Case Study Avon (Business Policy And Strategic Planning)

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The completed case must include:

  • Executive summary;
  • Existing vision, mission, objectives, and strategies;
  • SWOT analysis;
  • Porter’s 5 Forces;
  • Value Chain Analysis;
  • Financial Ratio Analysis;
  • Balance Score Card;
  • Intellectual Assets: Human Capital, Social Capital, Technology;
  • Organizational Design;
  • A list of alternative strategies, giving advantages and disadvantages for each;     need this section done
  • A recommendation of specific strategies and long term objectives;             need this section done
  • An action timetable/agenda.                                                                                                    need this section doneAVON: A NEW ERA?*

    “If we stop and look over the past and then into the future, we can see that the possibilities are growing greater and greater every day; that we have scarcely begun to reach the proper results from the field we have before us.” —David McConnell, Avon Founder, late 19th century1 Overcoming the Challenges The year of Avon Products’ 131th anniversary, 2017, brought numerous challenges for CEO Sheri McCoy. For the first time since David McConnell had founded Avon in 1886, his vision of endless possibilities and growth for Avon had begun to seem unattainable. Could McCoy prove the naysayers wrong and return the iconic, direct-selling company to profitable growth? Or was it time to wake up and sell the company to an interested bidder? CEO McCoy had recently taken some promised steps to turn around the company. To combat their continuous financial deficit, Avon had made a strategic partnership deal with Cerberus Capital Management, a prominent financial institution based in New York City. Avon Products sold 80 percent of its North American business to Cerberus Capital Management for $170 million, forming a separate private entity called New Avon LLC. Cerberus had also bought approximately 16.6 percent of Avon Products Inc.’s international business, investing an additional $435 million.2 New Avon LLC appointed former president of Abbot Laboratories Scott White as its CEO on April 25, 2016. White had a proven record of delivering consistent revenue growth at Abbott Laboratories.3 The formation of New Avon LLC was expected to take advantage of significant operational expertise from Cerberus Capital. Having thus split Avon Product’s North American business with Cerberus Capital, CEO Sheri McCoy expected that additional capital and suspension of dividend payouts would enable the company to achieve some operational efficiency and financial flexibility. Ms. McCoy had laid out a three-year transformation plan for Avon starting 2016 through 2018 to improve the declining revenues and to achieve cost efficiency. The transformation plan had three key objectives: driving out cost, improving financial resilience, and investing in growth.4 First, in order to drive out cost by about $350 million by the end of 2018, the company would move Avon Products’ headquarters from New York to the United Kingdom and cut about 2,500 jobs. Despite the Brexit vote, the decision to relocate the company headquarters to the U.K. was expected to save about $70 million by 2017. It also put the company closer to its lucrative European customers.5 Second, to improve financial resilience, the company suspended dividend payouts and divested its Liz Earle business, in addition to making the promising Cerberus deal. Third, the company would invest in growth by increasing digital media spending to expand their product presence in the market. (See Exhibit 1.) EXHIBIT 1 Avon’s Three-Year Transformation Plan Source: Avon 2015 Annual Report. C-134 CEO McCoy stated that the execution of the transformation plan would be evolutionary over at least three years and must reflect the direct-selling representative perspective. Improving growth of their direct-selling representatives in the most promising markets was another significant priority for the company. In the past, radical changes to selling approaches had been unsuccessful (e.g., selling Avon products in retail locations) because they had attempted to do too much too fast and did not involve the critical direct-selling representatives in the planning process. There were other challenges. In several emerging markets within the Latin America, EMEA,6 and Asia-Pacific regions, intense competition and price discounting threatened to erode market share and profitability. On the other hand, the company’s attempted price increases in these markets had only hurt its cause further. Last but not least, Avon had agreed to a $135 million settlement to address charges that it had violated the Foreign Corrupt Practices Act (FCPA) in China. This fine was nearly 10 times higher than its original settlement offer to the Securities and Exchange Commission (SEC).Avon Background—First 100 Years Marked by Opportunity and Growth7Unique Opportunity for WomenIn 1886, David H. McConnell, a book salesman from rural New York, created a novel opportunity for women—a chance to become financially independent by selling perfumes. This was at a time when only one-fifth of women in the United States were working outside the home and for wages that were a fraction of what men earned. Most of these working women were employed in agriculture, domestic service, and manufacturing jobs, which did not always provide safe environments. As a book salesman, McConnell had noticed that his women customers were far more interested in free perfume samples than in the books he sold. He had started using these samples as “door openers” when visiting the homes of potential customers. But McConnell had also noticed one more need that, if effectively tapped, could provide tremendous growth potential for both him and his women customers. Women were looking for ways to supplement their household incomes, and he believed many would make the perfect perfume salespersons for other women customers. McConnell could offer women the opportunity to create and manage their own perfume businesses using a unique direct-selling approach. Earning a commission for selling perfumes to other women like themselves could create an exciting and glamorous solution for an existing need. McConnell’s first recruit for Avon, or the California Perfume Company as it was known then, was Mrs. P. F. E. Albee of New Hampshire. He provided Albee and other early sales representatives with an earnings opportunity within a supportive, family-like environment. The attractiveness of the offering was tremendous, and the army of representatives rose to 5,000 within only 13 years. With the seed of an idea, McConnell had created a “company for women,” which would eventually become the slogan for the company a century later. Pioneering Direct-Selling Mode lThe company had thus pioneered a new direct-selling model. Company representatives sold products directly to the end users, bypassing any go-between distribution channels. The model generated efficiencies by eliminating the need for a middleman. In addition it made for direct and regular contact with consumers. In the late 19th century, direct selling at Avon connected women, who were otherwise isolated and immersed in domestic life, through what the company called “the original social network.” An intimate, personal selling approach allowed many women to bond over beauty products. Many women no longer had to travel to the closest department store or drugstore to purchase beauty products or seek beauty advice. The Avon Ladies (as the sales representatives came to be known) brought the store to them. Decades of success followed, and Avon and its direct-selling approach became famous. In the 1970s and 1980s, when the company’s core customer base of stay-at-home women began to shrink, the company adapted its direct-selling approach to keep up with the times. Avon Ladies began to leave samples and call-back brochures on front doorknobs, and with more women entering the workforce, even began offering the opportunity to buy products at the workplace. Direct selling continued to evolve over the years as needs and technologies evolved. The advent of the Internet prompted the company to engage in online promotion and to offer online selling options. In 2017, realizing the growing importance of e-commerce, CEO McCoy decided to further increase spending on digital media sources.

    The Power of Partnerships

    Fragrances were the first products Avon (then known as the California Perfume Company) sold, and they became an integral part of the company product line. Avon relied on partnerships to market its fragrance products. Celebrities from the movie and music industries were often used in advertising and created excitement for new fragrance launches. In addition, partnerships with fashion designers were established for enhanced image and efficiency.

    New Century Brings Many Changes

    Evolution of the Direct-Selling Model

    Throughout the long history of the company, representatives could earn money only on commissions by selling to customers. With the launch of Avon’s Sales Leadership program in the 1990s, representatives could now also earn money by recruiting and training others. This new earnings avenue exponentially increased the amount of money an individual representative could generate.C-135With the advent of the Internet, Avon created a collection of digital tools that enabled representatives to use the technology in their businesses. Online ordering, an ­e-brochure, and customized online communities allowed Avon Ladies to contemporize their offerings and image.“The relevance of direct selling has to do with what the consumer expects from service,” said Angie Rossi, group vice president of North America Sales. “There will always be a space for relationship-based service to the consumer.” So, while the media and tools might change with time, the company believed the relevance of direct selling as a strategy would never diminish. In the 21st century, Avon was producing and selling its products worldwide through its direct-selling, boutique store, and online channels.

    Launch of New Products and Partnerships

    The first product that Avon sold was the Little Dot Perfume Set. Over time, Avon product sales expanded to a wide range of color cosmetics, as well as skin care, fragrance, fashion, and home products. Some of its more established brand names were Avon Color, ANEW, Skin-So-Soft, Advance Techniques, and mark. Revenues came from three main categories:Beauty (73 percent of net sales): cosmetics, fragrances, and personal care products.Fashion (17 percent of net sales): jewelry, watches, apparel and accessories.Home (10 percent of net sales): home products and decorative products.The company continued to rely on celebrity partnerships to launch and market its new (mainly fragrance) products. These included Uninhibited by Cher (1988) and Undeniable by Billy Dee Williams (1990). Outspoken by Fergie (2010) was the most successful fragrance launch in the company’s history. The company then teamed up with the popular singer to offer a follow-up fragrance, Outspoken Intense (2011). American Ballet Theatre, was the new face of Avon Prima that highlighted creative confidence among women (2016).

    Avon also established partnerships with international design houses Christian Lacroix, Herve Leger, and Ungaro, which allowed the company to offer premium products at affordable prices for its mainstream customer base. On the fashion apparel front, it teamed up with designer Diane von Furstenberg to create a customized line for Avon called The Color Authority

    Expansion into Emerging Markets

    The 20th century had seen expansion into neighboring markets in Canada and Latin America. As the 21st century approached, Avon was rapidly expanding into additional emerging markets.9The company started selling its products in China in 1990. However, a direct-selling ban in China forced the company to open brick-and-mortar retail locations (Beauty Boutiques) within the Chinese market. The ban was lifted in 2006, and the company then started to sell via both direct-selling and retail routes in China. Avon also expanded into Russia in 1993 with retail stores, and it started direct selling its products there in 1995.By 2016, Avon products were sold in over 100 countries (sold through subsidiaries in 63 and through distributors in an additional 41). Operations were managed over four regions: North America, Latin America, EMEA (Europe, Middle East, Africa), Asia-Pacific. Latin America now accounted for nearly half of total company revenues, with Brazil being the largest market (see Exhibit 2).

     

     

    Global and Regional Competition

    On a broader level, Avon’s beauty products faced competition from international cosmetics companies (e.g., Procter & Gamble, L’Oreal, Estee Lauder, Revlon, and Mary Kay) as well as regional players (e.g., Natura in Brazil).In the direct-selling space, the company primarily competed with Mary Kay, which had a similar product lineup. Mary Kay Inc. was created in 1963 by Mary Kay Ash, direct-selling sales director, who believed women needed more opportunities in business.10 Mary Kay and Avon used slightly different approaches to reimbursing their representatives:Avon representatives (Avon Ladies) bought their products on credit without paying for anything up front. After completing product sales, they reimbursed the company for the products and pocketed a 20 percent margin.Mary Kay representatives considered themselves “skin care consultants” and were required to invest $100 up front to buy a demo kit to provide skin care and makeup training to customers. To maintain the position, consultants had to buy at least $200 worth of Mary Kay products at 50 percent wholesale discount offered by the company.

    By the beginning of 2017, Avon was one of the biggest direct-selling enterprises globally, with over 6 million active sales representatives. Between 2006 and 2011, this selling route had grown by an impressive 30 percent into a $136 billion global market. Unlike traditional retailers, which used a pull strategy to get customers into the store, direct selling was a push business.11Direct selling also presented a tremendous entrepreneurship opportunity in emerging markets like Brazil, Russia, China, and India. Avon faced intense competition from Mary Kay in recruiting representatives in these markets.12 In Brazil, Avon also faced intense competition from a regional direct-selling player, Natura. Direct selling accounted for nearly one-third of the sales of beauty products in the country, due to an underdeveloped retail sector.Avon’s remaining beauty competitors distributed their products to retail resellers such as department C-136stores, drugstores, or cosmetic stores. In recent years more of these competitors and channels had begun offering discounted products that encroached on Avon’s traditional value-shopping customer base. Many international competitors like L’Oreal had also made major strides in growing the retail channel within emerging markets like Brazil.In the fashion and home categories, Avon had competitors in the jewelry, accessories, apparel, housewares, and gift and decorative products industries globally, including retail establishments (principally department stores, gift shops and specialty retailers, and mass merchandisers) and direct-sales companies specializing in these products.

     

    Management Changes

    The 1990s ushered in a period of management change and the first woman CEO in the company’s history. Andrea Jung arrived at the company in 1993 with a background in high-end retail (i.e., Neiman Marcus, I. Magnin, and Bloomingdale’s). She was appointed by then-CEO Jim Preston to look into the feasibility of selling Avon products in retail outlets. Jung quickly assessed that Avon didn’t have the right packaging or positioning to compete in that arena. Impressed by her work, Preston invited her to join the company full-time in 1994 as president of the product marketing group for Avon U.S., a newly created position.When Preston retired in 1998 after nine years with the company, Charles Perrin (Avon board member and former head of Duracell) became the new CEO. Jung rose to the prominent role of president and chief operating officer. Perrin had planned on staying for about five years but remained for less than two. Jung then took over in November 1999, becoming the first woman to ever lead the company.

     

    Focus Shifts from Direct Selling to Retailing and Marketing

    In 1998, Avon opened the Avon Center, with a store, spa, and salon, in Trump Tower on Fifth Avenue. When Jung became CEO in 1999, Avon adopted the slogan “the company for women,” moving away from its long-time ad campaign “Ding Dong, Avon Calling.” The change was meant to modernize Avon, but it also paralleled a shift in focus within the company. The old tagline emphasized the direct-selling side of the business; now the priority was retail.A year later, Jung launched the “Let’s Talk” global advertising initiative, with Venus and Serena Williams as spokespersons. Advertising spending jumped from $63 million in 1999 to a high point of $400 million in 2010. “Mark,” a hipper, trendier product line, was launched to attract a younger demographic and contemporize the company’s image.

     

    Business Slows Down Due to Competition and Execution Issues

    In 2005, earnings flattened for the first time due to competitive encroachments in key markets. Avon completed a major restructuring, cutting 30 percent of managers and chopping its 15 layers down to 8. Consultants were hired and acquisitions explored to achieve growth. Senior managers were brought in from top-tier companies that Avon wanted to emulate. Liz Smith, who joined as president of global brand marketing in 2005 after working for Kraft, tried to bring a new kind of discipline to Avon. New rigor was infused into the marketing evaluation and execution process. The changes created some friction with existing managers. “Avon’s an iconic brand,” said one former marketing executive in the U.S. business. “It’s not the same as macaroni and cheese.”Another restructuring began in 2009 and left employees demoralized and uncertain about the leadership and future of the company. Rather than working toward a long-term vision, employees often felt as though they were patching up problems for the short term. “At Avon, when something doesn’t go right, just put some concealer on it,” said a former communications manager. A major gap appeared to exist between what the company wanted to accomplish and what it was capable of executing:Also in 2010, Avon announced an ambitious five-year plan called the “Road to $20 billion.” Less than a year later, the company cut off funding for most of the initiatives in this plan. Executives then communicated a new directive that Avon would eventually hit $20 billion but not by 2017. Avon had revenues of only $5.57 billion by 2016 (see Exhibits 3 and 4)

     

    Problems in Emerging Markets

    Avon pursued an ambitious global growth strategy by expanding its presence in Brazil and China. Unfortunately, there were several hiccups in this ambitious effort.Brazil Brazil was the third-largest beauty market, behind the United States and Japan. Importantly, direct selling accounted for almost 30 percent of the booming market. Vivienne Rudd, head of beauty research at Mintel, explained: “The retail structure in Brazil isn’t sufficiently developed yet for the beauty industry, so direct selling is a much more valuable model.” Brazil surpassed the U.S. in 2010 to become the biggest market for Avon in terms of sales, but managing operations there proved to be a major challenge.When the government required electronic invoicing for tax purposes in June 2010, Avon’s computer systems were not prepared to handle the additional load. The change created service issues for representatives, forecasting problems, and product shortages.

    A year later the company went ahead with implementing a new information-management system in Brazil, one it had been planning for nearly two years. However, when the new system went live, there were additional execution problems. Orders were missed, and shipments to representatives got delayed. The service problems dragged down sales, with nearly half of the decrease coming from lost sales due to a problem with representatives. Unlike the case in the U.S. direct-sales market, representatives in Brazil often sold for multiple companies, and Avon lost many of them to its regional competitor, Natura.

    China In China, Avon’s problems were more pronounced. Avon opened for business there in 1990 amid press reports that the company had sold out six months’ worth of inventory in just four weeks. However, a direct-selling ban by the Chinese government in 1998 forced Avon to seek alternate approaches to selling and eventually open brick-and-mortar locations called Beauty Boutiques. Avon received the first license to resume direct selling in China in 2006.Despite these efforts, in 2008 Avon received a whistleblower letter with allegations of bribery and possible violations of the Foreign Corrupt Practices Act. Avon began an internal investigation, which subsequently led to the departure of six employees. The highest-level dismissal took place in January 2012, when Avon reported that Charles Cramb, the former CFO, was no longer with the company. In October 2012, Avon disclosed that the SEC had opened a formal investigation. (The company finally settled for a whopping $135 million with the agency.)

     

    New CEO Seeks New Solutions

    Faced with Avon’s soft performance and also its legal issues, the board decided the company needed a change of leadership. Jung resigned as CEO in 2011, and the search for a new CEO began.In April 2012, Sheri McCoy was appointed CEO of the company. She came with a proven track record at the Johnson & Johnson (J&J) Company, where she was responsible for the global pharmaceutical and consumer businesses. The consumer business included well-known skin care brands like Neutrogena. She had a good pedigree, with a master’s in chemical engineering from Princeton and broad experience in a number of roles of increasing responsibility at J&J. Despite the impressive background, McCoy had no prior experience in direct selling. In some ways, her profile matched that of Jung when Jung took the reins of the company.Shortly after becoming Avon CEO in 2012, McCoy sought the input of current and former sales representatives to hear firsthand what the company could do better. She then used the information to develop a plan for the future, and she laid out how this plan would be different from things the company had tried in the past.

     

    As she prepared to lead the transformation of the company, she made some critical changes to her executive team:15C-140In August 2012, McCoy made her first C-level appointment: PR expert Cheryl Heinonen was recruited as chief communications officer and senior vice president of Corporate Relations. The company could clearly benefit from an image makeover.Soon after, McCoy appointed Jeff Benjamin and Scott Crum to lead the Legal and Human Resource departments, signaling the importance of legal compliance and personnel development in the new company environment.In December 2012, she appointed P&G veteran Patricia Perez-Ayala as chief marketing officer. Perez-Ayala had started her career with P&G in Venezuela and was an expert on Latin America.In 2013, more critical additions were made to the leadership team. Experienced transformation guru David Powell joined as senior vice president of Business Transformation and Supply Chain. Tupperware executive Pablo Munoz, who had a successful track record of direct selling and turning around businesses, was brought in to lead the ailing North American business. Brian Salsberg, an Asia-Pacific market expert from McKinsey, was recruited to head up Strategy.In 2015, James Scully joined the firm as its new CFO after 9 years at J.Crew, a multichannel apparel retailer. He replaced company veteran Kimberly Ross, who had resigned to pursue an external opportunity.McCoy believed the company needed to evolve by focusing on three critical areas: executing growth platforms, driving simplification and efficiency, and improving organizational effectiveness. She indicated that the company was making progress in these three areas and the new turnaround would increase the prospects of future success:

    In the area of growth platforms, the company had begun refining its consumer value proposition. This involved clearly defining product categories and developing fully integrated marketing plans. It also included a renewed organizational focus on improving all aspects of the representative experience and achieving geographic optimization. An important C-141priority was given to expand the company’s presence through digital media and advertising.In the area of simplification and efficiency, the company was streamlining complex processes and trying to create a mind-set of cost management. To improve the cost efficiency, the company divested its low performing segment Liz Earle in 2015.In the area of organizational effectiveness, a new culture of discipline and accountability was being implemented.Soon after taking charge, McCoy pushed the adoption of technology at all levels, including mobile applications and online brochures. The company invested nearly $200 million in expanding its information technology systems and in updating and repositioning brands.Unlike past changes, however, these changes were implemented with the direct-selling representative at the center of the planning effort. In the past, some of the changes that had been implemented without active involvement of the sales representatives had failed due to lack of relevance and inconvenience for the representatives.

    As mentioned at the start of this case, McCoy’s new three-year transformational plan cut about 2,500 jobs, announced Avon’s exit from unprofitable markets, and sold off 80 percent of the North American business as part of a plan to save $350 million by the end of 2018. Previously, in July 2013, Avon had sold its Silpada jewelry unit to Rhinestone Holdings (original owner of Silpada) for $85 million.McCoy believed marketing would play a critical role during the transformation. “We have to continue to look at how we make direct selling more modern in some ways,” including using technology and social media to amplify the social connections forged by the reps, she said. “You see this blurring of the channels, and that’s why the brand is so important because in the end, the consumer is going to buy on the brand.”If CEO McCoy was unable to turn the company with the new three-year transformational plan, there would continue to be takeover bids that investors would expect the board to consider for the remaining international and North America business.

     

    The Rocky Road Ahead

    High Tab of Litigation

    According to company releases, an internal investigation was being conducted and covered a broad range of areas: travel, entertainment, gifts, use of third-party vendors and consultants, joint ventures and acquisitions, and payments to third-party agents and others. The legal fees and costs for the outside counsel conducting the internal investigation totaled $59 million in 2009 and $95 million in 2010. In December 2014, the company revealed it had settled with the SEC for $135 million.

    Women-Centric Philanthropic Efforts

    The “company for women” had a rich history and mission of supporting women-centric causes (see Exhibit 5). However, its 2015 balance sheet (see again Exhibit 4) showed a drop from $249 million to $92 million in assets relating to goodwill. The company had lost the majority of its goodwill value after Egypt business accounting signified that carried business was considerably overvalued relative to its fair price. Similarly, revenue decline in China indicated loss of goodwill in the Chinese market as well, shrinking the company’s intangible assets.17 Will the company be able to continue to fund these causes in the future? Could these commitments eventually become a financial liability for the company?

    Breast Cancer

    Avon’s Breast Cancer Crusade was launched in the United Kingdom in 1992. Through Avon’s sales channel, an army of Avon Ladies was mobilized to raise awareness and funds for the cause. In 1998, the Avon Foundation was named the beneficiary of the first long-distance walk series for breast cancer. Five years later, the foundation launched its current highly successful event model in the United States: the Avon Walk for Breast Cancer, a marathon-and-a-half walk (39.3 miles) over two days.In 2005, the company started the Avon Walk Around the World for Breast Cancer series, bringing grassroots activism to a global scale. Walk Around the World mobilized a quarter of a million people each year for the breast cancer cause. This “walk” sometimes included runs, concerts, and educational seminars. World walkers trekked past historic sites, including the Great Wall of China and the Kremlin, and through diverse locales such as Kuala Lumpur, and Prague.In 2007, popular actress Reese Witherspoon was appointed as Avon’s global ambassador and as honorary chairperson of the Avon Foundation for Women.By 2017, the Avon Breast Cancer Crusade had become a powerful global force, and Avon was the leading corporate supporter of the breast cancer cause worldwide. The crusade had donated more than $800 million to accelerate research progress and improve access to care.

     

    Domestic Violence

    The Avon Foundation supported efforts to build awareness of domestic violence as a problem. By 2017, Avon and Avon Foundation had contributed approximately $60 million to the cause.C-142EXHIBIT 5 Avon Values and PrinciplesAvon’s VisionTo be the company that best understands and satisfies the product, service, and self-fulfillment needs of women globally.Avon’s MissionAvon’s mission is focused on six core aspirations the company continually strives to achieve:Leader in global beauty: Build a unique portfolio of beauty and related brands, striving to surpass competitors in quality, innovation, and value, and elevating Avon’s image to become the world’s most trusted beauty company.Women’s choice for buying: Become the shopping destination for women, providing a personal, high-touch experience that helps create lifelong customer relationships.Premier direct-selling company: Expand Avon’s presence in direct selling, empowering women to achieve economic independence by offering a superior earnings opportunity as well as recognition, service and support, making it easy and rewarding to be affiliated with Avon.Most admired company: Deliver superior returns to shareholders by pursuing new growth opportunities while maintaining a commitment to be a responsible, ethical company and a global corporate citizen that is held as a model of success.Best place to work: Elevate the company’s leadership, including its high standards, respect for diversity, and commitment to helping Associates achieve their highest potential in a positive work environment.To have the largest foundation dedicated to women’s causes: Be a committed global champion for the health and well-being of women through philanthropic efforts, with a focus on breast cancer, domestic violence, and women’s empowerment.

     

    The Avon Values

    Trust means we want to live and work in an environment where communications are open—where people feel free to take risks, to share their points of view and to speak the truth as they see it. Trust people to do the right thing—and help them to understand your underlying reasoning and philosophy—and they won’t disappoint. Respect helps us to value differences, to appreciate each person for her or his unique qualities. Through respect, we help bring out the full potential of each person. Belief is the cornerstone of empowering Associates to assume responsibilities and be the very best they can be. Believe in someone—and show it—and that person will move mountains to prove you’re right .Humility simply means we’re not always right—we don’t have all the answers—and we know it. We’re no less human than the people who work for us, and we’re not afraid to ask for help. Integrity should be the hallmark of every Avon Associate. In setting and observing the highest ethical standards and doing the right thing, we fulfill a duty of care, not only to our Representatives and customers in the communities we serve, but to our colleagues and ourselves. Principles That Guide Avon To provide individuals an opportunity to earn in support of their well-being and happiness .To serve families throughout the world with products of the highest quality backed by a guarantee of satisfaction. To render a service to customers that is outstanding in its helpfulness and courtesy. To give full recognition to employees and Representatives, on whose contributions Avon depends. To share with others, the rewards of growth and success. To meet fully the obligations of corporate citizenship by contributing to the well-being of society and the environment in which it functions. To maintain and cherish the friendly spirit of Avon.

     

    The Future—A Fix or Sell Proposition

    By 2017, CEO McCoy had a big challenge and opportunity ahead of her. She had developed and articulated her ambitious three-year transformation plan, and sold off a large part of the company. However, she would quickly need to prove to shareholders that the plan was working and that the company was returning to growth and profitability. Shareholders were getting increasingly impatient and wanted to see their stocks appreciate again. If a turnaround was not the answer, they would expect the CEO and board to seek value by selling rest of the company as well.

 
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Case 5: Monsanto: A Growing Controversy

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Please Read the Case (PDF file attached) and answer the questions completely in a formal paper format following APA requirements.

Remember, it is quality that counts so be brief, thorough, and to the point.

Include the reference page to the course material

1. Does Monsanto maintain an ethical culture that effectively responds to various stakeholders?

2. Compare the benefits of growing GM seeds for crops with the potential negative consequences of using them.

3. How should Monsanto manage the potential harm to plant and animal life from using products such as Roundup?

374 Part 5: Cases

Case 5

Monsanto: A Growing Controversy*

INTRODUCTION

When you think of Monsanto, the phrase genetically modified likely comes to mind. The Monsanto Company is the world’s largest seed company, with sales of $13.5 billion. It spe- cializes in biotechnology, or the genetic manipulation of organisms. Monsanto scientists have spent the last few decades modifying crops—often by inserting new genes or adapt- ing existing genes within plant seeds—to meet certain aims, such as higher crop yields or insect resistance. Monsanto develops genetically engineered seeds of plants that can sur- vive weeks of drought, ward off weeds, and kill invasive insects. Monsanto’s genetically modified (GM) seeds have increased the quantity and availability of crops, helping farmers worldwide increase food production and revenues.

Today, 90 percent of the world’s GM seeds are sold by Monsanto or companies that use Monsanto genes. Yet Monsanto has met its share of criticism from sources as diverse as governments, farmers, activists, and advocacy groups. Monsanto supporters say the com- pany creates solutions to world hunger by generating higher crop yields and hardier plants. Critics accuse the multinational giant of attempting to take over the world’s food supply and destroying biodiversity. The announcement that Bayer AG is acquiring Monsanto for $66 billion has intensified these concerns because the acquisition would create a company that would command over one-fourth of the world’s seeds and pesticides market. Since biotechnology is relatively new, critics also express concerns about the possibility of nega- tive health and environmental effects from biotech food. These criticisms have not kept Monsanto from becoming one of the world’s most successful businesses.

This analysis first looks at the history of Monsanto as it progressed from a chemical company to an organization focused on biotechnology. It then examines Monsanto’s cur- rent focus on developing GM seeds, including stakeholder concerns regarding the safety and environmental effects of these seeds. Next, we discuss key ethical concerns, includ- ing organizational misconduct and patent issues. We also look at Monsanto’s corporate responsibility initiatives. We conclude by examining the challenges and opportunities that Monsanto may face in the future.

*This case was prepared by Jennifer Sawayda, Danielle Jolley, and Annalisa LaRue for and under the direction of O.C. Ferrell and Linda Ferrell. It was prepared for classroom discussion rather than to illustrate either effective or ineffective handling of an administrative, ethical, or legal decision by management. All sources used for this case were obtained through publicly available material © 2019.

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Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-202

 

 

Case 5: Monsanto: A Growing Controversy 375

HISTORY: FROM CHEMICAlS TO FOOD

Monsanto was founded by John E. Queeny in 1901 in St. Louis, Missouri. He named the company after his wife, Olga Monsanto Queeny. The company’s first product was the arti- ficial sweetener saccharine, which it sold to Coca-Cola. Monsanto also sold Coca-Cola caffeine extract and vanillin, an artificial vanilla flavoring. At the start of World War I, company leaders realized the growth opportunities in the industrial chemicals industry and renamed the company The Monsanto Chemical Company. The company began spe- cializing in plastics, its own agricultural chemicals, and synthetic rubbers.

Due to its expanding product lines, the company’s name was changed back to the Monsanto Company in 1964. By this time, Monsanto was producing such diverse products as petroleum, fibers, and packaging. A few years later, Monsanto created its first Roundup herbicide, a successful product that propelled the company even more into the spotlight.

However, during the 1970s Monsanto encountered a major legal obstacle. The com- pany had produced a chemical known as Agent Orange, which was used during the Vietnam War to quickly deforest the thick Vietnamese jungles. Agent Orange contained dioxin, a chemical that caused a legal nightmare for Monsanto. Dioxin was found to be extremely carcinogenic, and in 1979 a lawsuit was filed against Monsanto on behalf of hun- dreds of veterans who claimed they were harmed by the chemical. Monsanto and several other manufacturers agreed to settle for $180 million.

In 1981 Monsanto leaders determined that biotechnology would be the company’s new strategic focus. In 1986 Monsanto successfully spliced bacterium DNA into a seed. The bacterium was lethal to certain types of insects that feed on corn, potatoes, and cotton. The quest for biotechnology was on, and in 1994 Monsanto introduced the first biotech- nology product to win regulatory approval. Soon the company was selling soybean, cotton, and canola seeds engineered to be tolerant to Monsanto’s Roundup herbicide. Many other herbicides killed good plants as well as the bad ones. Roundup Ready seeds allowed farm- ers to use the herbicide to eliminate weeds while sparing the crop.

In 1997 Monsanto spun off its chemical business as Solutia, and in 2000 the company entered into a merger and changed its name to the Pharmacia Corporation. Two years later, a new Monsanto, focused entirely on agriculture, broke off from Pharmacia, and the companies became two legally separate entities.

The emergence of new Monsanto was tainted by disturbing news about the company’s conduct. For nearly 40 years the Monsanto Company had released toxic waste into a creek in the Alabama town of Anniston. The company had also disposed of polychlorinated biphenyls (PCBs), a highly toxic chemical, in open-pit landfills in the area. The results were catastrophic. Fish from the creek were deformed, and the population had highly elevated PCB levels. A paper trail showed that Monsanto leaders had known about the pollution since the 1960s but had not stopped the dumping. Once the cover-up was discovered, thou- sands of plaintiffs from the city filed a lawsuit against the company. In 2003 Monsanto and Solutia agreed to pay a settlement of $700 million to more than 20,000 Anniston residents.

When CEO Hugh Grant took over in 2003, scandals and stakeholder uncertainty over Monsanto’s GM products had tarnished the company’s reputation. The price of Monsanto’s stock had fallen by almost 50 percent, down to $8 a share. Grant knew the company was fragile and decided to shift its strategic focus. Through a strong strategic focus on GM foods, the company has recovered and is now prospering.

In spite of their controversial nature, GM foods have become popular in developed and developing countries. Monsanto became so successful with its GM seeds that it acquired Seminis Inc., a leader in the fruit and vegetable seed industry. The acquisition transformed Monsanto into a global leader in the seed industry. Today, Monsanto employs over 20,000

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376 Part 5: Cases

people worldwide. It is recognized as one of the 100 best corporate citizens by Corporate Responsibility Magazine and has made Fortune magazine’s World’s Most Admired Compa- nies list.

MONSANTO’S EMPHASIS ON BIOTECHNOlOGY

While the original Monsanto made a name for itself through the manufacturing of chemi- cals, the new Monsanto changed its emphasis from chemicals to food. Today’s Monsanto owes its $13.5 billion in sales to biotechnology, specifically to its sales of GM plant seeds. These seeds have revolutionized the agriculture industry. Not content with resting on its laurels, Monsanto continues to use its research budget to investigate new methods of farm- ing at its 1.5-million-square-foot complex in Missouri.

Throughout history, weeds, insects, and drought have been the bane of the farmer’s existence. In the twentieth century, synthetic chemical herbicides and pesticides were invented to ward off pests. Yet applying these chemicals to an entire crop was both costly and time consuming. Then Monsanto scientists, through their work in biotechnology, were able to implant seeds with genes that make the plants themselves kill bugs. They also created seeds containing the herbicide Roundup, an herbicide that kills weeds but spares the crops. Since then Monsanto has used technology to create many innovative products, such as drought-tolerant seeds for dry areas like Africa.

The company utilizes its technological prowess to gain the support of stakeholders. For example, Monsanto has a laboratory in St. Louis that gives tours to farmers. One of the technologies the company shows farmers is a machine known as the corn chipper, which picks up seeds and removes genetic material from them. That material is analyzed to see how well the seed will grow if planted. The “best” seeds are the ones Monsanto sells for planting. Monsanto is extending its reach into the computing industry as well. The com- pany offers software and hardware that use big data to yield important information to help farmers in the field. It even provides recommendations on when and where to plant. Mon- santo also arranges tours for its critics to help them understand the process of GM crops and their implications.

However, GM crops are not without critics. Opponents believe influencing the gene pools of the plants we eat could result in negative health consequences. Others worry about the health effects on beneficial insects and plants, fearing that pollinating GM plants could affect nearby insects and non-GM plants. CEO Hugh Grant decided to curtail the tide of crit- icism by focusing biotechnology on products not directly placed on the dinner plate but on seeds that produce goods like animal feed and corn syrup. In this way, Grant reduced some of the opposition. The company invests largely in four crops: corn, cotton, soybeans, and canola. Monsanto owes much of its revenue to its work on GM seeds, and today more than half of U.S. crops, including most soybeans and 90 percent of corn, are genetically modified.

Farmers who purchase GM seeds can grow more crops on less land and with less left to chance. GM crops have saved farmers billions by preventing loss and increasing crop yields. For example, in 1970 the average corn harvest yielded approximately 70 bushels an acre. With the introduction of biotech crops, the average corn harvest increased to roughly 150 bushels an acre. Monsanto predicts even higher yields in the future. According to Monsanto CEO Hugh Grant, this increase in productivity will increase crop yields without taking up more land, helping to meet the world’s growing agricultural needs.

Monsanto’s GM seeds have not been accepted everywhere. Attempts to introduce them into Europe met with consumer backlash. Consumers have gone so far as to destroy fields of GM crops and arrange sit-ins. Greenpeace has fought Monsanto for years, espe- cially in the company’s efforts to promote GM crops in developing countries. Even China

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Case 5: Monsanto: A Growing Controversy 377

placed bans on certain GM corn imports, although it has since relaxed the ban and appears to be encouraging more acceptance of GM crops among its citizens. This animosity toward Monsanto’s products is generated by two main concerns: the safety of GM food and the environmental effects of genetic modification.

Concerns about the Safety of GM Food Of great concern to many stakeholders are the moral and safety implications of GM food. Many skeptics see biotech crops as unnatural, with the Monsanto scientist essentially “play- ing God” by controlling what goes into the seed. Critics contend that effective standards have not been created to determine the safety of biotech crops. Some geneticists believe the splicing of these genes into seeds could create small changes that might negatively impact the health of humans and animals that eat them. Also, even though the Food and Drug Administration (FDA) has declared biotech crops safe, critics say they have not been around long enough to gauge their long-term effects. In 2013 protestors began an annual protest called March against Monsanto.

One concern is toxicity, particularly considering that many Monsanto seeds are equipped with a gene to allow them to produce their own Roundup herbicide. Could ingesting this herbicide, even in small amounts, cause detrimental effects on consumers? Some stakeholders say yes, and point to statistics on glyphosate, Roundup’s chief ingredi- ent, for support. According to an ecology center fact sheet, glyphosate exposure is the third most commonly reported illness among California agriculture workers, and glyphosate residues can last for a year. Yet the Environmental Protection Agency (EPA) lists glyphosate as having low skin and oral toxicity, and a study from the New York Medical College states that Roundup does not create a health risk for humans. Since its inception, glyphosate has become the most widely used herbicide. An estimated 18.9 billion pounds of glyphosate have been used across the world.

In 2013 over 250,000 people signed a petition in response to President Barack Obama’s signing of H.R. 933 into law. The new law, called the Agricultural Appropriations Bill of 2013, contains a provision that protects GM organisms and genetically engineered seeds from litigation concerning their health risks. In other words, courts cannot bar the sale of GM food even if future health risks are revealed. Critics of the provision claim the provi- sion was slipped in at the last moment and that many members of Congress were not aware of it. For consumers, questions pertaining to the health risks associated with GM crops have gone unanswered and are the primary reason the petition was started. Many people have called this bill the “Monsanto Protection Act” and believe it will help protect the sur- vival of biotech corporations.

More controversy ensued in 2015 when the House of Representatives added an addi- tion to a chemical safety bill intended to replace the outdated Toxic Substances Control Act. The additional paragraph was interpreted as protecting chemical firms from legal liability for chemical spills if they were the only company that manufactured the chemical. Because Monsanto was largely the only manufacturer of the now-banned PCBs, state attor- neys general and environmental regulators believe the law might protect Monsanto against lawsuits involving chemical spills or dumping of PCBs. This controversy has occurred in the midst of a number of lawsuits from individuals, cities, and school systems accusing Monsanto of selling a dangerous chemical. Although Congress claimed the bill does not favor Monsanto, the addition immediately sparked protest and demands for Congress to change the bill.

Despite consumer concerns, the FDA and the American Association for the Advance- ment of Science have proclaimed that GM food is safe to consume. The European Com- mission examined more than 130 studies and concluded that GM food does not appear to

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378 Part 5: Cases

be riskier than crops grown by conventional methods. As a result of its research, the FDA determined that Americans did not need to know when they were consuming GM prod- ucts. Therefore, this information was not placed on labels in most states, although 64 other countries, notably those in the European Union, require GM food products to state this fact in their labeling.

However, there are signs that labeling laws are changing in the United States. President Obama signed a bill that will require foods containing GM ingredients to be labeled as such. According to the bill, food manufacturers could choose to use digital QR codes or 1-800 numbers as a form of labeling. Some have criticized these methods, however, say- ing that lower-income consumers do not have the technology to scan QR codes. Vermont Senator Bernie Sanders believes the bill is a weak form of legislation and not nearly as strong as a law Vermont passed to require GM labeling. GM labeling will take a few years to implement, and decisions must be made about the best course to take. Food manufac- turers continue to argue that this type of food labeling is too burdensome.

Concerns about Environmental Effects of Monsanto Products Some studies have supported the premise that Roundup herbicide, used in conjunction with the GM seeds called “Roundup Ready,” can be harmful to birds, insects, and par- ticularly amphibians. Such studies revealed that small concentrations of Roundup may be deadly to tadpoles. Other studies suggest that Roundup might have a detrimental effect on human cells, especially embryonic, umbilical, and placental cells. Research has also sug- gested that the chemical could contribute to antibiotic resistance in humans and hormone disruption. Monsanto has countered these claims by questioning the methodology used in the studies. The EPA maintains glyphosate is not dangerous at recommended doses. On the other hand, the World Health Organization (WHO) ruled that glyphosate prob- ably does have the potential to cause cancer in humans. Monsanto challenged this asser- tion and wants to meet with WHO officials to discuss the findings. A California judge has already ruled that the state can require Monsanto to put a cancer warning on its Roundup products.

A group of individuals have filed a lawsuit against Monsanto claiming that Roundup contributed to their illnesses of non-Hodgkin lymphoma. They claim that former EPA Deputy Director Jess Rowland may have concealed evidence regarding the weed killer’s harmful impact. Rowland worked with the Cancer Assessment Review Committee to develop a report combating the findings that glyphosate contributes to cancer. A federal court has unsealed documents of internal emails between Monsanto officials and federal regulators that may hint at collusion. Other emails suggest Monsanto may have manip- ulated academic research regarding the toxicity of glyphosate. The courts must decide whether Monsanto is innocent of wrongdoing or if it manipulated research and regulators into ignoring potential health concerns.

As honeybees have begun to die off, critics are blaming companies like Monsanto and Bayer. They believe the companies’ pesticides are killing off the good insects as well as the bad ones. While there is no definitive evidence that the honeybees are dying off due to pesticide use, opposition against Monsanto is rising as the honeybee population contin- ues to decline. Another concern with GM seeds is the threat of environmental contamina- tion. Bees, other insects, and wind can carry a crop’s seeds to other areas, sometimes to fields containing non-GM crops. These seeds and pollens might then mix with the farmer’s crops. Organic farmers have complained that GM seeds from nearby farms have “contami- nated” their crops. This environmental contamination could pose a serious threat. Some scientists fear that GM seeds spread to native plants may cause those plants to adopt the GM trait, thus creating new genetic variations of those plants that could negatively influ- ence the surrounding ecosystem.

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Case 5: Monsanto: A Growing Controversy 379

Another controversy involved the discovery of a field in Oregon filled with an experi- mental form of Monsanto’s GM wheat. The wheat was not approved by the United States Department of Agriculture. The discovery of this wheat raised concern over whether it could have contaminated U.S. wheat supplies. As a result, Japan temporarily instituted a ban on U.S. wheat. Initial investigations revealed that the wheat had been stored in a Colorado facility but were unable to provide an explanation for how it showed up in an Oregon field. Monsanto denied involvement and stated that it suspected someone had covertly obtained the GM wheat and planted it. The altered wheat is not believed to have caused any damage, and Japan lifted the ban. However, some farmers filed lawsuits against Monsanto seeking class-action status.

Monsanto has taken action in addressing environmental and health concerns. The company maintains that the environmental impact of everything it creates has been stud- ied by the EPA and approved. Monsanto officials claim that glyphosate in Roundup rarely ends up in ground water, and when it does contaminate ground water, it is soluble and will not have much effect on aquatic species. Monsanto has also partnered with Conservation International in an effort to conserve biodiversity. Stakeholders are left to make their own decisions regarding GM crops.

ResIsTaNCe TO PesTICIDes aND HeRbICIDes Another environmental problem that has emerged is weed and insect resistance to the herbicides and pesticides in Mon- santo crops. On the one hand, it is estimated that GM crops have prevented the use of more than $1.5 billion of pesticide use. On the other hand, critics fear that continual use of the chemicals could result in “super weeds” and “super bugs,” much like the overuse of antibiotics in humans has resulted in drug-resistant bacteria. The company’s Roundup line, in particular, has come under attack. GM seeds labeled Roundup Ready are engineered to withstand large doses of the herbicide Roundup. Because Roundup is used more fre- quently, weeds have started to develop a resistance to this popular herbicide. Significant numbers of Roundup resistant weeds have been found in the United States and Australia.

To combat “super bugs,” the government requires farmers using Monsanto’s GM prod- ucts to create “refuges,” in which they plant 20 percent of their fields with a non-GM crop. The theory is that this allows nonresistant bugs to mate with those that are resistant, pre- venting a new race of super bugs. To prevent resistance to the Roundup herbicide, farmers are required to vary herbicide use and practice crop rotations. However, since Roundup is so easy to use, particularly in conjunction with Roundup Ready seeds, some farmers do not take the time to institute these preventative measures. When they do rotate their crops, some will rotate one Roundup Ready crop with another. As a result, agricultural pests such as rootworm are becoming resistant to genes in GM crops intended to kill them. For the first time, regulators in the United States are encouraging limits on certain kinds of GM corn to prevent the spread of resistant bugs. The EPA acknowledges that farmers and seed companies have not done enough to curb resistance. It began recommending that 35  percent of fields be planted with another crop other than biotech corn. Resistance is of particular concern in Latin America, Africa, and Asia, where farmers may not be as informed of the risks of herbicide and pesticide overuse.

DEAlING WITH ORGANIZATIONAl ETHICAl ISSUES

In addition to concerns over the safety of GM seeds and environmental issues, Monsanto has dealt with concerns about organizational conduct. Organizations face significant risks from strategies and employees striving for high performance standards. Such pressure sometimes encourages employees to engage in illegal or unethical conduct. All firms have

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380 Part 5: Cases

these concerns. In the case of Monsanto, patents and other legal issues have resulted in legal, ethical, and reputational consequences.

Patent Issues As bioengineered creations of the Monsanto Company, Monsanto’s seeds are protected under patent law. Under the terms of the patent, farmers using Monsanto seeds are not allowed to harvest seeds from the plants for use in upcoming seasons. Instead, they must purchase new Monsanto seeds each season. By issuing new seeds each year, Monsanto ensures it secures a profit as well as maintains control over its property. This patent protection has become a controversial subject among farmers and has led to numerous litigation battles for Monsanto.

Throughout agricultural history, farmers have collected and saved seeds from previ- ous harvests to plant the following year’s crops. Critics argue that requiring farmers to sud- denly purchase new seeds each year puts an undue financial burden on them and gives Monsanto too much power. However, the law protects Monsanto’s right to have exclusive control over its creations, and farmers must abide by these laws. When they are found guilty of using Monsanto seeds from previous seasons, either deliberately or out of igno- rance, they are often fined.

Since it is fairly easy for farmers to violate the patent, Monsanto has found it necessary to employ investigators from law firms to investigate suspected violations. The resulting inves- tigations are a source of contention between Monsanto and farmers. According to Monsanto, investigators deal with farmers in a respectful manner. They approach the farmers suspected of patent infringement and ask them questions. The company claims that investigators prac- tice transparency with the farmers and tell them why they are there and who they represent. If after the initial interview is completed and suspicions still exist, the investigators may pull the farmer’s records. They may bring in a sampling team, with the farmer’s permission, to test the farmer’s fields. If found guilty, the farmer often pays fines. However, some farmers tell a different story about Monsanto and its seed investigators. They claim that Monsanto investigators have used unethical practices to get them to cooperate. They call the investiga- tors the “seed police” and say they behave like a “Gestapo” or “mafia.”

In 2007 Monsanto sued Vernon Bowman, an Indiana farmer who Monsanto claims used second-generation Monsanto seeds to plant soybeans. Monsanto claimed its patent protection reaches past first-generation seeds and Mr. Bowman infringed upon its patent. In 2009 the court ruled in favor of Monsanto and ordered Bowman to pay $84,000 in dam- ages. Mr. Bowman did not accept defeat, and in 2013 brought his case before the Supreme Court. The Supreme Court ruled in favor of Monsanto, representing a great victory for biotechnology companies.

Monsanto does not limit its investigations to farmers. It filed a lawsuit against DuPont, the world’s second-largest seed maker, for combining DuPont technology with Roundup Ready. Monsanto won that lawsuit, but was countersued by DuPont for anticompetitive prac- tices. These accusations of anticompetitive practices garnered the attention of federal anti- trust lawyers. With increased pressure coming from different areas, Monsanto agreed to allow patents to expire on its seeds starting in 2014. This will allow other companies to create less expensive versions of Monsanto seeds. However, Monsanto announced it would continue to strictly enforce patents for new versions of its products, such as Roundup Ready 2 soybeans.

Legal Issues Many major companies face occasional conflicts with government and legal forces, and Monsanto is no exception. The government has begun to examine Monsanto’s practices more closely. In early 2013 Monsanto settled with local residents in Nitro, West Virginia, after claims of health problems became persistent in a now-closed Agent Orange plant.

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Case 5: Monsanto: A Growing Controversy 381

The company agreed to spend up to $93 million on medical testing and local cleanup of as many as 4,500 homes. It also agreed to establish a medical monitoring program and will make additional money available to continue the program’s operation for 30 years.

In 1980 the Supreme Court allowed living organisms to be patented for the first time, giving Monsanto the ability to patent its seeds. Despite this victory, Monsanto came to the attention of the American Antitrust Institute for alleged anticompetitive activities. The insti- tute suggested that Monsanto hinders competition, exerting too much power over the trans- genic seed industry and limiting seed innovation. When Monsanto acquired DeKalb and Delta Land and Pine, it had to obtain the approval of antitrust authorities and gained that approval after agreeing to certain concessions. As a result of complaints, the Department of Justice (DOJ) began a civil investigation into Monsanto’s practices. Although the DOJ even- tually dropped the antitrust probe, concerns over Monsanto’s acquisitions continue.

The announcement that chemical, pharmaceutical, and life sciences firm Bayer AG would acquire Monsanto for $66 billion drew scrutiny from both U.S. and European authorities (Bayer is a German company). Such a merger would create a “one-stop shop” for seeds, pesticides and herbicides, and farmer services. Regulators are concerned that the merger might give the combined firm too much power over the seed and pesticide indus- try. During his presidential campaign, Vermont Senator Bernie Sanders claimed the deal threatened Americans because it would increase prices. Regulators in the European Union have asked for Bayer to provide them with more information before they make a deci- sion on whether to approve—actions which might potentially delay the proposed merger. Bayer and Monsanto deny that their merger would reduce competition. In a meeting with President Trump, Bayer said it would spend $8 billion for research and development in the United States and keep Monsanto’s workforce intact. However, the companies will have to convince the U.S. Justice Department, the Federal Trade Commission, and European regu- lators that its merger will not restrict competition for it to receive approval.

CORPORATE RESPONSIBIlITY AT MONSANTO

Despite criticisms levied against Monsanto, a study has provided evidence that GM crops have greatly benefited farming. The study estimated that farmers who adopted GM crops have seen their profits increase to 69 percent higher than those who did not. Today, the public generally expects multinational corporations to advance the interests and well- being of the people in the countries where they do business. Monsanto has given millions of dollars in programs to improve communities in developing countries.

Monsanto created a Code of Business Conduct to provide guidance on the firm’s eth- ical expectations and is concerned with maintaining integrity among its many different stakeholders. In 2003 the company adopted an additional Code of Conduct for its chief executives and financial officers and a Human Rights Policy in 2006 to ensure the rights of Monsanto employees and those in its supply chain. The company’s Business Conduct Office is responsible for investigating cases of alleged misconduct as well as maintaining the company’s anonymous hotline.

As part of Monsanto’s culture, the company wrote a pledge informing stakeholders about what it sees as its ethical commitments. According to Monsanto, the pledge “helps us to con- vert our values into actions, and to make clear who we are and what we champion.” Table 1 provides the values Monsanto pledges to uphold, including integrity, dialogue, transparency, sharing, benefits, respect, acting as owners to achieve results, and creating a great place to work.

As an agricultural company, Monsanto must address the grim reality that the world’s pop- ulation is increasing fast and the amount of land and water available for agriculture is decreas- ing. Some experts believe our planet must produce more food in the next 50 years to feed the world’s population than what has grown in the past 10,000 years, requiring us to double our

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382 Part 5: Cases

food output. As a multinational corporation dedicated to agriculture, Monsanto is expected to address these problems. The company developed a three-tiered commitment policy: (1) pro- duce more yield in crops, (2) conserve more resources, and (3) improve the lives of farmers. The company hopes to achieve these goals through initiatives in sustainable agriculture.

Sustainable Agriculture Monsanto’s CEO Hugh Grant has said, “Agriculture intersects the toughest challenges we all face on the planet. Together, we must meet the needs for increased food, fiber, and energy while protecting the environment. In short, the world needs to produce more and conserve smarter.” Monsanto is quick to point out that its biotech products added more than 100 million tons to worldwide agricultural production in a 10-year period, and the company estimates that this has increased farmers’ incomes by $33.8 billion. Monsanto also created partnerships between nonprofit organizations across the world to enrich the lives of farmers in developing countries. The company’s goal is to double its core crop yields by 2030. Monsanto intends to achieve this goal through new product innovations such as drought-tolerant seeds and better technology. Two regions Monsanto is now focus- ing on are India and Africa.

TABLE 1 The Monsanto Pledge

Integrity

Integrity is the foundation for all that we do. Integrity includes honesty, decency, consistency, and courage. Building on those values, we are committed to:

Dialogue

We will listen carefully to diverse points of view and engage in thoughtful dialogue. We will broaden our understanding of issues in order to better address the needs and concerns of society and each other.

Transparency

We will ensure that information is available, accessible, and understandable.

Sharing

We will share knowledge and technology to advance scientific understanding, to improve agriculture and the environment, to improve crops, and to help farmers in developing countries.

benefits

We will use sound and innovative science and thoughtful and effective stewardship to deliver high-quality products that are beneficial to our customers and to the environment.

Respect

We will respect the religious, cultural, and ethical concerns of people throughout the world. The safety of our employees, the communities where we operate, our customers, consumers, and the environment will be our highest priorities.

Act as owners to achieve results

We will create clarity of direction, roles, and accountability; build strong relationships with our customers and external partners; make wise decisions; steward our company resources; and take responsibility for achieving agreed-upon results.

Create a great place to work

We will ensure diversity of people and thought; foster innovation, creativity, and learning; practice inclusive teamwork; and reward and recognize our people.

Source: Monsanto Corporation, Monsanto Code of Conduct, http://www.monsanto.com/SiteCollectionDocuments/Code-of-Business-Conduct-PDFs/ code_of_conduct_english.pdf (accessed April 1, 2017).

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Case 5: Monsanto: A Growing Controversy 383

The need for better agriculture is apparent in India, with a population of nearly 1.3 billion people. Biotech crops have helped improve the size of yields in India, and Monsanto has estimated that Indian cotton farmers using biotech crops earn approximately $176 more in revenues per acre than their non-biotech contemporaries. Monsanto launched Project SHARE, a sustainable yield initiative created in conjunction with the nonprofit Indian Society of Agribusiness, to improve the lives of 10,000 cotton farmers in 1,050 villages.

In Africa Monsanto partnered with organizations, scientists, and philanthropists to develop and introduce drought-tolerant and virus-resistant seeds for African farmers. For instance, the Monsanto Fund is working with scientists to develop cassava plants that are resistant to two common types of viruses. The cassava is an important food product for many African communities. As CEO Hugh Grant writes, “This initiative isn’t simply altru- istic; we see it as a unique business proposition that rewards farmers and shareowners.”

But not all view Monsanto’s presence in Africa as an outreach in corporate responsibil- ity. Some consider it as another way for Monsanto to improve its bottom line. Opponents see the company as trying to take control of African agriculture and destroy African agri- cultural practices that have lasted for thousands of years.

Charitable Giving In 1964 the Monsanto Company established the Monsanto Fund. This fund contributes to educational opportunities and the needs of communities across the world. One recipient of the Monsanto Fund is Nanmeng Village in China. The company is helping to train farmers in the area about ways to improve agricultural methods and infrastructure development. The Monsanto Fund also provides $1,500 scholarships to students who are interested in agriculture. Each applicant must be endorsed by three farmers in their communities to be eligible for the grant.

Another program implemented by the company is the Matching Gifts Program. This program matches employee contributions to charitable and educational organizations, dollar-for-dollar, by the Monsanto Fund. The program matches a maximum of $5,000 per employee every year and includes organizations supporting the environment, arts and cul- ture, and disaster relief, among many others.

In the first decade of the twenty-first century, Monsanto supported youth programs and donated nearly $1.5 million in scholarships to students wanting to pursue agriculture- related degrees. The company supports 4-H programs and the program Farm Safety 4 Just Kids, a program that teaches rural children about safety while working on farms. Monsanto also partnered with the organization Agriculture Future of America (AFA), providing more than $100,000 in scholarships to youth in eight states who want to pursue agricul- tural careers. In St. Louis, where its headquarters are located, Monsanto offers grants to schools who develop innovative approaches to teaching students math and science.

CONClUSION

Monsanto faces challenges that it must address, including lingering concerns over the safety and the environmental impact of its products. The company needs to enforce its code of conduct effectively to avoid organizational misconduct. Monsanto also faces scru- tiny from antitrust authorities who are concerned that the firm is too large, especially in light of Monsanto’s proposed merger with German firm Bayer AG.

Yet despite the onslaught of criticism from Monsanto detractors, Monsanto has numerous opportunities to thrive in the future. The company is currently working on new innovations that could increase its competitive edge as well as benefit farmers worldwide.

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384 Part 5: Cases

Monsanto has teamed up with a Danish biotechnology firm to develop microscopic organ- isms that could be used to aid plant growth and ward off pests. The company is also taking advantage of big data and its potential uses for farming. Monsanto’s inroads into the com- puting industry are likely to grow in the coming years.

Although Monsanto has made ethical errors in the past, it is trying to portray itself as a socially responsible company dedicated to improving agriculture. As noted, the com- pany still has problems. The predictions from Monsanto critics about biotech food have not yet come true, but that has not eradicated the fears among stakeholders. Non-GM food products are becoming more popular, despite their higher costs. Faced with the increasing popularity of organic food and staunch criticism from opponents, Monsanto needs to con- tinue working with stakeholders to promote its technological innovations and eliminate fears concerning its industry.

QUesTIONs FOR DIsCUssION

1. Does Monsanto maintain an ethical culture that effectively responds to various stakeholders?

2. Compare the benefits of growing GM seeds for crops with the potential negative conse- quences of using them.

3. How should Monsanto manage the potential harm to plant and animal life from using products such as Roundup?

sOURCes

Annie Gasparro, “GMO Fight Ripples Down Food Chain,” The Wall Street Journal, August 8, 2014, A1; Associated Press, “Another Wheat Lawsuit,” The kansas City Star, July 8, 2013, http://www.kansascity.com/news/local/ article322692/Another-wheat-lawsuit-filed-against-Monsanto.html (accessed April 1, 2017); Brian Hindo, “Monsanto: Winning the Ground War,” BusinessWeek, December 5, 2007, 35–41; Carey Gillam, “UPDATE 1-Monsanto Unapproved GMO Wheat Stored in Colorado through ’11,” Reuters, June 28, 2013, http://www.reuters. com/article/monsanto-wheat-idUSL2N0F40QR20130628 (accessed April 1, 2017); “Chinas GMO Corn Approval Seen Spurring Recovery in U.S. Imports,” Bloomberg, December 18, 2014, http://www.bloomberg.com/news/ articles/2014-12-18/china-gmo-corn-approval-seen-spurring-recovery-in-u-s-imports (accessed April 1, 2017); Claire Oxborrow, Becky Price, and Peter Riley, “Breaking Free,” ecologist 38, no. 9 (November 2008): 35-36; Connor Adam Sheets, “Farmers and Food Safety Advocates Lead Monsanto Backlash,” Salon, March 27, 2013, http://www.salon.com/2013/03/27/farmers_and_food_safety_advocates_lead_monsanto_backlash_partner/ (accessed April 1, 2017); Crystal Gammon and Environmental Health News, “Weed-Whacking Herbicide Proves Deadly to Human Cells,” Scientific American, June 23, 2009, https://www.scientificamerican.com/article/weed- whacking-herbicide-p/ (accessed April 1, 2017); Dennis K. Berman, Gina Chon, and Scott Kilman, “Monsanto Pushes Deeper Into China,” The Wall Street Journal, July 11, 2011, B1–B2; Donald L. Barlett and James B. Steele, “Monsanto’s Harvest of Fear,” Vanity Fair, May 5, 2008, http://www.vanityfair.com/news/2008/05/monsanto200805 (accessed April 1, 2017); Drake Bennett, “What Are They Doing at Monsanto?” Bloomberg Businessweek, July 3, 2014, 52–59; “DuPont and Monsanto Agree to End Lawsuits,” Bloomberg, March, 26, 2013, http://www.bloomberg. com/news/2013-03-26/dupont-monsanto-agree-to-end-lawsuits.html (accessed April 1, 2017); Economist staff, “Field Research,” The economist, November 8, 2014, 82; E. Freeman, “Seed Police?” Monsanto, November 10, 2008, http://www.monsanto.com/newsviews/Pages/Seed-Police-Part-4.aspx (accessed April 20, 2015); Ellen Gibson, “Monsanto,” BusinessWeek, December 22, 2008, 51; Elizabeth Weise, “Monsanto in Dispute with Veggie Farmers,” USA Today, March 18, 2014, 7B; “Even Small Doses of Popular Weed Killer Fatal to Frogs, Scientist Finds,” ScienceDaily, August 5, 2005, https://www.sciencedaily.com/releases/2005/08/050804053212.htm

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What Were Solomon’s Strengths And Weaknesses As A King?

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1.What were Solomon’

The Old Testament Story, Ninth Edition, by John Tullock and Mark McEntire. Published by Pearson Learning Solutions. Copyright © 2012 by Pearson Education, Inc.

7 The Division of the Monarchy I The Reign of Solomon and the Story of the Northern Kingdom

C H A P T E R

145

Timeline 960 B.C.E. Approximate death of David and beginning of the reign of Solomon

922 B.C.E. Common estimate of the death of Solomon and division of the kingdom

900 B.C.E. End of Iron Age I and beginning of Iron Age II

876 B.C.E. Beginning of the reign of Omri and the Omride dynasty in the Northern Kingdom

869 B.C.E. Beginning of the reign of Ahab

745 B.C.E. Approximate date of the beginning of Hosea’s prophetic career

722 B.C.E. Fall of Samaria to the Assyrian Empire

Chapter Outline I. The Reign of Solomon

II. Approaching the Divided-Kingdom Story III. The Division of the Kingdom IV. The Dynasty of Omri V. Elijah’s Confrontation with Ahab and Jezebel

VI. Jehu to Jereboam II (842–746 B.C.E.) VII. The Destruction of the Northern Kingdom

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146 Chapter 7 ‱ The Division of the Monarchy I

CHAPTER OVERVIEW

The book called 1 Kings opens with David on his deathbed, while the members of his family and his officials struggle to determine who will succeed him on the throne of Israel. Solomon won this struggle and began an ambitious reign, which included the development of foreign alliances and massive building projects. Once Solomon died, however, the Israelite monarchy was no longer able to hold itself together. This chapter includes the story of Solomon, the division of the kingdom after his death, and the line of kings who ruled over the northern nation after the division, until this northern kingdom was conquered and dispersed by the Assyrian Empire. The story of the Northern Kingdom of Israel in 2 Kings also includes an increasingly prominent and shifting role for prophetic figures, particularly Elijah and Elisha. A parallel account of the period of the Israelite monarchy is presented in 1 and 2 Chronicles. This account places more emphasis on the reigns of Solomon and David, often omitting material that reflects negatively on them, and it omits the story of the Northern Kingdom almost entirely.

THE REIGN OF SOLOMON

If Saul was a judge who tried to be king and David was an empire builder, then Solomon intro- duced Israel to the rule of a typical oriental despot.

Getting Rid of Potential Rivals

Solomon moved quickly to consolidate his power. Whereas David had nothing directly to do with the elimination of anyone who might have been his rival, Solomon had no qualms about dealing with his enemies. Adonijah was his first victim. When Adonijah asked Bathsheba to persuade Solomon to let him have Abishag, David’s last concubine, for his wife, Solomon found the wickedness in Adonijah that he had been looking for as an excuse to kill him. The request Adonijah made actually was an insult. David’s harem became Solomon’s responsibility on David’s death, even though the concubines probably were not viewed as Solomon’s wives, because his own mother was in the group. Adonijah’s request was his own death warrant (2:13–25).

Dealing with Abiathar was a more delicate matter. Not only was he a priest, but he had been David’s chief northern priest in tandem with Zadok, the chief priest from Judah. His execution would certainly alienate the northern tribes at a time when Solomon could ill afford to lose their support. By exiling Abiathar to Anathoth, Solomon still offended the northerners somewhat, but not to the extent of losing their support. The prophet Jeremiah probably was a descendant of Abiathar (2:26–27).1

Solomon probably considered Joab his most dangerous rival. Even though he was old, Joab was a cunning and ruthless man who had managed to hold power in the army even when David tried to get rid of him. But his luck had run out. Solomon was just as ruthless as Joab, or more so. He ordered Joab’s execution. When Joab fled to the sanctuary for refuge and refused to come out, Solomon defied the taboo against killing anyone in the sanctuary. He ordered Joab killed even as he held onto the horns of the sacred altar. His executioner, Benaiah, the son of Jehoida, took Joab’s place as general over the armies of Israel (2:28–35).

The last to be dealt with was Shimei, who was placed under a form of house arrest that forbade him to leave the city of Jerusalem. Shimei observed the rules for three years, but when one of his slaves ran away, Shimei went after him. Solomon had not forgotten—Shimei died (2:36–46).

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Chapter 7 ‱ The Division of the Monarchy I 147

Solomon, the Wise One (1 Kings 3:1–28; 4:29–34)

The Israelite historian, in his evaluation of Solomon as a religious man, could not be quite as complimentary as he was about David. Perhaps he was hinting at one of the obstacles to Solomon’s devotion to the LORD when he mentions his Egyptian wife. She and other of his wives influenced him to worship pagan gods.

In describing a prayer offered by Solomon, the narrator tells of the LORD appearing in a dream and telling him to ask what he should be given. Instead of asking for great riches, Solomon asked for wisdom to govern his people. The LORD, in turn, promised both wisdom and riches (3:1–15).

An illustration of Solomon’s wisdom is the famous story of the two women who claimed the same child. After the women argued before him, Solomon ordered the child cut into two pieces, one piece to be given to each woman. One woman agreed, but the other asked Solomon to spare the child and give it to the other woman. The assumption of the story, and of King Solomon in the story, was that the woman who objected to killing the child was the true mother, and so Solomon awarded the child to her (3:16–28).

A summary statement concerning Solomon’s wisdom describes Solomon as wiser than all the eastern wise men. He was a speaker and collector of proverbs, a zoologist and a biologist, and

FIGURE 7–1 “Joab fled to the tent of the LORD and grasped the horns of the altar” (1 Kings 2:28). The “horns of the altar,” as illustrated by this tenth century B.C.E. limestone altar from Megiddo, were supposed to keep a fugitive safe as long as he clung to them. This did not happen in Joab’s case. Courtesy of the Israel Antiquities Authority.

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148 Chapter 7 ‱ The Division of the Monarchy I

a marvel to all who heard him (4:29–34). The queen of Sheba came from North Africa (Ethiopia) to marvel at his wisdom. Ethiopian tradition has it that she carried away more than wisdom, since later Ethiopian rulers were called in part, “the Lion of Judah” (1 Kings 10:1–10). According to leg- end, the first emperor of Ethiopia, Menilik, was the son of Solomon and the queen of Sheba, and he took the Ark of the Covenant to Ethiopia, where many believe it still resides.2

Solomon, the Organizer (1 Kings 4:1–28)

In organizing the kingdom, Solomon seems to have had two purposes in mind: (1) to divide the land as evenly as possible to provide for the systematic support of his elaborate court and for other taxation purposes and (2) to break down the old tribal distinctions by paying little or no attention to tribal lines when dividing the country into tax districts. In his first purpose, he suc- ceeded; in the second, he failed.

Solomon, the Builder

David built an empire by conquest, but Solomon covered it with buildings. Of all the building projects carried on by Solomon, the Temple at Jerusalem ranked first in importance for the Israelite historian.

THE BUILDING OF THE TEMPLE (1 KINGS 5:1–38; 7:15–51). To build as Solomon was said to have done takes skilled workmen and quality materials, neither of which was abundant in Israel. The one thing that Israel had in abundance was stone, but it lacked the forests to supply the needed wood.

To provide the needed materials and skilled workmen, Solomon turned to David’s ally, Hiram, king of Tyre and Phoenicia. Hiram agreed to supply cedar and cypress wood, as well as skilled workmen, to carry out the building of the Temple and the palace complex in Jerusalem. In turn, Solomon agreed to supply food to Hiram. Solomon also furnished Israelites to do the labor of cutting the wood and quarrying the stone in Israel. Israelite men had to work without pay for the state, one month out of every three.

Like Jerusalem itself, the Temple—first built by Solomon, then destroyed, then rebuilt again in the post-Exilic period, and built a third time by Herod the Great—has managed to seize the imaginations of countless people for nearly 3000 years. Its remains, except for portions of the wall that supported the platform on which it was built, under an area containing two Islamic mosques—the Dome of the Rock and the Al-Asqa Mosque. As a result, archaeological work on the Temple Mount is forbidden.

By taking the biblical description, however, and comparing it with similar temples found in Israel and Phoenicia, a fairly accurate idea of the Temple’s appearance can be gained. One such building was a Canaanite temple found at Hazor in northern Israel. It had the three-room plan used in the Jerusalem Temple. A later temple, from the period of the Israelite monarchy, was found at Arad, south of Jerusalem. In addition, a horned altar, like the one mentioned in the Old Testament, was found at Beersheba (1 Kings 1:50–2:28).

In 1 Kings 6:1, it says that the Temple was built 480 years after Israel left Egypt. This poses a problem in chronology, because it does not agree with other evidence for the date of the Exodus. One possible explanation is that the figure 480 represents twelve generations. Biblical writers fig- ured a generation as 40 years, while today, 25 years equals a generation. If this were the case, twelve times 25 equals 300 years, which would place the Exodus at about 1300 B.C.E.

According to all descriptions, both biblical and archaeological, the Temple was divided into three parts: (1) a porch or vestibule, 15 feet deep and 30 feet wide; (2) the Holy Place, 60 feet long

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Chapter 7 ‱ The Division of the Monarchy I 149

FIGURE 7–2 A sixteenth-century engraving depicts Solomon’s temple with the horned altar in the center and the Holy of Holies beyond it.

and 30 feet wide; and (3) the Holy of Holies, which was a perfect cube—30 feet long, 30 feet wide, and 30 feet high. The interior height of the rest of the building was 45 feet. Along the outside of the building were three levels of rooms, used for storage and other purposes. The interior of the building was decorated with elaborate carved woodwork. Gold also was used extensively in deco- rating the interior (6:1–36).

The Holy Place contained three principal items: the altar for incense, the seven-branched lamp stand, and the table for the sacred bread (shew bread, or bread of the presence). In later times, the lamp stand became a seven-branched candlestick called a menorah.

The Holy of Holies originally contained the sacred box, the Ark of the Covenant. At either end stood a winged creature 15 feet high. It was carved from olive wood and plated with gold. It probably had both human and animal features, designed to represent all living creatures giving praise to the LORD, whose dwelling place was the Holy of Holies. Once a year, on the solemn Day of Atonement (Yom Kippur), the High Priest would enter the Holy of Holies. Even he had to undergo an elaborate ceremony of cleansing before he could enter the room. His purpose was to bring before the LORD the sins of the people so that they might be forgiven. Thus, the Holy of Holies represented for Israel the meeting place between God and humankind.

In the Temple courtyard stood the great altar made of uncut stones upon which the sacri- fices were made. Two huge bronze columns, named Jachin and Boaz, stood to the north and south of the entrance of the Temple. Their meaning and purpose are unknown (7:15–22). An

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elaborate bronze bowl called the Molten Sea, resting on a base made from twelve bronze bulls, also stood in the courtyard. It held about 10,000 gallons of water and may have been a reminder of the watery chaos mentioned in the Creation story and of how God overcame it to create the world (7:23–26).

All the furnishings and equipment for the Temple were made by the Phoenicians. It should not be surprising, then, that the descriptions given in the Bible match things found in Phoenician temples. The major difference seems to be that Israel’s Temple contained no image of the Deity, while Phoenician temples contained many such images (7:27–51).3

THE DEDICATION OF THE TEMPLE (1 KINGS 8:1–66). After years of labor, the Temple was fin- ished. The first act of Solomon was to have the Ark of the Covenant moved into its permanent home, the Holy of Holies. It was moved with elaborate precautions and with many sacrifices being offered (8:1–13).

The address and prayer of Solomon (8:14–53) emphasized the importance of the covenant with David and the building of the Temple as carrying out Solomon’s responsibility in light of that covenant (8:14–26).

The Ark of the Covenant in the Old Testament

The Ark of the Covenant has often been an object of fascination for a variety of reasons. This object, which functions both as a container and as a portable Divine throne, comes and goes in the Bible. Below is a book-by-book list and description of how it appears.

Exodus—the ark is mentioned about twenty times in Exodus 25–40, which contains both God’s instructions to Moses about how to make it and a description of its construction.

Leviticus—the Ark is mentioned only once, in the description of the Day of Atonement rituals in Leviticus 16.

Numbers—the Ark is mentioned six times in descriptions of its care and movement by the priests, but it is not mentioned after Numbers 14:44.

Deuteronomy—the Ark is mentioned eight times, all in Chapter 10, where Moses is recalling the making and purpose of the Ark in a speech, and in Chapter 31, when Moses and the Levites pro- duce a “book of the law” and place it in the Ark.

Joshua—after its construction in Exodus, the Ark remains in the background for the next sev- eral books, but it becomes much more prominent in the book of Joshua, where it is mentioned more than twenty-five times, all in Joshua 3–8, as the Israelites cross the Jordan and begin conquering cities in the Promised Land.

Judges—the Ark is mentioned only once, in Judges 20:27, as an oracular object residing in Shiloh. 1 Samuel—the Ark is mentioned more than thirty times but only once after 1 Samuel 4–7, a

passage sometimes called the Ark Narrative. 1 Samuel 14:18 is the only time Saul makes use of it. 2 Samuel—the Ark is mentioned about twenty times, more than half of these concentrated in

2 Samuel 6, where David brings the Ark to Jerusalem. 1 Kings—the Ark is mentioned about a dozen times, all in the first eight chapters, where

Solomon is established as king, builds the Temple, and places the Ark in it. 1 and 2 Chronicles—of approximately forty remaining references to the Ark in the Old Testament,

all but two are in 1 and 2 Chronicles, mostly in passages that parallel those in Samuel and Kings. The last two references to the Ark in the Old Testament are in Psalm 132:8 and Jeremiah 3:16

as it seems to disappear into distant memory.

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FIGURE 7–3 David’s kingdom and the united monarchy. Artwork by Margaret Jordan Brown, from Mercer Dictionary of the Bible. © 1990, courtesy of Mercer University.

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152 Chapter 7 ‱ The Division of the Monarchy I

The prayer was a plea for the LORD to keep the Divine side of the covenant. The story in 1 Kings 8:27–30 is particularly important because it emphasizes what many Israelites forgot in later years—namely, that the LORD did not dwell only in the Temple in Jerusalem. No mere building could hold the LORD. The prayer lists the situations that would give rise to prayer: (1) sin against one another; (2) defeat in war because of sin; (3) drought; (4) famine caused by pestilence, mildew, or locusts; (5) foreigners who came to the Temple to worship; (6) holy war; and (7) sin against God. With each there was a plea for forgiveness based on the choice of Israel as God’s people (8:31–53).

In this section, then, the principle of the covenant was in operation. God, who gave the covenant, although not required to do so, was self-obligated to Israel because of Divine mercy. An Israelite could call on God to show mercy on his behalf when he came to God in repentance. One could not expect forgiveness without a proper attitude. This theme is repeated by the great prophets and is prominent in the book of Deuteronomy.

After the people were led in praise to the LORD, to conclude the dedicatory services, elabo- rate festivities were observed. The seven-day feast, held at the time of the feast of Tabernacles, sent away all those who came proud, happy, and filled with roast beef and mutton (8:54–66).

THE LORD APPEARS TO SOLOMON AGAIN (1 KINGS 9:1–9). After the dedication of the Temple, the LORD appeared to Solomon. The promise of the continuance of David’s line was made, but it was to be based on faithfulness to the LORD If Solomon and those who followed him turned away from the LORD, judgment would come upon Israel.

SOLOMON’S OTHER BUILDING PROJECTS (1 KINGS 7:1–12; 9:10–28; 10:14–29). Solomon spent even more time building an elaborate system of palaces and government buildings. Thirteen years were spent building his palace, which had several sections: (1) the House of the Forest of Lebanon, built almost entirely of cedar; (2) the Hall of Pillars; (3) the Hall of the Throne, where justice was administered; (4) Solomon’s house; and (5) the house of his Egyptian wife.

He also carried on other extensive building programs, including projects in Jerusalem, Gezer, Hazor, and Megiddo. At the latter three, identical city gates have been found. This would seem to indicate that the same architect planned and constructed all three. Each of these cities shows indications of other building programs during Solomon’s time. Elaborate shafts were con- structed to enable the people to reach the water supply. At Megiddo, for instance, stone steps led down into the shaft to a tunnel. This tunnel led to a water source outside the city wall.4

Another building project consisted of a fleet of merchant ships, based in the Gulf of Aqaba at Ezion–Geber. Here, the gulf reaches its northernmost point. Hiram of Tyre furnished the vital know-how, as well as sailors, to operate the fleet (9:26–28). The Phoenicians were the supreme sailors of the ancient world, while Israel, with no suitable ports, developed little interest in the sea, except in Solomon’s time. Trade probably was with countries along the coast of Africa and the Arabian Peninsula.

Solomon’s building projects were costly in more ways than one. For one thing, they cost him part of his empire. For all the work he had done, Hiram demanded payment in the form of territorial grants. Although Solomon gave him twelve cities in the Plain of Acre, Hiram was still unhappy. The name Cabul, possibly meaning “that is nothing,” was given to the region. Even then, Hiram had to pay him for the region. The remains of a fortress dating to the time have been found. It seems to have served as the administrative center for the area, whose local prod- ucts—wine, olive oil, and cereals—were collected and stored. That these cities belonged to the northern tribes probably did nothing to increase Solomon’s popularity there (9:10–14).5

The monetary cost was also great. Solomon got money from various sources, the most obvious of which was taxation. But that was not enough. He would also have collected tariffs

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from caravans that used the international highways, the Via Maris, and the King’s Highway. Another source of income was international trade. Among other things, Solomon traded horses and chariots. He seems to have been the middleman in the trade between Egypt and the Asian and Mesopotamian states. An elaborate description of Solomon’s luxuries (10:14–29) helps us to understand why so much money was needed in addition to the money for his build- ing programs.6

The Seeds of Division (1 Kings 9:15–23; 11:1–43)

The greatest cost of maintaining Solomon’s elaborate kingship was in human freedom. That cost eventually would destroy the united monarchy. Slavery made the building projects possible. It is said that “Solomon conscripted forced labor out of all Israel” (5:13) and that the non-Israelite population was enslaved to carry on the building projects (9:15, 20–23). In so doing, Solomon sowed the seeds of social unrest that eventually would erupt in rebellion. It is said that the Israelites were “the soldiers, . . . his officials, his commanders, his captains, and the commanders of his chariotry and cavalry” (9:22). Although it says that “of the Israelites Solomon made no slaves,” they did have to give one month out of every three in free labor for the state.7

Another divisive force was Solomon’s large harem. Composed of more than 1000 women, the harem functioned primarily as a status symbol. Just as a wealthy man today may collect ex- pensive automobiles as a way of showing off his wealth, so some kings collected beautiful women. With the women, many of whom were married to Solomon to symbolize a covenant relationship with a foreign ruler, came the various deities they worshiped. Solomon’s tolerance of foreign gods did not sit well with devout Israelites, especially when he built altars for these gods and even par- ticipated in worshiping them in defiance of the LORD’s commands (11:1–13).

Solomon’s last years saw the seeds of destruction begin to take root and grow. People on the fringes of his empire began to rebel and break away. First, it was Edom, led by Hadad, a member of its royal house who had escaped to Egypt when David conquered his country (11:14–22). Soon, Rezon, a Syrian leader, took control of Damascus (11:23–25).

More serious than either of these events were stirrings of rebellion within Israel itself. The old rivalry between Ephraim and Judah had been suppressed during David’s and Solomon’s time, but it still survived. Surviving with it was the belief that the LORD through a prophet should des- ignate a leader, not a dying king who passed on the kingdom to his son. Solomon, on the other hand, seems not to have had a prophetic advisor in his court, such as Nathan had been to David. Solomon most certainly would have encouraged the idea that the LORD’s covenant with David was more important than the idea that a prophet should choose the future king.

The charismatic figure around whom the dissidents rallied was Jeroboam, an Ephraimite who had been in charge of all of Solomon’s forced labor. A prophet who also was a northerner, Ahijah the Shilonite, met Jeroboam one day. Taking a cloak, Ahijah tore it into twelve pieces to symbolize that an emergency existed. Ten of the pieces he gave to Jeroboam, telling him he was chosen to be leader over ten tribes, leaving only two to Solomon’s house. Ahijah said that the LORD was bringing judgment upon Solomon for following foreign gods (11:26–40). Ahijah was the first independent prophet who participated in an attempt to overthrow an existing ruler who had become intolerable to the people.8

Word came to Solomon of Jeroboam’s disloyalty. Fortunately for Jeroboam, he was able to escape to Egypt before Solomon could have him arrested, where he found refuge. Shishak, the new Pharaoh of Egypt, seems to have encouraged and protected Jeroboam, as he had other rebels and fugitives from Solomon (11:40).

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The Literary Structure of Chronicles

The book of Chronicles is perhaps the most neglected book in the Old Testament. It is a story of Israel that lives in the shadow of that other story of Israel told in the books of Genesis–Kings, the Primary History. It is true that more than half of the contents of Chronicles appears in Samuel and Kings, which invites readers to look at them in parallel fashion and compare the way certain stories are told and used in each. Chronicles was almost certainly written after Samuel and Kings, so it can be assumed that the writer of Chronicles used the earlier history as a source, and that much can be learned of this writer’s thinking and purpose by closely examining the differences. The result of these patterns of study is that the book of Chronicles is rarely read as a unified work of literature in its own right. Originally a single book, Chronicles is now typically divided into 1 Chronicles and 2 Chronicles. These designations will be used when necessary for references below.

The book of Chronicles opens in a surprising way. The first word in the book is Adam. The second word is Seth. The first nine chapters of 1 Chronicles are almost entirely genealogical in nature. The part of Israel’s story from creation through the beginning of the monarchy is covered in a very rapid manner through this genealogical material. The story slows down slightly to tell about Saul and his family in Chapter 10, but it is David who finally receives full attention beginning in Chapter 11. As the story of David moves toward its conclusion, the attention of Chronicles turns to the temple in 1 Chronicles 22–29. Brief attention is given to priestly offices in 1 Chronicles 9, so that the rise of David and the monarchy is surrounded by issues of worship. 1 Chronicles ends with the death of David. Solomon has been anointed king and is fully prepared to begin construction on the Temple. The building of the Temple occupies the first seven chapters of 2 Chronicles. The report of the construc- tion of this dwelling place for God matches the creation of the world and the development of Israel in the first part of 1 Chronicles. It is followed in 2 Chronicles 8–9 by the report on the remainder of Solomon’s career and his death.

Second, Chronicles 10–36 describes the reigns of the rest of the kings of Judah after Solomon. Chronicles is even less interested in the northern kingdom of Israel than are Samuel and Kings. The pattern is one of general decline until the destruction of the Temple in Chapter 36. The exceptions to this pattern of decline are the reforms mounted by certain kings, such as Jehoshaphat, Hezekiah, and Josiah, which receive extended attention. The resulting story in the book of Chronicles thus highlights the establishment of institutions, the Israelite monarchy and the Jerusalem Temple, and the lives of the two great kings, David and Solomon, in alternating fashion. The story of the decline of these in- stitutions then offers a paradigm for their reestablishment.

Finally, considerations of Chronicles as a literary work are complicated by its relationship to Ezra–Nehemiah. The last few verses of Chronicles present the Decree of Cyrus, which released the Is- raelites from captivity and authorized them to return to Judah. The opening verses of Ezra are a somewhat different version of this decree. The overlap connects these books in a way that is difficult to determine. The books of Chronicles and Ezra–Nehemiah are sometimes referred to collectively as the Chronistic History. The Hebrew canon places Chronicles at the very end, with Ezra–Nehemiah actually preceding it, a decidedly nonchronistic move. The Christian canon reverses the order of these books and moves them to the middle of the canon, immediately following Kings. This emphasizes the notion that Chronicles is secondary to Samuel and Kings, a perception from which Chronicles continues to suffer.

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The End of Solomon’s Reign (1 Kings 11:41–43)

After forty years of magnificence, Solomon died. He had acquired wealth, built buildings, and gained fame for his wisdom. It was during Solomon’s time, furthermore, that Israelite literature began to flourish. Wisdom literature undoubtedly was rooted in Solomon’s reign, making him the patron saint of Israelite wisdom. The long period of peace possibly saw the first attempts to write down Israel’s history. A good example of such an attempt may have been the Court History of David. Others have conjectured that the stories of the Egyptian oppression took form then be- cause of Solomon’s oppression.9

But Solomon also lit the fuse for the bombs that would soon blow the kingdom apart. Excessive taxation, denial of human freedom, and religious apostasy were but a few of the prob- lems left for Solomon’s egotistical son and successor, Rehoboam, to solve. Rehoboam, unfortu- nately, was so self-centered that he did not even realize that any problems existed.

APPROACHING THE DIVIDED-KINGDOM STORY

Northern and Southern Perspectives

One problem in studying the divided monarchy is how to organize it. The books of 1 and 2 Kings combine the histories of the two kingdoms in order to compare the beginning of one king’s reign with that of his counterpart in the other kingdom. Because this is somewhat confusing to the reader, in this discussion their histories will be divided as follows: This chapter will discuss the history of the Northern Kingdom (Israel) from the breakup of the united monarchy to the fall of Samaria in 721 B.C.E. Chapter 8 will deal with the history of the Southern Kingdom (Judah) from the breakup through the fall of Jerusalem to the Babylonians (586 B.C.E.). 10

As the previous chapter described, the Bible contains two great historical narratives that run parallel to one another, the Primary History in Genesis–2 Kings and the Chronistic History in 1 and 2 Chronicles. The two accounts of Israel’s story run in particularly close parallel beginning with David’s reign. For example, the story of the division of Israel into the Northern and Southern Kingdoms, which will be the starting point for this chapter, is reported in identical fash- ion in 1 Kings 12:1–19 and 2 Chronicles 10:1–19. The most significant difference between the ac- counts of the divided kingdom in 1 Kings 12–2 Kings 24 and 2 Chronicles 10–36 is that the latter will give no attention to the Northern Kingdom, unless its activities have a direct impact on the story of the Southern Kingdom.

Chapter 6 reported on what is often called the united monarchy, as opposed to the divided monarchy after the death of Solomon. It is important to acknowledge that even within the bibli- cal account of this story, the kingdom is never fully united. Hints of the fracture between north and south run throughout the accounts of the “unified” reigns of Saul, David, and Solomon in texts like 1 Samuel 11, 2 Samuel 2, and 1 Kings 11.

The Problem of Chronology

If one reads several books about the Old Testament, one may find different dates for the same person or event. The reason for this is that biblical calendars, unlike modern calendars, followed no universally accepted starting point. Today, the calendars of the Western world use the a medieval approximation of the date of the birth of Jesus as the starting point, a hypothetical “year one.” In the ancient world, every nation had a different way of figuring dates. For the Israelites, time was figured from the beginning of a king’s reign. Thus, a given event was said to have occurred “in the

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eighth year of King Hezekiah.” How do we know when the eighth year of King Hezekiah was by our way of reckoning time?

It is necessary to pinpoint a few key dates in the history of Israel and calculate from them. Fortunately, the Assyrians and Babylonians kept accurate calendars based on the rule of their kings, which always began on the first day of the new year. Their method was to name each year after a different court official to keep it separate. In addition, important events were recorded for each year. For scholars, the most important events used for dating are eclipses, the mention of contacts with the Israelite kingdoms, and the mention of specific Israelite rulers. As a result, at least two key dates, 853 B.C.E. and 605 B.C.E., can be established. The first was the battle of Qarqar, involving the troops of Ahab, king of Israel. The mention of an eclipse within a few years of this battle is important because, if one knows where it occurred, an eclipse can be dated with preci- sion. Qarqar is not mentioned in the Old Testament but Ahab is, so the time of his reign can be pinpointed. The same is true of the battle of Carchemish in 605 B.C.E. The records mention Jehoiakim, king of Judah. An eclipse again was the vital clue to the date.

This does not solve all the problems, but it helps. The Israelites were not always arithmeti- cally precise in recording the length of a king’s reign. For instance, Uzziah was said to have reigned for fifty-two years. Yet, when he developed leprosy, his son Jotham came to the throne as his coregent and reigned for sixteen years. In reality, the total time was somewhere between fifty- two and fifty-six years, depending on the date of Uzziah’s death. This creates difficulties for one working on chronologies and is the major reason why dates vary from one scholar’s scheme to another. Most authors pick what seems to be the best chronology and stay with it.

THE DIVISION OF THE KINGDOM

Rehoboam’s Choice (1 Kings 12:1–19)

After the deat of Solomon, internal strife was not long in coming. Solomon was powerful enough to keep things under control as long as he lived; but his successor, Rehoboam, lacked the sound judgment needed to deal with the problems he inherited from his father.

After his coronation in Jerusalem, Rehoboam went to the old northern shrine at Shechem for another coronation by the northern tribes. The people appeared before him and asked for relief from the harsh requirements laid on them by Solomon. Rehoboam, instead of taking the advice of his senior counselors to lighten their burdens, listened to his younger friends. His arrogant answer was that if they thought things had been harsh under Solomon, they had not seen any- thing harsh yet (12:1–11).

The northern tribes, led by Jeroboam, revolted. Rehoboam tried to put down the rebellion by sending his labor foreman to threaten the people. They killed him by stoning, and Rehoboam barely escaped in his chariot. Thereafter, the kingdoms would be known as Israel and Judah. (From this point on, when discussing the two kingdoms, kings of Israel will be identified with [I], while kings of Judah will be identified with [J].)

Jeroboam’s Reign (1 Kings 12:20–14:20)

Jeroboam was installed as king of the northern tribes, leaving only the tribe of Judah and perhaps the tribe of Benjamin under Rehoboam’s control (12:20). Rehoboam raised an army to take back the northern territory, but a prophet named Shemaiah warned that such an attempt would be futile.

Jeroboam got the better part of the kingdom by almost any standard. Israel, stronger econom- ically, had a larger population, controlled the major roads, and had the best and most productive

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FIGURE 7–4 The excavated ruins of the ancient city of Bethel where, according to 1 Kings 12:28–29, King Jereboam set up two golden cows as a worship site for the Northern Kingdom of Israel.

land. Its greatest weakness was the instability of its government. No consistent way had developed for making the transition from the rule of one king to another. Israel’s material assets also made it more attractive to outside powers, to which Israel was accessible by its roads. Judah, on the other hand, had the poorest land and a smaller population. It was isolated, which made it less at- tractive to invaders. Its greatest assets were Jerusalem, with its already rich traditions, and the Davidic monarchy, which assured stability in government.

While reading the history of the divided kingdom, one must be aware of certain things. First, the writers were from Judah, and they admired David. Because Israel opposed the Davidic monarchy and the Davidic covenant, the historians had negative feelings about any- thing connected with the Northern Kingdom. Second, Jerusalem (to the Deuteronomic histo- rians) was the only place where true worship could be performed. When Jeroboam led the revolt and set up worship centers at Dan and Bethel, he chose golden calves to replace the Ark of the Covenant as the symbol of the LORD’s throne. For this reason, Jeroboam was considered a worshiper of false gods by the religious leaders of Judah, and all who followed Jeroboam were put in the same category.

By choosing calves as symbols of the throne of God, Jeroboam chose the symbol of Hadad, the chief god of the Baal religion (12:25–33). This brought down on him the wrath of the prophets. A Judean prophet came to Bethel and pronounced the LORD’s judgment upon it (13:1–3). Jeroboam tried to punish the prophet, but paralysis struck him and caused him to back down. Then, he offered to pay the prophet, but the prophet refused (13:4–10).

On his way back to Judah, the prophet was stopped by another prophet who invited him in for a meal. The Judean refused, saying that the LORD had told him not to eat in Israel. The Israelite persuaded him to do so by telling him that he had a message from the LORD that he should eat.

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While they were eating, the Israelite told the Judean that he would be killed for disobeying the LORD. When the prophet was killed by a lion, the Israelite buried him and commanded that he, too, should be buried in the same tomb (13:11–32).

As further evidence of the LORD’s displeasure with Jeroboam, the prophet Ahijah told Jeroboam’s wife that their son Abijah would die. He said, furthermore, that Jeroboam’s dynasty would be replaced. All this is an indication of the important roles that prophets played in relation to the kings of both Israel and Judah. When Jeroboam died, he was succeeded by Nadab, another of his sons (13:33–14:20).

The Succession of Kings in Israel after Jereboam (1 Kings 15:25–16:20)

After the death of Jeroboam, Israelite kings came and went with surprising rapidity. The biblical text contains no description of a selection process or anointing ceremony, and provides little detail about the reigns of these kings. This passage functions much like some of the geneologies in Genesis, as a literary “fast-forward” mechanism for the author to get to a more significant part of the story. The following is a summary of this turbulent time:

King Period of Reign Fate

Nadab (901–900 B.C.E.) Murdered by Baasha

Baasha (900–877 B.C.E.) Died naturally

Elah (877–876 B.C.E.) Murdered by Zimri

Zimri (876 B.C.E. [7 days]) Suicide provoked by Omri

Omri (876–864 B.C.E.) Succeeded by his son

THE DYNASTY OF OMRI

Israel and Its Neighbors

Israel and Judah had been fortunate to survive the first fifty years following the collapse of the united monarchy in 922 B.C.E. The key to their survival came from the outside, because Egypt was powerless and no one state had achieved dominance in Mesopotamia. For a brief time, it seemed that the quiet period would end when Assyria, led by Asshur-nasirpal (884–860 B.C.E.), rose to power and pushed all the way to the Mediterranean. His conquests probably did not reach as far south as Israel, nor were they permanent. He set a standard for cruel treatment of captives that other Assyrian rulers tried to emulate. In one inscription, he said of his captives,

I flayed as many nobles as had rebelled against me [and] draped their skins over the pile [of corpses]; . . . some I erected on stakes on the pile. . . . I flayed many right through my land [and] draped their skins over the walls.11

Because of such cruelties, the Assyrians were the most dreaded conquerors in the ancient Near East. The more immediate problem for Israel was its relationship with Syria (called Aram in the

Hebrew text). Ben-Hadad, whose reign extended from about 884 to 842 B.C.E., was strong enough to be a constant problem to Omri and his son Ahab. As a result, the two small countries alternated between being at war and being allies. When no one else threatened them, they fought each other. But whenever a threat arose from Assyria, they joined forces for mutual protection.

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FIGURE 7–5 King Omri of the Northen Kingdom of Israel established his capital city at Samaria according to 1 Kings 16:24. This photograph shows the ruins of the palace likely used there by Omri and Ahab.

Omri also renewed with Phoenicia the old alliance that had been so profitable for both David and Solomon. To seal the covenant, Omri’s son Ahab was married to Jezebel, the daughter of the king of Tyre. This marriage would have far-reaching effects upon Israelite society and religion.

Israel’s relations with Judah changed for the better during the Omrid dynasty. The two kingdoms became allies, with Israel being the dominant party. To symbolize the union between the two kingdoms, Athaliah, who probably was Ahab’s daughter (2 Kings 8:18, 26), was married to Jehoram of Judah.

The Influence of Omri (1 Kings 16:21–28)

Omri (I, 876–869 B.C.E.), after overcoming brief opposition from another contender named Tibni, moved quickly to organize his kingdom along the lines of the Davidic and Solomonic kingdoms. He renewed old alliances, began building programs (which Ahab extended), and moved the capital from Tirzah to the hill of Samaria.

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This last accomplishment (1 Kings 16:23–24) showed something of Omri’s sense of judg- ment. From a military standpoint, the hill of Shemer, on which Omri and Ahab built Samaria, was an excellent city site. A century later, it would take the Assyrian army several years to capture it.

By Omri’s time, water was no longer the problem it had been because the Israelites had de- veloped the cistern in the tenth century. A cistern was an underground jug dug into the rock and plastered with lime to keep it from leaking. During the rainy season, runoff water was channeled into the cisterns to be stored for the dry months.

The ruins of Omri’s and Ahab’s palace have been found at Samaria. The exceptionally fine masonry work enclosed an area 582 feet long by 424 feet wide. The palace, which Ahab built for Jezebel, was 89 by 79 feet. In this palace were found many ivory pieces fitting the description in 1 Kings 22:39 as “the ivory house that he built.” During the Omri–Ahab years, extensive building programs were carried out in other cities, including Megiddo.12 Omri’s power and influence can also be seen in the fact that, many years after his death, Israel was known in Assyrian records as “the land of Omri.” The Moabite Stone (found in 1868) also gives an account of how Moab was conquered by Omri and lists the annual tribute or bribe the Moabites had to pay to Israel. Mesha, the king of Moab who erected the stone, threw off Israelite control during Ahab’s wars with Syria.13

Despite Omri’s achievements, the biblical writer only mentions that he built Samaria and that “he did more evil than all who were before him” (1 Kings 16:25–28).

The Reign of Ahab (I, 869–850 B.C.E.) (1 Kings 16:29–22:4)

As far as the biblical writer was concerned, the news about Ahab was bad—first, last, and always. He was worse than his father, Omri (16:30). He married Jezebel, an ardent worshiper of the Canaanite god Baal, and he worshiped her gods. He also built altars to Baal and made an idol to represent Asherah, Baal’s mistress. The implication is that he gave approval to human sacrifice as part of worship (16:31–34).

Aside from the Bible, Ahab, in purely secular terms, was a much more impressive ruler. As excavations at Megiddo, at Samaria, and now at Dor on the coastal plain attest, Ahab was a prodi- gious builder, “the greatest of the builder kings between Solomon and Herod.” What once were thought to be Solomon’s stables at Megiddo are now credited to Ahab. In the military realm, Ahab was able to supply 2000 war chariots for the western alliance against Shalmaneser III at the battle of Qarqar.14

Elijah Among the Prophets

Elijah was not the first prophet, but he significantly expanded the role of the prophetic figure, andin later Jewish tradition, he became the symbol of the ideal prophet, as Moses was the symbol of the ideal lawgiver (Luke 9:30, 33). Before examining Elijah, it may be helpful to look at the whole idea of prophecy as it was practiced in Israel and Judah in the time of the monarchy. (In this discussion, the term Israel will apply to all the people, north and south, not just those of the Northern Kingdom.)

Israel was not alone in having prophets. Balaam (Num. 22:1–24:25) was not an Israelite, as both the Bible and a recently found inscription show.15 Mari, a city in northern Mesopotamia, had prophets who gave oracles (sayings) in much the same manner as the Israelite prophets.16,17

Furthermore, as later discussions will show, not all Israelite prophets were admirable men. Some simply were “yes men” to the kings. But the true prophets of Israel were in a class by themselves.

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Canaanite Fertility Religion

One of Israel’s major problems from the day it entered Palestine was what to do about the Canaanite culture and religion. The harsh demands for a holy war were one attempt to deal with the problem. Israel’s leaders were intelligent enough to know that the sexually oriented religion of the Canaanites would make the more demanding requirements of the worship of the LORD harder to live by. For this reason, the uncompromising demands of the holy war, if carried out, would eliminate not only the re- ligious shrines, but all who taught the religion.

But although holy war may have been practiced occasionally, it was not on a large scale. Israel failed to conquer the land completely. Instead, the Canaanites were absorbed into the population, even when Canaanite lands were taken. With the Canaanites came their culture and religion.

Imagine what it would be like to be Sam Israelite, who comes from the desert fringe, where his principal occupation has been that of a shepherd. Suddenly, he finds himself in possession of a house and land of his own. He is now a farmer. He plants his crops, but they fail. He has a Canaanite neigh- bor who plants his crops and they produce abundantly.

He goes to his neighbor, Joe Canaanite, and says, “Say, Joe, how is it that your barley looks so much better than mine?”

Joe answers, “Why, Sam, the problem with your crops is that you worship the wrong god. Your god was okay when it came to warfare, but he is just not experienced at growing crops. Come with me tomorrow to the shrine of Hadad. We are having our spring fertility dance and, man, are those temple girls beauties. After all, Baal really knows how to make that barley grow!” It is not hard to imagine what many Israelite men would have done in that case.

It was this religion that Jezebel was so ardently promoting in Israel. She also donated money to it. In the court alone, there were 450 prophets of Baal and 400 prophets of Asherah (1 Kings 18:19). Baalism threatened to sweep over the land, but one man—the prophet Elijah—stemmed the tide.

Three Hebrew terms are used to describe the prophets. Two of them, ro’eh and hozeh, are often translated as “seer.” The third word is navi’, which probably meant “one who speaks for an- other.” Thus, Aaron was the navi’ for Moses, because he was the one who spoke for Moses (Exod. 7:1). Moses, of course, was also desgnated as a navi’, because he spoke for God (Deut. 34:10). Seer was a term used earlier to describe the prophets, but by the time of the great prophets in the eighth to sixth centuries B.C.E., it was more of a derogatory term.

Two other related terms used to talk about prophets and prophecy in the ancient Near East were ecstatic and diviner. Ecstatics were prophets whose prophecy came as part of an altered phys- ical state, such as a trance or a frenzy. This was what was meant when Saul was described as being among the prophets (1 Sam. 10:10–13). Ecstatic prophets did strange things and had strange ex- periences. Diviners, on the other hand, read the signs of nature, such as the patterns of the clouds or the patterns of the internal organs of animals, somewhat like the reading of palms or tea leaves today. None of the great prophets were diviners in this sense of the word, but a number of them (especially Ezekiel) did have some characteristics of the ecstatics.

Up until the time of Elijah, most of the prophets mentioned in the story of the Israelite monarchy held official positions as royal advisors. Samuel, Gad, and Nathan often provided di- vine counsel for Israel’s early kings. At a later point, Isaiah also functioned in this role. Of course, their work could include confronting the king about disobedient behavior, such as Samuel did

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with Saul (1 Sam. 13:8–15) and Nathan did with David (2 Sam. 12:1–15). Elijah, however, is por- trayed as a prophet entirely outside of the palace. His interactions with royal leaders were only confrontational, and they did not seek his advice. Thus, Elijah separates the institutions of palace and prophecy, and creates a distinct and independent role for prophets in the story of Israel.

These characteristics marked Israel’s prophets:

1. They claimed to speak for God, often introducing their sayings with formulas like “Thus says the LORD.”

2. They were courageous persons, unafraid to deliver their message, regardless of the personal danger involved.

3. They were moral persons who preached a message that demanded the highest moral living from their hearers.

4. They were compassionate persons, sensitive to the difficulties of the poor and the oppressed. 5. They were sensitive persons, aware of what was happening in the world around them and

convinced that the LORD was in control of events.

Two other common misunderstandings of Old Testament prophets need to be mentioned. First, the prophets were primarily concerned with their own time and what was about to happen to their people. The desire to turn their messages into elaborate and esoteric predictions about the distant future can often obscure the meaning of what they were saying. Their message has meaning for later generations, including ours today, because they were applying divine principles to the human problems they saw right in front of them. This is still the task of religion. Second, time was the sure test of the validity of a prophet’s message. Readers often look back on these sit- uations in the Old Testament and wonder how the audiences of the prophets ignored or misun- derstood such obvious messages, but many times it was very difficult to distinguish between the contradictory messages of two prophets. Naturally, the people often preferred the word of the prophet with the more positive message. The same problem is with us today.

ELIJAH’S CONFRONTATIONS WITH AHAB AND JEZEBEL

Although there is no book in the Bible that bears Elijah’s name, he is given more space in the Deuteronomistic History than any other prophet, including Isaiah and Jeremiah.

Elijah was a mysterious person. He would appear, give an oracle (pronouncement), and disappear. He was a prophet of doom and a man who could be both courageous and cowardly. His first confrontation was with Ahab. He appeared before Ahab to tell him that there would be a three-year drought in Israel. The point was that Baal, whom worshipers claimed could bring rain, was to be challenged at his own game (17:1). Elijah finished his immediate task and returned to the eastern side of the Jordan, where he was in familiar territory and safe from Ahab’s clutches (17:2–5). When the drought began to devastate the Transjordan, Elijah, at the LORD’s command, went to Phoenicia, where he stayed with a widow and her son. The presence of the man of God in her home brought prosperity to her and restored her son to life after he died (17:8–24).

Things were bad in Israel—so bad, in fact, that the king himself went out looking for water for the royal animals. Accompanying Ahab was Obadiah. Unknown to Ahab and Jezebel, during a purge by Jezebel, Obadiah had been responsible for saving one hundred prophets of the LORD (18:1–6).

When Obadiah and Ahab separated to increase their chances of finding water, Obadiah met Elijah. Elijah asked Obadiah to tell Ahab that he wanted to see him. Obadiah was afraid that if he did, Elijah would disappear again. Finally, Obadiah was convinced and agreed to do as Elijah asked (18:7–16).

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FIGURE 7–6 “Ahab took as his wife Jezebel . . . and went and served Baal, and worshiped him” (1 Kings 16:31). Baal was the god of the storm, and thus the god of fertility, since water was essential for the growth of crops. This stele (stone monument) of Baal, which is from the nineteenth or eighteenth century B.C.E., is from Ras Shamra. It shows the god holding a bolt of lightning.

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King and prophet confronted each other, each accusing the other of being a “troubler of Israel.” Then Elijah issued a challenge: Bring the people and all the Baal prophets to Mount Carmel for a test of strength (18:17–19).

Ahab took up the challenge and did as Elijah proposed. Mount Carmel was an ancient wor- ship site, a mountain that juts out into the Mediterranean Sea on Palestine’s northern coast. Its height causes clouds blowing in from the sea to release their moisture, so that the vegetation stays green longer there than in any other place in Israel. The sure sign of severe drought was when the vegetation on top of Mount Carmel withered (Amos 1:2). Thus, it was a favorite shrine for Baal worshipers. Like Moses’ challenge to Pharaoh by the Nile, Elijah was issuing a challenge from the LORD to play the contest on Baal’s home court (18:20).

The people gathered. Elijah challenged them to follow either Baal or the LORD. Then he challenged the 450 Baal prophets to prepare a sacrifice. They were to call on Baal to ignite the fire, as he was the god of storm and fire (lightning). Elijah would do the same thing and would call on the LORD. The god who answered by fire would be the winner. The people agreed and pledged to follow the god whose power was revealed (18:21–24).

The Baalites prepared their sacrifice and began a day-long ritual designed to evoke Baal’s response. Doing a sort of limping dance, they circled the altar crying, “O Baal, answer us!” Noon came, but there was no response from Baal. Elijah made sarcastic remarks and suggested that they were not crying loud enough, that Baal was meditating, relieving himself, traveling, or perhaps just sleeping. The frenzy among the prophets increased. They cut themselves, hoping that the flow of blood would cause rain to fall. “But there was no voice, no answer, no response” (18:25–29). The rain did not come. Baal had failed.

When evening came, the exhausted Baalites gave up their futile efforts. Elijah went into ac- tion. He built an altar, prepared the sacrificial bull (which, ironically, was the symbol of Baal), and then soaked everything thoroughly with water. Elijah’s prayer was simple:

“O LORD, God of Abraham, Isaac, and Israel, let it be known this day that you are the God in Israel, that I am your servant, and that I have done all these things at your bidding. Answer me, O LORD, answer me, so that this people may know that you, O LORD, are God, and that you have turned their hearts back.” Then the fire of the LORD fell. (18:36–38)

What happened on Mount Carmel? Some say that lightning appeared; others say that the water contained petroleum or gas. What happened really defies explanation, but it was a vital moment in the history of a people. The LORD had beaten Baal at his own game by bringing rain when Baal could not. Elijah took a practical approach to limiting the power of Baalism. He called upon the people, who seized the Baal prophets and killed them, even as Jezebel had killed the prophets of the LORD. Elijah did not stop Baalism completely, but he dealt it such a severe setback that it, at least, did not envelop Judah as much as it had Israel (18:30–40).

When the rains came, Ahab had to ride furiously to get down the mountain. Elijah showed his ability as a distance runner by outrunning Ahab’s chariot to Jezreel, some seventeen miles away. It was just a warm-up for his encounter with Jezebel (18:41–46).

Courageous Elijah soon became cowardly Elijah when Jezebel heard what he had done to her prophets. She sent him word that when she got her hands on him, it would be the end of him. Elijah decided that it was time for him to beat a hasty retreat.

Being an experienced runner, he lost no time in putting distance between himself and Jezebel. His servant could not keep up, so Elijah left him at Beersheba and continued south to- ward Sinai. In the wilderness, where he stopped to rest, he prayed to the LORD to take his life. Instead, he awoke to find food. After eating, he continued his journey (19:1–8).

J O H N S O N , O L I V I A 9 1 1 0

 

 

The Old Testament Story, Ninth Edition, by John Tullock and Mark McEntire. Published by Pearson Learning Solutions. Copyright © 2012 by Pearson Education, Inc.

Chapter 7 ‱ The Division of the Monarchy I 165

Arriving at Horeb (Sinai), Elijah rested in a cave. While he was there, the LORD appeared (theophany) with an accusing question: “What are you doing here, Elijah?” (19:9). Instead of an- swering the question, Elijah complained that he was the only faithful servant of the LORD left. Told to go stand on the mountain, he experienced wind, earthquake, and fire, but the LORD did not appear in any of the natural phenomena. Instead, in the quietness following the tumult, a still, small voice asked the same accusing question: “What are you doing here, Elijah?” (19:13). Elijah gave the same whining excuse (19:14). The answer came back: “Get up and get busy. There are seven thousand people in Israel who are still faithful” (19:9–18). On his return, he found a new disciple named Elisha (19:19–21).

The most dangerous enemy Ahab had was Ben-hadad of Syria. Warfare between the two kingdoms was frequent, each side winning some and losing some. Ben-hadad laid siege to Samaria and took tribute, as well as Ahab’s wives and children. Ahab, on the advice of an unknown prophet, launched a surprise attack and routed the Syrians. Later, in a battle at Aphek in Transjordan near the Sea of Galilee, Israel defeated Syria and took Ben-hadad prisoner. He pleaded for his life and agreed to grant Ahab business concessions in Damascus. Ahab agreed to let Ben-hadad go. The un- known prophet rebuked the king for freeing Ben-hadad to fight again. The prophet had seen the war as a holy war in which Ben-hadad should have been killed (20:1–43).

Naboth’s story illustrates the changes that were taking place in Israel. On the surface Ahab’s offer to buy his land seems fair, but Naboth’s refusal to sell illustrates the strong sense of respon- sibility that Naboth had to preserve the family inheritance for his children. It was a legacy to be passed on from generation to generation.

When Naboth refused, Ahab went home and sulked. Jezebel found out the cause of his un- happiness and set out to get Ahab what he wanted (21:1–7).

Skillfully using the law to the advantage of the royal house, Jezebel bribed the village elders to call a meeting of the group, of which Naboth probably was a member. Then she hired two of the most dishonest witnesses that money could buy to swear that they had heard Naboth curse God and the king. Two witnesses were required by the law to prove any charge (Deut. 17:6). The penalty for blasphemy (cursing God) was death by stoning. After Naboth was accused, tried, and convicted, the sentence was carried out (21:8–14). To compound the tragedy, Naboth’s supposed crime also made his sons liable to the death penalty, thus effectively eliminating any heirs for the property within his family (2 Kings 9:26).

The story of Naboth’s land illustrates two important matters: (1) the role of the prophet as the conscience of the nation and (2) the transition of Israelite society from a nation of small, in- dependent landowners to one in which most of the land was owned by a few wealthy men. This left the rest of the population more or less at the mercy of the rich.

With the last obstacle out of the way, Ahab took over Naboth’s land. When he went to in- spect it, however, the first person he saw was Elijah. Elijah pronounced the LORD’s judgment upon Ahab and his family, and more specifically upon Jezebel. He said she would be eaten by dogs. This was the most disgraceful thing that could happen to a person. Ahab repented, but it stayed the ex- ecution for only a little while (21:15–29).

More Stories of Kings and Prophets

Before the incident described here, an important historical event had taken place. In 853 B.C.E., at Qarqar on the Orontes River in northwestern Syria, Shalmaneser III of Assyria fought against an alliance of western kings, including Ahab of Israel and Ben-hadad of Syria. They, along with other small kingdoms, patched up their differences long enough to face a common enemy. A measure

s strengths and weaknesses as a king?

2.What factors contributed to the negative reaction of the northern tribes to Rehoboam?

3.Why did the worship of Baal appeal to the Israelites so strongly?

4.Why did Ahab handle Elijah differently from the way Jezebel dealt with him?

5.How are the portrayals of Elijah and Elisha alike, and how do they differ?

6.What happened to bring an end to the hostilities between Israel and Judah?

7.Who was Athaliah? Why is she a significant figure in Israel’s story?

8.How did Judah manage to survive the Assyrian invasions that destroyed Israel and Syria in the later eighth century (745-721 B.C.E.)?

9.How did Hezekiah prepare for a possible invasion by the Assyrians during Sennacherib’s reign?

10.What possible physical evidence has been found to confirm Hezekiah’s reform?

11.What does Lamentations tell us about conditions in Jerusalem during the Babylonian siege?

12What were the three major groups of Israelites that formed in the wake of the Babylonian destruction, and how were they related to each other?

13.How did Cyrus’ conquest of the Babylonians affect the Jews in exile?

14.Assess the relative significance of Ezra and Nehemiah to the Jerusalem community.

15.How did Ezra and Nehemiah address the issue of foreign wives? Why?

 

 
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IRobot In 2019: Can The Company Keep The Magic?

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Identify the driving forces in the robotic vacuum industry. Which of these forces appears to be the strongest? Where does the industry appear to be headed as a result of these forces?

Select “yes” for those statements below that are accurate and choose “no” for those that are not.

a. The driving force of innovation and the resulting advanced features appeared to have the greatest influence on increasing demand in the robotic vacuum industry.

(Click to select) Yes No

b. Driving forces in the robotic vacuum industry include slow demand, shrinking differences among competitors, and lower prices.

(Click to select) Yes No

c. Government policy changes have impacted production of these innovative products.

(Click to select) Yes No

d. The robotic vacuum industry is in a maturity stage with demand and profits declining.

(Click to select) Yes No

e. Advanced features are especially powerful driving forces when coupled with a defensive strategy that slows or prevents emulation by rivals.

(Click to select) Yes No

f. The driving force of product innovation has been slow with consumers opting for less expensive products.

(Click to select) Yes No

 

 

Which of the following accurately characterize iRobot’s resource strengths and competitive capabilities?

Select “yes” for the strengths and capabilities that are accurate and choose “no” for those that are not.

a. iRobot enjoys a liquid financial position, a large amount of working capital, and ample financial resources to sustain its growth.

(Click to select) Yes No

b. iRobot’s brand is not as recognizable as its closest competitor.

(Click to select) Yes No

c. iRobot has accumulated a large portfolio of patents (1,000) worldwide, which covers the concept of a self-navigating household robot.

(Click to select) Yes No

d. iRobot has not been able to achieve a competitive strategy to differentiate themselves.

(Click to select) Yes No

e. The company has not been able to secure a global presence but enjoys a strong national presence.

(Click to select) Yes No

f. iRobot has accumulated significant proprietary technology, and superior technological and innovative skills.

(Click to select) Yes No

 

Which of the following accurately characterize iRobot’s resource weaknesses and competitive liabilities?

Select “yes” for the resource weaknesses that are accurate and choose “no” for those that are not.

a. iRobot has an increasing number of competitors.

(Click to select) Yes No

b. The company has focused on only one product.

(Click to select) Yes No

c. iRobot has introduced many products into the market.

(Click to select) Yes No

d. iRobot faces many barriers to enter international markets.

(Click to select) Yes No

e. iRobot faces the threat of new and existing competitors leapfrogging iRobot’s products with new features, and lower costs.

(Click to select) Yes No

f. iRobot’s profitability has been stagnant for the past few years.

(Click to select) Yes No

 

Which of the following accurately characterize iRobot’s market opportunities?

Select “yes” for the market opportunities that are accurate and choose “no” for those that are not.

a. increasing buyer demand for robotic vacuums

(Click to select) Yes No

b. adopting a late mover strategy to learn from the failures of competitors

(Click to select) Yes No

c. alliances or joint ventures with companies such as Apple, Amazon, and Google to monetize data obtained by iRobot devices

(Click to select) Yes No

d. outsource essential tasks that outside companies can perform better

(Click to select) Yes No

e. utilization of existing company skills and technological ability to develop additional robotic vacuums with new advanced features

(Click to select) Yes No

 

Which of the following represent external threats to iRobot’s future well-being?

Select “yes” for the external threats that are accurate and choose “no” for those that are not.

a. public concerns and negative publicity about data-collecting vacuums and vacuums connected to the internet and the “smart home”

(Click to select) Yes No

b. aggressive competitive pressure in the Chinese market

(Click to select) Yes No

c. increasing strength of competition among industry rivals who could squeeze profit margins

(Click to select) Yes No

d. likely continuing entrance of new rivals, and price-based competition

(Click to select) Yes No

e. consumer preference for more standardized products

(Click to select) Yes No

f. increased tariffs to enter global markets

(Click to select) Yes No

 

Considering all four SWOT lists, which of the following accurately characterize the attractiveness of iRobot’s overall situation?

Select “yes” for the items that characterize the attractiveness of the situation and choose “no” for those that do not.

a. iRobot has a winning strategy, a strong financial position, and a well-known brand name in a growing market.

(Click to select) Yes No

b. iRobot has a significant amount of proprietary technology and a large number of patents that offer the company good protection against rivals.

(Click to select) Yes No

c. The growing robotic vacuum industry and new robotic lawnmower industry will provide iRobot the opportunity to expand its global coverage, increase revenue, profits, and market share.

(Click to select) Yes No

d. iRobot does not enjoy many market opportunities to sustain its growth.

(Click to select) Yes No

e. iRobot’s situation is not an attractive one due in large part to its mounting debt.

(Click to select) Yes No

 

Describe iRobot’s business strategy. Does it appear well-suited for the company in 2019?

Select “yes” for those statements below that are accurate and choose “no” for those that are not.

a. iRobot’s business strategy has a focus on globalization and continuation of Roomba’s leadership in the consumer robotic industry.

(Click to select) Yes No

b. iRobot’s business strategy includes a focus on unrelated diversification.

(Click to select) Yes No

c. iRobot focuses its business strategy on slow growth and delayed entrance into the global markets.

(Click to select) Yes No

d. iRobot’s business strategy was designed to protect the company’s share in the maturing global consumer robotic industry through aggressive competitive pricing.

(Click to select) Yes No

e. iRobot’s strong brand name allows it to spend less in advertising and marketing.

(Click to select) Yes No

f. iRobot passes the three tests of a winning strategy by being well-matched to the robotic vacuum industry, achieving a competitive advantage and producing outstanding performance.

(Click to select) Yes No

 

 

iRobot has the largest market share in a growing market, but does the company have a competitive advantage? A sustainable advantage? What additional strategies could the company adopt to secure or sustain competitive advantage?

Select “yes” for those statements below that are accurate and choose “no” for those that are not.

a. iRobot has a competitive advantage largely because of its first-mover advantage, increasing global scope of operations, and strategy execution capabilities.

(Click to select) Yes No

b. iRobot has built competitively valuable expertise and capabilities, plus a volume advantage that rivals cannot match.

(Click to select) Yes No

c. The company has focused on lower priced robotic vacuums to capture a different market.

(Click to select) Yes No

d. The company’s partnership with a number of local distribution partners allows for further growth.

(Click to select) Yes No

e. iRobot possesses differentiating features of higher quality, better performance, and a value advantage that has given the company a sustainable competitive advantage.

(Click to select) Yes No

 

Which of iRobot’s competitors presents the greatest competitive threat? Why? Support your answer.

Select “yes” for those statements below that are accurate and choose “no” for those that are not.

a. A top competitor that presents a competitive threat is Ecovacs, which is one of the top three brands of in-home robots worldwide and has 65 percent of the market in China.

(Click to select) Yes No

b. SharkNinja has presented a competitive threat to iRobot based on its lower price and different models.

(Click to select) Yes No

c. Eufy Robovacs proved to be of higher quality and lower price, posing a threat to iRobot.

(Click to select) Yes No

d. Ecovacs has a strong financial position and ample working capital to continue R&D and aggressive marketing.

(Click to select) Yes No

e. SharkNinja has a strong brand name, global operations, and a broad distribution network.

(Click to select) Yes No

 

From the provided financial data, what is iRobot’s financial condition? What do the financial statements suggest about the company’s future? If present trends continue, where do you see iRobot in the next few years?

Select “yes” for those statements below that are accurate and choose “no” for those that are not.

a. The company had 17 percent of its assets in cash in 2018, and 19 percent in 2017, supporting the company’s ability to pay current debts using cash and cash equivalents.

(Click to select) Yes No

b. iRobot’s gross profit margin steadily increased from 46 percent in 2014 to 52 percent in 2018.

(Click to select) Yes No

c. iRobot decreased spending on research and development, and sales and marketing.

(Click to select) Yes No

d. iRobot’s revenue had grown at a compound average growth rate of 15.4 percent and net income grew at 20.5 percent CAGR.

(Click to select) Yes No

e. Gross margin, operating income, net income, and income per common share grew at a greater rate than the growth in total revenue.

(Click to select) Yes No

f. iRobot reported a 23.6 percent increase in revenue and a 72.6 percent increase in net profit over the prior year and announced expectations for about 17 to 20 percent revenue growth in 2019.

(Click to select) Yes No

g. The company’s stock reached $115.00 on April 23, 2019, which was a 110 percent increase over the same date in 2018.

(Click to select) Yes No

h. iRobot is a very strong, liquid, and profitable company with robust growth trends in revenue and profit, in a very attractive situation, and it appears to be getting better.

(Click to select) Yes No

 

What advice would you offer to CEO Angle to improve iRobot’s market position and profitability. Support your decision.

There are spaces for up to six action recommendations and supporting justifications. Each recommended action must be supported with convincing, analysis-based justifications founded on the relevant concepts and tools that apply to this case.

a. Action Recommendation:

Supporting Justification:

b. Action Recommendation:

Supporting Justification:

c. Action Recommendation:

Supporting Justification:

d. Action Recommendation:

Supporting Justification:

e. Action Recommendation:

Supporting Justification:

f. Action Recommendation:

Supporting Justification:

Netflix in 2019: Striving to Solidify Its Position as the Global Leader

 

We feel that the Netflix in 2019: Striving to Solidify Its Position as the Global Leader case pairs particularly well with the material covered in Chapter 7, in which the five primary reasons that companies choose to enter foreign markets are identified:

 

1. To gain access to new customers.

2. To achieve lower costs through economies of scale, experience, and increased purchasing power.

3. To gain access to low-cost inputs of production.

4. To further exploit its core competencies.

5. To gain access to resources and capabilities located in foreign markets.

 

Before beginning this exercise, you will need to read the Netflix case.

 

 

What factors are acting to intensify/weaken rivalry in the subscription video-on-demand industry?

 

Select “yes” for those statements below that are accurate and choose “no” for those that are not.

 

a. Amazon Prime, YouTube, and Hulu are exerting tremendous competitive pressure on Netflix to maintain its pace as the creator of “must-watch” on-demand content.

b. Local providers in both developed and emerging markets are also rivals with possibly lower cost structures and more localized content.

c. Rivalry is centered on two main factors: price and breadth of selection; providers with the largest content library will most likely have the most subscribers.

d. The competitive pressures associated with rivalry among providers of subscription video on demand is intense due to price competition and price wars.

e. Rivalry among subscription-based providers of streamed video content is a moderate competitive force that is likely to intensify in the years ahead.

f. Deep-pocketed newer entrants such as Apple, Disney, and Warner Media will ratchet up that pressure.

 

 

What factors are acting to intensify/weaken the bargaining power and leverage of suppliers in the subscription video-on-demand industry?

 

Select “yes” for those statements below that are accurate and choose “no” for those that are not.

 

a. The cost of licensing studio-produced content involving top writers, location shooting, and actors with box-office appeal will rise as competitors emerge and bid for content and talent that Netflix desires.

b. The competitive pressures associated with the bargaining power of suppliers to providers of subscription video on demand is weak to moderate.

c. All streaming/VOD providers will undoubtedly have to compete on the basis of having a large library of titles available for streaming.

d. As technology improves and decreases in cost, more consumers will be able to create as well as download content quickly via the web and play it on their televisions or alternative devices.

e. The bargaining power and leverage of suppliers is a moderate to very strong competitive force, depending on the type of supplier.

f. The cost to deliver content over broadband and cellular networks provided by third parties could increase, and the need to pay for fast-lane network access could drag on margins.

 

 

 

 

 

What factors are acting to intensify/weaken the competitive pressures associated with substitutes in the subscription video-on-demand industry?

 

Select “yes” for those statements below that are accurate and choose “no” for those that are not.

 

a. Competition from substitutes is a moderate to strong competitive force, depending on the extent to which consumers prefer to watch content on demand versus watching movies at movie theaters or buying movie DVDs for their own personal library.

b. Other than labor-intensive work to create and stream personal videos via YouTube and other social media outlets such as Twitter, Facebook, Instagram, and Snapchat, there are few powerful substitutes for subscription video-on-demand services.

c. Acceptable substitutes are readily available and competitively priced (in some cases).

d. The slow demise of movie theaters as well as cable and broadcast television also exacerbate the decreasing power of substitutes.

e. The competitive pressures associated with the threat of substitutes in the market for subscription video on demand is weak.

 

What factors are acting to intensify/weaken the bargaining power of buyers in the subscription video-on-demand industry?

 

Select “yes” for those statements below that are accurate and choose “no” for those that are not.

 

a. Individual subscribers/viewers may opt to switch to a different provider and negotiate for a better rate at any time.

b. The competitive pressures associated with the bargaining power of buyers of subscription video on demand is moderate.

c. Buyers have a variety of streaming services from which to choose (Amazon, Apple TV, Hulu, Netflix, Roku, etc.).

d. Switching costs for buyers are moderately low compared to switching among cable and satellite TV providers.

e. Consumers in most markets have multiple ways to view archival and new content, either via traditional broadcast TV or via rentals of DVD/Blue-Ray media.

f. Most consumers already possess a tablet, mobile device, or smart TV, there is no need to purchase add-on boxes or purpose-specific viewing equipment.

What factors are acting to intensify/weaken the threat of new entrants into the subscription video-on-demand industry?

 

Select “yes” for those statements below that are accurate and choose “no” for those that are not.

 

a. The competitive pressures associated with the threat of new entry into the market for subscription video on demand is weak to moderate.

b. Some markets, such as China, Crimea, North Korea, and Syria, remain closed to external providers of streaming media services (or do not allow such services to exist).

c. The entry threat into the market for subscription video on demand should be viewed as moderate to strong.

d. The entry into the subscription video on demand has become prohibitively high and is rising.

What do you see as the key drivers impacting growth and key success factors for rivals competing in the market for subscription video on demand?

 

Select “yes” for those statements below that are accurate and choose “no” for those that are not.

 

a. Social/Demographic—global population growth and increasing urbanization, accompanied by rising standards of living and technology adoption

b. Economic—changes in per capita disposable income in emerging economies, some of which are located in the Southern Hemisphere, offsetting economic slowdowns in countries in the Northern Hemisphere

c. Increased competition—low barriers to entry will increase the number of competitors

d. Government/Political/Legal—absence or presence of subsidies, low-interest rates, barriers to trade, presence or absence of high-speed Internet, cellphone and tablet adoption rates, and currency exchange rates

e. Technology—increasing reliance on innovation and R&D to develop new programming content, increase video streaming throughput, differentiate products, and mine or analyze customer data

f. Industry growth—the mass entry of video-on-demand competitors has caused growth to slow down at least for a short period

Which of the following accurately characterize Netflix’s resource strengths and competitive capabilities?

 

Select “yes” for those statements below that are accurate and choose “no” for those that are not.

 

a. Netflix enjoys an international presence

b. Netflix was not a first mover but was certainly successful in following the strategy of other streaming providers

c. differentiated, cutting-edge, critically acclaimed content

d. Netflix has the capability to track and query customer analytical data

Which of the following accurately characterize Netflix’s resource weaknesses and competitive liabilities?

 

Select “yes” for the resource weaknesses that are accurate and choose “no” for those that are not.

 

a. the financial strains of producing a greater number of original, in-house produced content has left Netflix financially drained

b. inability to enter Chinese market

c. Netflix is vulnerable to the bargaining power of movie studios and other content suppliers to extract higher license fees from Netflix

d. diversion of cash flows to service debt

e. high financial leverage

Which of the following accurately characterize Netflix’s market opportunities?

 

Select “yes” for the market opportunities that are accurate and choose “no” for those that are not.

 

a. increasing global availability of broadband and high-speed cellular networks

b. increasing installed base of devices capable of showing streaming content

c. vast potential in world’s second largest economy (China), and second most populous market (India and Southeast Asia)

d. partner with smaller streaming providers such as Redbox

e. partner with movie studios to negotiate lower license fees

Which of the following represent external threats to Netflix’s future well-being?

 

Select “yes” for the external threats that are accurate and choose “no” for those that are not.

 

a. hacking of consumer data and illegal reproduction of proprietary content

b. continued political and legal barriers to enter China and other emerging markets

c. continued jockeying for position among existing rivals plus entry of Apple, Disney, and Warner Media that will change the game for subscription services

d. government regulations that can prevent them from producing their own in-house content

Considering all four SWOT lists, which of the following accurately characterize the attractiveness of Netflix’s overall situation?

 

Select the best response from the options provided.

Top of Form

Multiple Choice

· Netflix should address its weaknesses very closely as it continues to lose subscribers to Amazon.

· Netflix’s overall situation is strong and its long-term outlook is promising.

· Netflix’s situation is threatened by movie studios with high licensing fees, adding to Netflix’s financial burden.

Bottom of Form

How have Netflix’s business strategy choices strengthened or weakened its competitive position in the streaming video on-demand industry? Discuss how the company’s senior management has chosen to increase the horizontal or vertical scope of the firm.

 

Select “yes” for those statements below that are accurate and choose “no” for those that are not.

 

a. CEO Reed Hastings has, over time, successfully transitioned Netflix from a DVD rental service to the premier streaming video on demand service.

b. Netflix’s internal recommendation software and large subscriber base have afforded the company an edge when deciding which content to acquire in future years.

c. Netflix is not the current market leader; this increases the bargaining power of suppliers.

d. Netflix has built a substantial content library that will benefit the firm over the long term.

e. Rivalry has been moderate between Amazon Prime, Hulu, YouTube, and Netflix.

f. Netflix incurs a cost to localize content and production of content to sustain access to global markets and grow subscriber base in those markets.

g. Netflix is highly dependent on favorable reception from foreign governments and consumers’ acceptance of content as well as access to high-speed Internet services for streaming that content.

Has Netflix’s increase in scope also been a part of its international strategy? Is the international strategy best characterized as a multidomestic strategy, global strategy, or transnational strategy? Which strategy for entering international markets should be selected for China?

 

Select “yes” for those statements below that are accurate and choose “no” for those that are not.

 

a. It is expected that Netflix will expand further into local-language programming to offset the weakness of its relatively more modest offerings in many countries.

b. Netflix’s expansion outside the United States could continue to drag on cash flow due to different tastes and lower video consumption.

c. It is expected that Netflix will successfully enter international markets with a multidomestic strategy.

d. A transnational strategy allows Netflix the ability to exploit experience-curve effects and location economies and to customize product offerings in accordance with local response.

e. It is highly probable that Netflix’s international expansion will disappoint, particularly in terms of the speed of margin expansion and compounded by its current inability to enter the Chinese market.

f. A global/international strategy allows Netflix the opportunity to customize product offerings and marketing in accordance with local responsiveness.

g. The disadvantages of a multidomestic strategy for Netflix are the inability to realize location economies, experience-curve effects, and be able to transfer distinctive competencies to foreign markets.

What do the data in case Exhibits 1, 2, and 5 reveal about Netflix’s financial and operating performance?

 

Select “yes” for those statements below that are accurate and choose “no” for those that are not.

 

a. Netflix’s year-on-year and Compound Annual Growth Rates (CAGR) are extremely robust.

b. Total operating expenses have remained steady between 2016 and 2018.

c. Operating income declined dramatically between 2017 and 2018.

d. Net income has almost doubled year after year from 2016 to 2018.

e. Netflix’s improved profitability and phenomenal growth rates have come at the cost of high debt leverage.

What three to four top priority issues do CEO Reed Hastings and Netflix management need to address?

 

There are spaces for up to six top priority issues that should be addressed by CEO Reed Hastings and Netflix Management. Draw conclusions from your analyses of the case and the industry. Each top priority issue must be supported with convincing justifications using relevant concepts and tools and set the stage for what actions/recommendations need to be taken.

 

a. Action Recommendation:

 

 

Supporting Justification:

 

 

b. Action Recommendation:

 

 

Supporting Justification:

 

 

c. Action Recommendation:

 

 

Supporting Justification:

 

 

d. Action Recommendation:

 

 

Supporting Justification:

 

 

e. Action Recommendation:

 

 

Supporting Justification:

 

 

f. Action Recommendation:

 

 

Supporting Justification:

 

What recommendations would you make to Netflix CEO Reed Hastings? At a minimum, your recommendations should cover what to do about each of the top priority issues identified in question 7.

 

There are spaces for up to six action recommendations and supporting justifications. Each recommended action must be supported with convincing, analysis-based justifications founded on the relevant concepts and tools that apply to this case.

 

a. Action Recommendation:

 

 

Supporting Justification:

 

 

b. Action Recommendation:

 

 

Supporting Justification:

 

 

c. Action Recommendation:

 

 

Supporting Justification:

 

 

d. Action Recommendation:

 

 

Supporting Justification:

 

 

e. Action Recommendation:

 

 

Supporting Justification:

 

 

f. Action Recommendation:

 

 

Supporting Justification:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tesla in 2019: Is Sustained Profitability a Realistic Prospect?

 

We feel that the Tesla in 2019: Is Sustained Profitability a Realistic Prospect? case pairs particularly well with the material covered in all chapters of the textbook. The case can be used with the chapters covering environmental and industry analysis, competitive positioning, diversification, corporate social responsibility, and leadership.

 

Before beginning this exercise, you will need to read the Tesla case.

 

What are the chief elements of Elon Musk’s overall leadership and managerial style? How well is it working? Is his style evolving?

 

Select “yes” for those statements below that are accurate and choose “no” for those that are not.

 

a. Musk has been gradually but firmly expanding Tesla’s repertoire to include environmental responsibility, walking the talk to support his belief that “the world needed an environmentally clean method of transportation.”

b. Musk’s ability to retain the strengths of Tesla’s prior business model while making incremental adjustments to improve and broaden that model has maintained the culture of innovation while empowering employees and pushing authority down to teams.

c. Musk has failed at overseeing the building and strengthening of Tesla’s competitively valuable resources and capabilities.

d. Tesla has achieved its success through R&D, while the impact of acquisitions and partnerships, particularly in China, remains to be seen.

e. On a market creation and share basis, there are preliminary indications of very slow progress as compared to other auto manufacturers.

f. Tesla’s vision is to disrupt and transform existing industries.

Explain Tesla’s business model. How—if at all—has it changed under Musk’s leadership?

 

Select “yes” for those statements below that are accurate and choose “no” for those that are not.

 

a. Tesla is pursuing a focused differentiation generic strategy, that is, one that aims to differentiate a company’s product or service from that of rivals in ways that will appeal to a high-growth niche composed of sophisticated buyers.

b. Customers are characterized as, “wealthy individuals anxious to be a part of the migration from gasoline-powered vehicles to electric-powered vehicles and to publicly display support for a cleaner environment.”

c. There is some evidence that Tesla is already moving toward a broad differentiation generic strategy via more affordable EV, the Model Y, pickup trucks, and delivery vehicles (semis), autonomous vehicles, and a mobile ride sharing service.

d. Tesla has established a very limited number of recharging stations in a few locations to convey the selling point that Tesla cars rarely need to be charged.

e. Tesla is looking to appeal to a wider range of mass-market buyers through a best-cost strategy.

f. Tesla customers are characterized as young, educated, technologically-inclined customers focused on a clean environment.

How would you rate Elon Musk in terms of the three main managerial areas used to build an organization, as shown in Figure 10.1? Which are strengths, and which are areas for improvement? What grade does Musk deserve for his efforts thus far?

 

Select “yes” for those statements below that are accurate and choose “no” for those that are not.

 

a. Tesla’s strategy-supportive resources and capabilities are its strengths but are clearly in need of immediate and continuous improvement.

b. Production line employees interviewed by reporters indicated long shift hours and poor leadership leading to problems with quality control.

c. Elon Musk is known for setting stretch performance targets and high product quality standards and pushing hard for their achievement.

d. Musk exhibits perseverance, dedication, and an exceptionally strong work ethic—he typically worked 85 to 90 hours a week. Most weeks, Musk split his time between SpaceX and Tesla.

e. Tesla’s strategy-supportive resources and capabilities are its weaknesses and in need of immediate and continuous improvement.

f. On balance, Musk would earn an “A” for vision and a “C+” for execution, which averages out to about a “B+” composite grade for his leadership.

What is your assessment of Tesla’s recent financial performance under Musk’s leadership? (Use the financial ratios in the Appendix of the text or in Figure 4.1 as a guide when doing your financial analysis.)

 

Select “yes” for those statements below that are accurate and choose “no” for those that are not.

 

a. high growth in automotive sales, three-year CAGR about 73 percent and most recent year-on-year growth at over 100 percent

b. major investments in innovative technologies (R&D investments as a percentage of sales have ranged from 7 to 17 percent of revenues)

c. selling, general, and administrative expenses had a slight increase between 2015 and 2018

d. company gross margins have declined slightly from 2015 to 2018, from 23 percent to 19 percent

e. Tesla’s loss from operations has increased from 2015 to 2018

f. high financial leverage and high operating costs

What recommendations would you make to Elon Musk to allow Tesla to strengthen its position in its most important markets?

 

There are spaces for up to six action recommendations and supporting justifications. Each recommended action must be supported with convincing, analysis-based justifications founded on the relevant concepts and tools that apply to this case.

 

a. Action Recommendation:

 

 

Supporting Justification:

 

 

b. Action Recommendation:

 

 

Supporting Justification:

 

 

c. Action Recommendation:

 

 

Supporting Justification:

 

 

d. Action Recommendation:

 

 

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e. Action Recommendation:

 

 
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