Question 1.What industries do you think may offer the best U.S. (or domestic) job opportunities in the future? Which industries do you think may offer the

Question 1.What industries do you think may offer the best U.S. (or domestic) job opportunities in the future? Which industries do you think may offer the greatest job opportunities in the global market in the future? Use the PESTEL framework and the five forces model to think through a logical set of reasons that some fields will have higher job growth trends than others. 

T The paper should be at least 1.5 – 2 pages in length, Times New Roman 12-pt font, double-spaced, 1 inch margins and utilizing at least one outside scholarly or professional source related to organizational behavior. This does not mean blogs or websites. This source should be a published article in a scholarly journal. This source should provide substance and not just be mentioned briefly to fulfill this criteria. The textbook should also be utilized. Do not use quotes. Do not insert excess line spacing. APA formatting and citation should be used. Page i

Strategic
Management

Page iii

FIFTH EDITION
Strategic
Management

Frank T. Rothaermel
Georgia Institute of Technology

Page iv

STRATEGIC MANAGEMENT

Published by McGraw-Hill Education, 2 Penn Plaza, New York, NY 10121.
Copyright ©2021 by McGraw-Hill Education. All rights reserved. Printed
in the United States of America. No part of this publication may be
reproduced or distributed in any form or by any means, or stored in a
database or retrieval system, without the prior written consent of McGraw-
Hill Education, including, but not limited to, in any network or other
electronic storage or transmission, or broadcast for distance learning.

Some ancillaries, including electronic and print components, may not be
available to customers outside the United States.

This book is printed on acid-free paper.

1 2 3 4 5 6 7 8 9 LWI 24 23 22 21 20

ISBN 978-1-260-57123-3
MHID 1-260-57123-8

Cover Image: (Earth): skegbydave/Getty Images; (Spheres): Ilin
Sergey/Shutterstock

All credits appearing on page or at the end of the book are considered to be
an extension of the copyright page.

The Internet addresses listed in the text were accurate at the time of
publication. The inclusion of a website does not indicate an endorsement by
the authors or McGraw-Hill Education, and McGraw-Hill Education does
not guarantee the accuracy of the information presented at these sites.

mheducation.com/highered

http://mheducation.com/highered

Page v

DEDICATION

To my eternal family for their love, support, and sacrifice: Kelleyn, Harris,
Winston, Roman, Adelaide, Avery, and Ivy.
—Frank T. Rothaermel

Page vi

CONTENTS IN BRIEF

PART ONE / ANALYSIS 2
CHAPTER 1 What Is Strategy? 4
CHAPTER 2 Strategic Leadership:

Managing the Strategy
Process 32

CHAPTER 3 External Analysis:
Industry Structure,
Competitive Forces, and
Strategic Groups 72

CHAPTER 4 Internal Analysis:
Resources, Capabilities,
and Core Competencies
116

CHAPTER 5 Competitive Advantage,
Firm Performance, and
Business Models 154

PART TWO / FORMULATION 190
CHAPTER 6 Business Strategy:

Differentiation, Cost

Leadership, and Blue
Oceans 192

CHAPTER 7 Business Strategy:
Innovation,
Entrepreneurship, and
Platforms 230

CHAPTER 8 Corporate Strategy:
Vertical Integration and
Diversification 276

CHAPTER 9 Corporate Strategy:
Strategic Alliances,
Mergers and
Acquisitions 320

CHAPTER 10 Global Strategy:
Competing Around the
World 350

PART THREE / IMPLEMENTATION 388
CHAPTER 11 Organizational Design:

Structure, Culture, and
Control 390

CHAPTER 12 Corporate Governance
and Business Ethics 432

PART FOUR / MINICASES 459

Page vii

HOW TO CONDUCT A CASE
ANALYSIS 460

PART FIVE / FULL-LENGTH CASESTwelve full-length
cases are included
in Connect. A total
of 22 full-length
cases are available
through McGraw-
Hill Create:
www.mcgrawhillcr
eate.com/rothaerm
el

MINI CASES & FULL-LENGTH CASES

MINICASES /

1. Apple: What’s Next? 471
2. Starbucks CEO Kevin Johnson: “I’m not Howard Schultz” 475
3. BlackBerry’s Rise and Fall 480
4. Nike’s Core Competency: The Risky Business of Creating Heroes 482
5. Business Model Innovation: How Dollar Shave Club Disrupted Gillette

487
6. How JCPenney Sailed into a Red Ocean 489
7. Platform Strategy: How PayPal Solved the Chicken-or-Egg Problem

492
8. GE: Corporate Strategy Gone Wrong 495

http://www.mcgrawhillcreate.com/rothaermel

9. Disney: Building Billion-Dollar Franchises 499
10. Hollywood Goes Global 503
11. Yahoo: From Internet Darling to Fire Sale 508
12. Uber: Ethically Most Challenged Tech Company? 511

FULL-LENGTH CASES /
The twelve cases included in Connect are noted below. All cases are
available through McGraw-Hill Create:
www.mcgrawhillcreate.com/rothaermel

1. Airbnb, Inc. *
2. Kickstarter >> +
3. Facebook, Inc. >>
4. SpaceX >> +
5. Delta Air Lines, Inc.
6. The Movie Exhibition Industry >> +
7. Starbucks Corporation
8. The Vanguard Group *
9. Better World Books and the Triple Bottom Line

10. McDonald’s Corporation >>
11. Best Buy Co., Inc. >>
12. Walmart, Inc.
13. Tesla, Inc. >>
14. Netflix, Inc.
15. Amazon.com, Inc. >>
16. Apple, Inc. >>
17. The Walt Disney Company >>
18. UPS in India

http://www.mcgrawhillcreate.com/rothaermel

Page viii

19. Alphabet’s Google
20. Merck & Co., Inc.
21. Nike, Inc. *
22. Uber Technologies

* New to Fifth Edition, >> Revised and updated for the Fifth Edition, +
Third-Party Case

CHAPTERCASES & STRATEGY
HIGHLIGHTS

CHAPTERCASES /

1 Tesla’s Secret Strategy 5
2 Leadership Crisis at Facebook? 33
3 Airbnb: Disrupting the Hotel Industry 73
4 Five Guys’ Core Competency: “Make the Best Burger,

Don’t Worry about Cost” 117
5 The Quest for Competitive Advantage: Apple vs.

Microsoft 155
6 JetBlue Airways: En Route to a New Blue Ocean? 193
7 Netflix: Disrupting the TV Industry 231
8 Amazon’s Corporate Strategy 277
9 Little Lyft Gets Big Alliance Partners and Beats Uber in

Going Public 321
10 IKEA: The World’s Most Profitable Retailer 351
11 “A” Is for Alphabet and “G” Is for Google 391
12 Theranos: Bad Blood 433

STRATEGYHIGHLIGHTS /

1.1 Does Twitter Have a Strategy? 9
1.2 Merck’s Stakeholder Strategy 20
2.1 Teach for America: How Wendy Kopp Inspires Future

Leaders 41
2.2 Starbucks CEO: “It’s Not What We Do” 54
3.1 Blockbuster’s Bust 79
3.2 From League of Legends to Fortnite: The Rise of e-Sports

103
4.1 Dr. Dre’s Core Competency: Coolness Factor 122
4.2 Applying VRIO: The Rise and Fall of Groupon 133
5.1 PepsiCo’s Indra Nooyi: Performance with Purpose 175
5.2 Threadless: Leveraging Crowdsourcing to Design Cool T-

Shirts 178
6.1 Dr. Shetty: “The Henry Ford of Heart Surgery” 210
6.2 Cirque du Soleil: Finding a New Blue Ocean? 219
7.1 Standards Battle: Which Automotive Technology Will

Win? 244
7.2 Wikipedia: Disrupting the Encyclopedia Business 261
8.1 The Equity Alliance between Coca-Cola and Monster: A

Troubled Engagement? 288
8.2 P&G’s Diversification Strategy: Turning the Tide? 306
9.1 How Tesla Used Alliances Strategically 327
9.2 Kraft Heinz: From Hostile Takeovers as Specialty to

Eating Humble Pie 338
10.1 Does GM’s Future Lie in China? 360

10.2 Walmart Retreats from Germany, and Lidl Invades the
United States 363

11.1 Zappos: Of Happiness and Holacracy 407
11.2 Sony vs. Apple: Whatever Happened to Sony? 414
12.1 HP’s Boardroom Drama and Divorce 444
12.2 VW’s Dieselgate: School of Hard NOx 449

Page x

Page ix

CONTENTS

PART ONE / ANALYSIS 2
CHAPTER 1
WHAT IS STRATEGY? 4

CHAPTERCASE 1 / Part I
Tesla’s Secret Strategy 5
1.1 What Strategy Is: Gaining and Sustaining Competitive Advantage 6

Crafting a Good Strategy at Tesla 7
What Is Competitive Advantage? 10

1.2 Stakeholder Strategy and Competitive Advantage 13
Value Creation 13
Stakeholder Strategy 14
Stakeholder Impact Analysis 15

1.3 The Analysis, Formulation, Implementation (AFI) Strategy
Framework 21

Key Topics and Questions of the AFI Strategy Framework 22
1.4 Implications for Strategic Leaders 23

CHAPTERCASE 1 / Part II 24
CHAPTER 2
STRATEGIC LEADERSHIP: MANAGING THE STRATEGY
PROCESS 32

CHAPTERCASE 2 / Part I
Leadership Crisis at Facebook? 33

2.1 Strategic Leadership 34
What Do Strategic Leaders Do? 35
How Do You Become a Strategic Leader? 35
The Strategy Process across Levels: Corporate, Business, and
Functional Managers 37

2.2 Vision, Mission, and Values 40
Vision 40
Mission 45
Values 46

2.3 The Strategic Management Process 47
Top-Down Strategic Planning 47
Scenario Planning 48
Strategy as Planned Emergence: Top-Down and Bottom-Up 51

2.4 Strategic Decision Making 57
Two Distinct Modes of Decision Making 58
Cognitive Biases and Decision Making 58
How to Improve Strategic Decision Making 62

2.5 Implications for Strategic Leaders 63

CHAPTERCASE 2 / Part II 64
CHAPTER 3
EXTERNAL ANALYSIS: INDUSTRY STRUCTURE,
COMPETITIVE FORCES, AND STRATEGIC GROUPS 72

CHAPTERCASE 3 / Part I
Airbnb: Disrupting the Hotel Industry 73
3.1 The PESTEL Framework 74

Political Factors 75
Economic Factors 76
Sociocultural Factors 78
Technological Factors 78

Ecological Factors 80
Legal Factors 80

3.2 Industry Structure and Firm Strategy: The Five Forces Model 81
Industry vs. Firm Effects in Determining Firm Performance 81
Competition in the Five Forces Model 82
The Threat of Entry 84
The Power of Suppliers 87
The Power of Buyers 88
The Threat of Substitutes 89
Rivalry among Existing Competitors 90
Applying the Five Forces Model to the U.S. Airline Industry 96
A Sixth Force: The Strategic Role of Complements 98

3.3 Changes over Time: Entry Choices and Industry Dynamics 99
Entry Choices 99
Industry Dynamics 102

3.4 Performance Differences within the Same Industry: Strategic Groups
105

The Strategic Group Model 106
Mobility Barriers 107

3.5 Implications for Strategic Leaders 108

CHAPTERCASE 3 / Part II 109
CHAPTER 4
INTERNAL ANALYSIS: RESOURCES, CAPABILITIES,
AND CORE COMPETENCIES 116

CHAPTERCASE 4 / Part I
Five Guys’ Core Competency: “Make the Best Burger, Don’t Worry
about Cost” 117
4.1 From External to Internal Analysis 119
4.2 Core Competencies 120

Resources and Capabilities 124

4.3 The Resource-Based View 126
Resource Heterogeneity and Resource Immobility 127
The VRIO Framework 128
Isolating Mechanisms: How to Sustain a Competitive Advantage 132

4.4 The Dynamic Capabilities Perspective 137
Core Rigidities 137
Dynamic Capabilities 138
Resource Stocks and Resource Flows 139

4.5 The Value Chain and Strategic Activity Systems 140
The Value Chain 140
Strategic Activity Systems 143

4.6 Implications for Strategic Leaders 146
Using SWOT Analysis to Generate Insights from External and
Internal Analysis 146

CHAPTERCASE 4 / Part II 148
CHAPTER 5
COMPETITIVE ADVANTAGE, FIRM PERFORMANCE,
AND BUSINESS MODELS 154

CHAPTERCASE 5 / Part I
The Quest for Competitive Advantage: Apple vs. Microsoft 155
5.1 Competitive Advantage and Firm Performance 156

Accounting Profitability 156
Shareholder Value Creation 163
Economic Value Creation 165
The Balanced Scorecard 171
The Triple Bottom Line 174

5.2 Business Models: Putting Strategy into Action 177
The Why, What, Who, and How of Business Models Framework 177
Popular Business Models 180

Dynamic Nature of Business Models 182
5.3 Implications for Strategic Leaders 183

CHAPTERCASE 5 / Part II 184

PART TWO / FORMULATION 190
CHAPTER 6
BUSINESS STRATEGY: DIFFERENTIATION, COST
LEADERSHIP, AND BLUE OCEANS 192

CHAPTERCASE 6 / Part I
JetBlue Airways: En Route to a New Blue Ocean? 193
6.1 Business-Level Strategy: How to Compete for Advantage 195

Strategic Position 196
Generic Business Strategies 196

6.2 Differentiation Strategy: Understanding Value Drivers 198
Product Features 201
Customer Service 201
Complements 201

6.3 Cost-Leadership Strategy: Understanding Cost Drivers 202
Cost of Input Factors 204
Economies of Scale 204
Learning Curve 207
Experience Curve 211

6.4 Business-Level Strategy and the Five Forces: Benefits and Risks 212
Differentiation Strategy: Benefits and Risks 212
Cost-Leadership Strategy: Benefits and Risks 214

6.5 Blue Ocean Strategy: Combining Differentiation and Cost Leadership
215

Value Innovation 216
Blue Ocean Strategy Gone Bad: “Stuck in the Middle” 218

Page xi

6.6 Implications for Strategic Leaders 222

CHAPTERCASE 6 / Part II 222
CHAPTER 7
BUSINESS STRATEGY: INNOVATION,
ENTREPRENEURSHIP, AND PLATFORMS 230

CHAPTERCASE 7 / Part I
Netflix: Disrupting the TV Industry 231
7.1 Competition Driven by Innovation 232

Netflix’s Continued Innovation 233
The Speed of Innovation 233
The Innovation Process 234

7.2 Strategic and Social Entrepreneurship 237
7.3 Innovation and the Industry Life Cycle 240

Introduction Stage 241
Growth Stage 243
Shakeout Stage 247
Maturity Stage 247
Decline Stage 248
Crossing the Chasm 249

7.4 Types of Innovation 255
Incremental vs. Radical Innovation 256
Architectural vs. Disruptive Innovation 258

7.5 Platform Strategy 263
The Platform vs. Pipeline Business Models 263
The Platform Ecosystem 264

7.6 Implications for Strategic Leaders 268

CHAPTERCASE 7 / Part II 269
CHAPTER 8

CORPORATE STRATEGY: VERTICAL INTEGRATION AND
DIVERSIFICATION 276

CHAPTERCASE 8 / Part I
Amazon’s Corporate Strategy 277
8.1 What Is Corporate Strategy? 280

Why Firms Need to Grow 280
Three Dimensions of Corporate Strategy 281

8.2 The Boundaries of the Firm 283
Firms vs. Markets: Make or Buy? 284
Alternatives on the Make-or-Buy Continuum 287

8.3 Vertical Integration along the Industry Value Chain 291
Types of Vertical Integration 292
Benefits and Risks of Vertical Integration 294
When Does Vertical Integration Make Sense? 297
Alternatives to Vertical Integration 297

8.4 Corporate Diversification: Expanding Beyond a Single Market 299
Types of Corporate Diversification 301
Leveraging Core Competencies for Corporate Diversification 303
Corporate Diversification and Firm Performance 308

8.5 Implications for Strategic Leaders 311

CHAPTERCASE 8 / Part II 312
CHAPTER 9
CORPORATE STRATEGY: STRATEGIC ALLIANCES,
MERGERS AND ACQUISITIONS 320

CHAPTERCASE 9 / Part I
Little Lyft Gets Big Alliance Partners and Beats Uber in Going Public
321
9.1 How Firms Achieve Growth 323

The Build-Borrow-or-Buy Framework 323

Page xii

9.2 Strategic Alliances 326
Why Do Firms Enter Strategic Alliances? 326
Governing Strategic Alliances 330
Alliance Management Capability 332

9.3 Mergers and Acquisitions 335
Why Do Firms Merge with Competitors? 335
Why Do Firms Acquire Other Firms? 337
M&A and Competitive Advantage 340

9.4 Implications for Strategic Leaders 341

CHAPTERCASE 9 / Part II 342
CHAPTER 10
GLOBAL STRATEGY: COMPETING AROUND THE
WORLD 350

CHAPTERCASE 10 / Part I
IKEA: The World’s Most Profitable Retailer 351
10.1 What Is Globalization? 353

Stages of Globalization 355
State of Globalization 357

10.2 Going Global: Why? 358
Advantages of Going Global 358
Disadvantages of Going Global 362

10.3 Going Global: Where and How? 365
Where in the World to Compete? The CAGE Distance Framework
365
How Do MNEs Enter Foreign Markets? 369

10.4 Cost Reductions vs. Local Responsiveness: The Integration-
Responsiveness Framework 370

International Strategy 371
Multidomestic Strategy 372
Global-Standardization Strategy 372

Transnational Strategy 373
10.5 National Competitive Advantage: World Leadership in Specific
Industries 375

Porter’s Diamond Framework 376
10.6 Implications for Strategic Leaders 379

CHAPTERCASE 10 / Part II 380

PART THREE / IMPLEMENTATION 388
CHAPTER 11
ORGANIZATIONAL DESIGN: STRUCTURE, CULTURE,
AND CONTROL 390

CHAPTERCASE 11 / Part I
“A” Is for Alphabet and “G” Is for Google 391
11.1 Organizational Design and Competitive Advantage 393

Organizational Inertia: The Failure of Established Firms 395
Organizational Structure 397
Mechanistic vs. Organic Organizations 398

11.2 Strategy and Structure 400
Simple Structure 401
Functional Structure 401
Multidivisional Structure 404
Matrix Structure 408

11.3 Organizing for Innovation 412
11.4 Organizational Culture: Values, Norms, and Artifacts 416

Where Do Organizational Cultures Come From? 419
How Does Organizational Culture Change? 419
Organizational Culture and Competitive Advantage 420

11.5 Strategic Control-and-Reward Systems 422
Input Controls 423

Output Controls 423
11.6 Implications for Strategic Leaders 424

CHAPTERCASE 11 / Part II 425
CHAPTER 12
CORPORATE GOVERNANCE AND BUSINESS ETHICS 432

CHAPTERCASE 12 / Part I
Theranos: Bad Blood 433
12.1 The Shared Value Creation Framework 435

Public Stock Companies and Shareholder Capitalism 435
Creating Shared Value 437

12.2 Corporate Governance 438
Agency Theory 440
The Board of Directors 441
Other Governance Mechanisms 443

12.3 Strategy and Business Ethics 448
Bad Apples vs. Bad Barrels 450

12.4 Implications for Strategic Leaders 451

CHAPTERCASE 12 / Part II 452

PART FOUR / MINICASES 459
HOW TO CONDUCT A CASE ANALYSIS 460

PART FIVE / FULL-LENGTH CASES
Twelve full-length cases are included in Connect. A total of 22 full-
length cases are available through McGraw-Hill Create:
www.mcgrawhillcreate.com/rothaermel

Company Index 517

http://www.mcgrawhillcreate.com/rothaermel

Name Index 523
Subject Index 531

Page xiii

ABOUT THE AUTHOR

Frank T. Rothaermel
Georgia Institute of Technology
Frank T. Rothaermel, PhD, a Professor of Strategy & Innovation, holds
the Russell and Nancy McDonough Chair in the Scheller College of
Business at the Georgia Institute of Technology (GT) and is an Alfred P.
Sloan Industry Studies Fellow. He received a National Science Foundation
(NSF) CAREER award, which “offers the National Science Foundation’s
most prestigious awards in support of … those teacher-scholars who most
effectively integrate research and education” (NSF CAREER Award
description).

©Kelleyn Rothaermel

Frank’s research interests lie in the areas of strategy, innovation, and
entrepreneurship. Frank has published over 35 articles in leading academic
journals such as the Strategic Management Journal, Organization Science,
Academy of Management Journal, Academy of Management Review, and
elsewhere. Based on having published papers in the top 1 percent based on
citations, Thomson Reuters identified Frank as one of the “world’s most
influential scientific minds.” He is listed among the top-100 scholars based
on impact over more than a decade in both economics and business.
Bloomberg Businessweek named Frank one of Georgia Tech’s Prominent
Faculty in its national survey of business schools. The Kauffman
Foundation views Frank as one of the world’s 75 thought leaders in
entrepreneurship and innovation.

Frank has received several recognitions for his research, including the
Sloan Industry Studies Best Paper Award, the Academy of Management
Newman Award, the Strategic Management Society Conference Best Paper
Prize, the DRUID Conference Best Paper Award, the Israel Strategy
Conference Best Paper Prize, and he is the inaugural recipient of the Byars
Faculty Excellence Award. Frank currently serves or has served on the
editorial boards of the Strategic Management Journal, Organization
Science, Academy of Management Journal, Academy of Management
Review, and Strategic Organization.

Frank regularly translates his research findings for wider audiences in
articles in the MIT Sloan Management Review, The Wall Street Journal,
Forbes, and elsewhere. To inform his research Frank has conducted
extensive fieldwork and executive training with leading corporations such
as Amgen, Daimler, Eli Lilly, Equifax, GE Energy, GE Healthcare, Hyundai
Heavy Industries (South Korea), Kimberly-Clark, Microsoft, McKesson,
NCR, Turner (TBS), UPS, among others.

Frank has a wide range of executive education experience, including
teaching in programs at GE Management Development Institute
(Crotonville, New York), Georgia Institute of Technology, Georgetown
University, ICN Business School (France), Politecnico di Milano (Italy), St.
Gallen University (Switzerland), and the University of Washington. He
received numerous teaching awards for excellence in the classroom
including the GT-wide Georgia Power Professor of Excellence award.

When launched in 2012, Frank’s Strategic Management text received
the McGraw-Hill 1st Edition of the Year Award in Business & Economics.
In 2018, the 4th edition of the text received McGraw-Hill’s Product of the
Year Award in Business & Economics. Frank’s Strategic Management text
has been translated into Greek, Korean, Mandarin, and Spanish. Sixteen of
his case studies are Most Popular among the cases distributed by Harvard
Business Publishing.

Frank held visiting professorships at EBS University of Business and
Law (Germany), Singapore Management University (Tommie Goh
Professorship), and the University of St. Gallen (Switzerland). He is a
member of the American Economic Association, Academy of Management,
and the Strategic Management Society.

Frank holds a PhD degree in strategic management from the University
of Washington; an MBA from the Marriott School of Management at
Brigham Young University; and is Diplom-Volkswirt (M.Sc. equivalent) in
economics from the University of Duisburg-Essen, Germany. Frank
completed training in the case teaching method at the Harvard Business
School.

Page xiv

PREFACE

The market for strategy texts can be broadly separated into two overarching
categories: traditional application-based and research-based. Traditional
application-based strategy books represent the first-generation texts with
first editions published in the 1980s. The research-based strategy books
represent the second-generation texts with first editions published in the
1990s. I wrote this text to address a needed new category—a third
generation of strategy content that combines into one the student-accessible,
application-oriented frameworks of the first-generation texts with the
research-based frameworks of the second-generation texts. The market
response to this unique approach to teaching and studying strategy
continues to be overwhelmingly enthusiastic.

To facilitate an enjoyable and refreshing reading experience that
enhances student learning and retention, I synthesize and integrate strategy
frameworks, empirical research, and practical applications with current
real-world examples. This approach and emphasis on real-world examples
offers students a learning experience that uniquely combines rigor and
relevance. As John Media of the University of Washington’s School of
Medicine and lifelong researcher on how the mind organizes information
explains:

How does one communicate meaning in such a fashion that learning is
improved? A simple trick involves the liberal use of relevant real-world
examples, thus peppering main learning points with meaningful
experiences. . . . Numerous studies show this works. . . . The greater the
number of examples . . . the more likely the students were to remember
the information. It’s best to use real-world situations familiar to the
learner. . . . Examples work because they take advantage of the brain’s
natural predilection for pattern matching. Information is more readily
processed if it can be immediately associated with information already
present in the brain. We compare the two inputs, looking for similarities
and differences as we encode the new information. Providing examples is
the cognitive equivalent of adding more handles to the door. [The more

Page xv

handles one creates at the moment of learning, the more likely the
information can be accessed at a later date.] Providing examples makes
the information more elaborative, more complex, better encoded, and
therefore better learned.*

Strategic Management brings conceptual frameworks to life via examples
that cover products and services from companies with which students are
familiar, such as Facebook, Amazon, Google, Tesla, Starbucks, Apple,
McDonald’s, Nike, Disney, Airbnb, and Uber. Liberal use of such examples
aids in making strategy relevant to students’ lives and helps them
internalize strategy concepts and frameworks. Integrating current examples
with modern strategy thinking, I prepare students with the foundation they
need to understand how companies gain and sustain competitive advantage.
I also develop students’ skills to become successful leaders capable of
making well-reasoned strategic decisions in a turbulent 21st century.

I’m pleased to introduce the new 5th edition of Strategic Management.
My distinctive approach to teaching strategy not only offers students a
unique learning experience that combines theory and practice, but also
provides tight linkages between concepts and cases. In this new 5th edition,
I build upon the unique strengths of this product, and continue to add
improvements based upon hundreds of insightful reviews and important
feedback from professors, students, and working professionals. The
hallmark features of this text continue to be:

■ Student engagement via practical and relevant application of
strategy concepts using a holistic Analysis, Formulation, and
Implementation (AFI) Strategy Framework.

■ Synthesis and integration of empirical research and practical
applications combined with relevant strategy material to focus on
“What is important?” for the student and “Why is it important?”

■ Strong emphasis on diversity and inclusion by featuring a
wide range of strategic leaders from different backgrounds and
fields, not just in business, but also in entertainment, professional
sports, and so forth.

■ Coverage of a wide array of organizations, including for-profit
public (Fortune 100) companies, private firms (including startups),
as well as nonprofit organizations. All of them need a good strategy!

■ Global perspective, with a focus on competing around the world,
featuring many leading companies from Asia, Europe, and Latin
America, as well as North America. I was fortunate to study, live,
and work across the globe, and I attempt to bring this cosmopolitan
perspective to bear in this text.

■ Direct personal applications of strategy concepts to careers and
lives to help internalize the content (including the popular
myStrategy modules at the end of each chapter).

■ Industry-leading digital delivery option (Create), adaptive learning
system (SmartBook), and online assignment and assessment system
(Connect).

■ Standalone module on How to Conduct a Case Analysis.
■ High-quality Cases, well integrated with text chapters and

standardized, high-quality and detailed teaching notes; there are
three types of cases that come with this text:
■ 12 ChapterCases begin and end each chapter, framing the

chapter topic and content.
■ 12 MiniCases in Part 4 of the book, with one MiniCase tailored

specifically to each chapter with accompanying discussion
questions. All of the cases are based on original research, provide
dynamic opportunities for students to apply strategy concepts by
assigning them in conjunction with specific chapters, and can be
used in a variety of ways (as individual assignments, group work,
and in class).

■ 22 full-length Cases, authored or co-authored by Frank T.
Rothaermel specifically to accompany this text; 12 of these cases
are included complimentary in 5e Connect.

I have taken great pride in authoring all the case materials that
accompany this text. This additional touch is a differentiating feature from
other offerings on the market and allows for strict quality control and
seamless integration with chapter content. All case materials come with sets
of questions to stimulate class discussion and provide guidance for written
assignments. High-quality case teaching notes that more fully integrate
content and cases are available to instructors in the Connect Library.

Page xvi

In addition to these in-text cases, McGraw-Hill’s custom-publishing
Create program offers all of the cases and teaching notes accompanying the
current as well as prior editions (www.mcgrawhillcreate.com/rothaermel).

What’s New in the Fifth Edition?
I have revised and updated the new edition in the following ways, many of
which were inspired by conversations and feedback from the many users
and reviewers of the prior editions.

OVERVIEW OF MAJOR CHANGES IN 5E
■ Section “Stakeholder Strategy and Competitive Advantage” now in

Chapter 1.
■ Section “Vision, Mission, and Values” now in Chapter 2.
■ New section “Strategic Decision Making” in Chapter 2.
■ New section “From External to Internal Analysis” in Chapter 4.
■ Three new ChapterCases: Five Guys (Chapter 4), Alphabet

and Google (Chapter 11), and Theranos (Chapter 12); all other
ChapterCases revised and updated.

■ All new or updated and revised Strategy Highlights (two per
chapter).

■ Revised and updated module on How to Conduct a Case Analysis.
■ Five new MiniCases (Uber, PayPal, JCPenney, GE, and

BlackBerry), featuring not only success stories but also failures; all
other MiniCases revised and updated. One MiniCase per chapter,
tightly integrated with learning objectives. Detailed and high-quality
teaching notes are available in the Connect Library.

■ Three new full-length Cases (Airbnb, Nike, and The Vanguard
Group); all other cases including most popular ones such as
Amazon, Apple, Best Buy, Facebook, McDonald’s, and Tesla,
among others, are revised and updated. Detailed and updated case
teaching notes, as well as financial data for these cases, are available
in the Connect Library.

http://www.mcgrawhillcreate.com/rothaermel

IN DETAIL
CHAPTER 1

■ Revised and updated ChapterCase: “Tesla’s Secret Strategy”
■ New Strategy Highlight: “Does Twitter have a Strategy?”
■ New Strategy Highlight: “Merck’s Stakeholder Strategy”
■ Improved chapter flow through moving the updated section

“Stakeholder Strategy and Competitive Advantage” into Chapter 1
(from Chapter 2)

CHAPTER 2
■ Revised and updated ChapterCase: “Leadership Crisis at

Facebook?”
■ New section: “Strategic Decision Making”
■ New exhibit: “Two Distinct Modes of Decision Making”
■ New …

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