what standards they would apply to investment choices. It may not be
obvious to some students that Christians should invest in differently than non-Christians – so, encourage
them to think about what goals Christians might have in investing. They might be encouraged to conduct
some on-line research here using such topics as Christian investments or “Christian financial planning.”

3. Is it ever wrong for a Christian executive to attempt to gain a competitive advantage

over rival companies? If so, under what conditions?

In this case, students might think of both the ends and the means. Certainly seeking competitive advantages
is not wrong as an end – in fact, making a company competitive is part of any manager’s responsibilities.
The means employed could well be a problem. Lying, manipulating, price fixing, collusion and other such
means would be outside the Christian boundaries.

4. How can Christian strategic managers manage the balance in their life (being
present for family and for worship), particularly when complex strategic decisions
must be made?

“Balance” is an elusive concept. In addition, what does it mean to achieve such balance at any given time
and over time? Students may suggest a variety of thoughts about achieving a life balance, but here are a
few principles to consider:
• Discipline – balance requires the discipline to establish plans and priorities in our personal life and
 to stick to them
• Flexibility – there are times when responding to particular demands may require us to adjust plans
and priorities to accommodate the realities of working
• Self-time – we all face demands from a variety of people with a variety of needs and expectations.
We must learn to take time out for ourselves also – resting, reading and hobbies. While some
would call it “down time” it really is the time that helps us “keep up” with the demands we face.

5. Describe how personal values influence strategic decisions.

This discussion is rooted the text discussion in the section “Strategic Thinking and Values.” Encourage
students to be specific both in citing values and in citing how those values might impact strategic thinking.

6. How can the Christian strategic decision maker fully live the eternal principles of
love, justice, and redemption while engaging fully in a competitive market where the
struggle for economic success is never-ending?

This question asks students to focus attention on Exhibit 7-3. The key is not just WHAT the student
believes, but WHY they believe that.

7. To what degree can a Christian executive who works in a publically traded

corporation implement a “business as mission” strategy? How will this type of
strategic choice be different in a private company owned by a Christian?

This question relates to the discussion in the text regarding how to integrate Christian faith in the work of
business. Christian executives working in publically traded corporations face both personal and fiduciary
responsibilities. Their faith might be acted out in more private and interpersonal ways. A private company
owned by a Christian would be able to act more broadly and directly.

8. What are the influences that cause a change in the core values on which company
strategy is made?

This focuses student attention on the discussion about “Strategic Thinking and Values.”. In a sense students
are asked to reflect on this section of text “in reverse.” That is, the text discusses how core values are
established – changes in any of these influences might change the core values. Among the influences that
students might suggest are:
• Changes in external conditions (competitors, financial pressures)
• Changes in company ownership
• Changes in top executives
• Changes in industry conditions

9. How influential are the personal values of a company’s founders 10 years after the
company is established? 25 years later? 50 years later?

This question is designed to encourage students to think about how those values might be preserved over
time. Time tends to dilute the commitment to the founding principles. To preserve those values founders
can:
• Keep the company private rather than going public. This allows more control over succeeding
executives and corporate Boards.
• Hire family members into the business – this may strengthen company values by intertwining
them with family values.
• Be careful in all hiring practices – look for those who share a commitment to the original company
 values.
• Train all employees to recognize and abide by company values

10. If a company founder dies or retires, how long will the core values that guided the
company strategy continue to have a strong influence?

Refer to the answer to question 9 above.

11. When a company goes public, does this increase the risk that core values will be
changed? Why?

The answer would have to be yes – public companies face pressures to provide adequate returns to
shareholders and often operate in very competitive industry environments.

12. Will the Christian strategic decision maker place more or less emphasis on values
than a non-Christian?

The student responses will vary depending on their views of Christians and non-Christians. Some will
contend that we should expect no difference – that non-Christians do have values, and that Christians
cannot always be depended on to be value-centered, Others will contend that real Christian faith is
transformative and changes a person from the inside (heart of values) out.

13. Should a Christian be willing to become unequally linked with individuals who do
not support fundamental Christian values through a merger or acquisition?

Some students might say that no person, Christian or non-Christian, should become linked with another
person who does not share their values.

Others may cite 2 Corinthians 6:14, Be ye not unequally yoked together with unbelievers: for what
fellowship hath righteousness with unrighteousness? And what communion hath light with darkness?”
Whether this verse necessarily refers to business alliances is a matter of some dispute in the Christian
media.

14. How great are the risks that a company such as Tata Motors will reduce its costs so
much that the product fails to meet minimum customer expectations for
performance and safety?

Low costs do not HAVE to mean low quality. Strategic designing can simplify product design. Careful
deployment of supply chains can reduce costs. There is, of course, always the chance that cars can be made
unsafely, or that performance standards can be unmet. A “free market” will generally take care of many
customer concerns by providing buying options.

15. If a merger requires downsizing of one or both of the firms, should the Christian
manager engage in restraint because these actions have a direct negative economic
effect on the lives of workers who are let go?

Every corporate action has a real impact on real people. “Downsizing” is never easy, and every manager
should be encouraged to act with restraint and seek to make the transition out of the company as humane
and compassionate as possible. Where possible, employees should be provided with as much financial help
as is reasonable.
Several In-class Exercises are designed to engage students in debate and discussion of important
issues.

SUPPLEMENTAL INFORMATION FOR

CHAPTER 7

SUPPLEMENTAL PARADOXES

Strategy tension points are similar in nature to many tensions in management. This is
because strategic issues are inseparable from operational management issues. For example, one
of the tensions in managerial decision making is between watching out for the short-term as well
as the long-run.
Being quick but be thorough. The rapid changes taking place in most industries
requires that strategic managers (and the subordinates who help them) need to be quick when
they analyze their marketplace and their organizations. But they also must be thorough. The
problem is that quickness fights against thoroughness. Younger managers will find this tension
especially troubling. This tension might be less of a problem for seasoned executives who hold
years of wisdom about the marketplace in their minds. But seasoned managers face a different
problem. The strategic thinker needs to develop specific assumptions (theories) about the
marketplace such as what customers and competitors will do. At the same time, the wise
strategic thinker will not hold to these assumptions too tightly. Assumptions should be both
believed and doubted given the fact that managers do not have perfect information or the ability
to assimilate all the details of the market perfectly.
The Paradox of the Internet. As a setting in which to transact business or in other ways
interact with customers the Internet has promised a lot. We believe that information can be made
more widely available through this medium. Purchasing products can be accomplished more
efficiently. However, because the Internet is available to all competitors world-wide, achieving
these and other benefits is more difficult than is first expected. See: Porter, M. E. (2001). Strategy and
the Internet. Harvard Business Review. 79(3), 63 – 78.
Gresham’s law of planning. If left uncontrolled the day-to-day activities will so
consume the mental energy of managers that they are effectively paralyzed to spending time with
the strategic questions. It’s like one manager said, “It’s hard to drain the swamp (the strategic
issue) when you are busy killing alligators (the operational issues). See: Ansoff, H. I. (1987). The
Emerging Paradigm of Strategic Behavior. Strategic Management Journal. 8(6), 501 – 515; March, J. G. & Simon,
H. A. (1993). Organizations. (2nd Ed.). Cambridge, MA: Blackwell. P. 206 – 208; Chandler, A. (1962). Strategy and
Structure. Cambridge, MA: MIT Press; Simon, H. A. (1993). Strategy and Organizational Evolution. Strategic
Management Journal. 14, 131 – 142.
What we want to do – What we should do. The strategic managers not only must walk
the balance between what the company might be able to do and what it reasonably can do. They
also must weigh the strategic alternatives and what they want to do while considering what the
company should do. This requires a keen awareness of clear values. See: Andrews, K. R. (1971). The
Concept of Corporate Strategy, Homewood, IL: Dow Jones – Irwin, Inc.; Vancil, R. F. (1976). Strategy Formulation
in Complex Organizations. Sloan Management Review. 17(2), 1 – 18.
Exploitation – Exploration. Exploring new opportunities slows the process of
exploiting current opportunities. But spending resources on improving current activities makes
exploration less attractive. The skill sets required for effective exploration and innovation can
easily submerge the drives to efficiency. But to be successful leaders, in many situations, must
lead the organization down both pathways. See: Benner, M. J. & Tushman, M. I. (2003). Exploitation,
Exploration, and Process Management: The productivity dilemma revisited. Academy of Management Review.
28(2), 238 – 256; Teece, D. J., Pisano, G. & Shuen, A. (1997). Dynamic capabilities and strategic management.
Strategic Management Journal. 18, 509 – 533; March, J. G. (1991). Exploration and Exploitation in Organizational
Learning, Organizational Science. 2, 71 – 87; Markides, C. C. (1999). A Dynamic View of Strategy. Sloan
Management Review. 40(3), 55 – 63; Clegg, S., da Cunha, J. V., & e Cunha, M. P. (2002). Management Paradoxes:
A relational view. Human Relations. 55(5), 483 – 503.
Attractive industries have entry barriers. Attractive industries are attractive because
the ability to make an economic profit is more or less protected by such things as scale and scope
economies, patents, or government regulations. Thus, firms who want to enjoy profits in these
industries will usually face high entry barriers that make it difficult to get in and successfully
achieve that which is attractive. See: Hamel, G. & Prahalad, C.K. (1994). Competing for the Future. Boston,
MA: Harvard Business School Press.