Fluent Essays

1. The chapter discusses several strategic leadership issues at Facebook. Several other firms are also noted in the chapter with some positive and some negative leadership results. Choose a firm mentioned in the chapter and discuss current controversial issues it faces. How should strategic leaders address the major issues you identified? In what situations is top-down planning likely to be superior to bottom-up emergent strategy development? . 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 criterion. 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 …