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Question I – This chapter discusses some key strategic leadership issues (such as privacy and fake news) facing Facebook leaders Sheryl Sandberg and Mark Zuckerberg. Consider other firms mentioned in the chapter such as Amazon, PepsiCo, Uber, VW, and Starbucks. What social and ethical issues do the leaders of these firms face today? Choose a firm or industry and explore the relevant controversial issues it faces. How should strategic leaders address the major issues you have identified?

Question II – The “job to do” approach discussed with the Clayton Christensen milkshake example can be useful in a variety of settings. Even when we are the customers ourselves, sometimes we don’t look for better solutions because we get into routines and habits. Think about a situation you sometimes find frustrating in your own life or one you hear others complaining about frequently. Instead of focusing on the annoyance, can you take a step back and look for the real job that needed doing when the frustration occurred? What other options can be developed to “do the job” that may lead to less irritation in these situations? Strategic
Management

rot6128x_fm_i-xxviii_1.indd 1 11/26/19 7:34 PM

Frank T. Rothaermel
Georgia Institute of Technology

FIFTH EDITION

Strategic
Management

rot6128x_fm_i-xxviii_1.indd 3 11/26/19 7:34 PM

STRATEGIC MANAGEMENT, FIFTH EDITION

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. Previous editions ©2019, 2017, and 2015.
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 978-1-260-26128-8 (bound edition)
MHID 1-260-26128-X (bound edition)
ISBN 978-1-264-10379-9 (loose-leaf edition)
MHID 1-264-10379-4 (loose-leaf edition)
ISBN 978-1-264-10370-6 (instructor’s edition)
MHID 1-264-10370-0 (instructor’s edition)

Portfolio Director: Michael Ablassmeir
Product Developers: Anne Ehrenworth, Lai Moy
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Compositor: Aptara®, Inc.

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

Library of Congress Cataloging-in-Publication Data

Names: Rothaermel, Frank T., author.
Title: Strategic management / Frank T. Rothaermel.
Description: Fifth edition. | New York, NY : McGraw-Hill Education, 2021. |
 Includes bibliographical references and index.
Identifiers: LCCN 2019046436 (print) | LCCN 2019046437 (ebook) | ISBN
 9781264103799 (spiral bound) | ISBN 9781260261288 (hardback) | ISBN
 9781264103782 (ebook) | ISBN 9781264103713 (ebook other)
Subjects: LCSH: Strategic planning. | Management.
Classification: LCC HD30.28 .R6646 2021 (print) | LCC HD30.28 (ebook) |
 DDC 658.4/012—dc23
LC record available at https://lccn.loc.gov/2019046436
LC ebook record available at https://lccn.loc.gov/2019046437

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

rot6128x_fm_i-xxviii_1.indd 4 11/26/19 7:34 PM

DEDICATION 

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

—Frank T. Rothaermel

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vi

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

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

CONTENTS IN BRIEF

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vii

MINICASES & 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
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
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

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viii

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

CHAPTERCASES & STRATEGY HIGHLIGHTS 

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ix

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

CONTENTS

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x CONTENTS

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

6.6 Implications for Strategic Leaders 222

CHAPTERCASE 6 / Part II 222

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CONTENTS xi

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

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

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xii CONTENTS

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
Name Index 523
Subject Index 531

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xiii

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).

Frank’s research interests lie in the areas of strategy, innovation, and
entrepreneurship. Frank has published over 35 articles in leading aca-
demic 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 eco-
nomics 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 execu-
tive 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.

ABOUT THE AUTHOR

©Kelleyn Rothaermel

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xiv

The market for strategy texts can be broadly separated into two overarching categories: tra-
ditional 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 learn-
ing 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 life-
long 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 informa-
tion. Providing examples is the cognitive equivalent of adding more handles to the door.
[The more 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 internal-
ize 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 com-
bines 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 pro-
fessors, 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?”

*Medina, J. (2014), Brain Rules: 12 Principles for Surviving and Thriving at Work, Home, and School. (Seattle: Pear Press), 139–140.

PREFACE

rot6128x_fm_i-xxviii_1.indd 14 11/26/19 7:34 PM

PREFACE xv

■ 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) com-
panies, 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 for-
tunate to study, live, and work across the globe, and I attempt to bring this cosmopoli-
tan 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 specifi-
cally 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.

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 …

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