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Brief Contents
Part 1: The Tools of Strategic Analysis 
Chapter 1 What Is Strategy and the Strategic Management Process? 2
Chapter 2 Evaluating a Firm’s External Environment 26
Chapter 3 Evaluating a Firm’s Internal Capabilities 62
End-of-Part 1 Cases PC 1–1

Part 2: Business-Level Strategies 

Chapter 4 Cost Leadership 100
Chapter 5 Product Differentiation 128
End-of-Part 2 Cases PC 2–1

Part 3: Corporate Strategies 

Chapter 6 Vertical Integration 160
Chapter 7 Corporate Diversification 186
Chapter 8 Organizing to Implement Corporate Diversification 218
Chapter 9 Strategic Alliances 246
C h a p t e r 1 0 Mergers and Acquisitions 274
C h a p t e r 1 1 International Strategies 306
End-of-Part 3 Cases PC 3–1

Appendix: Analyzing Cases and Preparing for Class Discussions 343

Glossary 347
Company Index 355
Name Index 358
Subject Index 363
  vii
This page intentionally left blank
Contents
Part 1: The Tools of Strategic Analysis 

Chapter 1 What Is Strategy and the Strategic Management Process? 2

Opening Case: What Are These Birds So Angry? 2 The Relationship Between Economic and Accounting
Strategy and the Strategic Management Process 4 Performance Measures 18
Defining Strategy 4 Emergent Versus Intended Strategies 18
The Strategic Management Process 4 Ethics and Strategy: Stockholders Versus Stakeholders 20
What Is Competitive Advantage? 8 Strategy in the Emerging Enterprise: Emergent Strategies
Research Made Relevant: How Sustainable Are and Entrepreneurship 21
Competitive Advantages? 10 Why You Need to Know About Strategy 22
The Strategic Management Process, Revisited 10 Summary 22
Measuring Competitive Advantage 11 Challenge Questions 23
Accounting Measures of Competitive Advantage 11 Problem Set 24
Strategy in Depth: The Business Model Canvas 12 End Notes 25
Economic Measures of Competitive Advantage 16

Chapter 2 Evaluating a Firm’s External Environment 26

Opening Case: iTunes and the Streaming
Challenge 26
Understanding a Firm’s General Environment 28
The Structure-Conduct-Performance Model of Firm
Performance 31
Ethics and Strategy: Is a Firm Gaining a Competitive
Advantage Good for Society? 32
A Model of Environmental Threats 33
Threat from New Competition 34
Strategy in Depth: Environmental Threats
and the S-C-P Model 35
Threat from Existing Competitors 40
Threat of Substitute Products 41
Threat of Supplier Leverage 42
Threat from Buyers’ Influence 43
Environmental Threats and Average Industry
Performance 44
Another Environmental Force: Complementors 45
Research Made Relevant: The Impact of Industry and Firm
Characteristics on Firm Performance 47
Industry Structure and Environmental
Opportunities 47
Opportunities in Fragmented Industries:
Consolidation 48
Opportunities in Emerging Industries: First-Mover
Advantages 49
Opportunities in Mature Industries: Product
Refinement, Service, and Process Innovation 51
Strategy in the Emerging Enterprise: Microsoft
Grows Up 53
Opportunities in Declining Industries: Leadership,
Niche, Harvest, and Divestment 54
Summary 56
Challenge Questions 58
Problem Set 58
End Notes 59

  ix
x    Contents
Chapter 3 Evaluating a Firm’s Internal Capabilities
Opening Case: When a Noun Becomes a Verb 62
The Resource-Based View of the Firm 64
What Are Resources and Capabilities? 64
Critical Assumptions of the Resource-Based View 65
Strategy in Depth: Ricardian Economics and the
Resource-Based View 66
The VRIO Framework 66
The Question of Value 67
Strategy in the Emerging Enterprise: Are Business
Plans Good for Entrepreneurs? 69
Ethics and Strategy: Externalities and the Broader
Consequences of Profit Maximization 71
The Question of Rarity 72
The Question of Imitability 73
The Question of Organization 78
Research Made Relevant: Strategic Human Resource
Management Research 79
Applying the VRIO Framework 81
Applying the VRIO Framework to Southwest
Airlines 82
End-of-Part 1 Cases
Case 1–1: You Say You Want a Revolution:
SodaStream International PC 1–1
Case 1–2: True Religion Jeans: Will Going
Private Help It Regain Its
Congregation? PC 1–11
Part 2: Business-Level Strategies 
Chapter 4 Cost Leadership 100
Opening Case: The World’s Lowest-Cost Airline 100
What Is Business-Level Strategy? 102
What Is Cost Leadership? 102
Sources of Cost Advantages 102
Research Made Relevant: How Valuable Is Market
Share—Really? 109
Ethics and Strategy: The Race to the Bottom 111
62
Imitation and Competitive Dynamics
in an Industry 84
Not Responding to Another Firm’s Competitive
Advantage 85
Changing Tactics in Response to Another Firm’s
Competitive Advantage 86
Changing Strategies in Response to Another Firm’s
Competitive Advantage 88
Implications of the Resource-Based View 88
Where Does the Responsibility for Competitive
Advantage in a Firm Reside? 88
Competitive Parity and Competitive Advantage 90
Difficult-to-Implement Strategies 90
Socially Complex Resources 91
The Role of Organization 92
Summary 92
Challenge Questions 94
Problem Set 94
End Notes 95
Case 1–3: Wal-Mart Stores, Inc. PC 1–32
Case 1–4: Harlequin Enterprises: The Mira
Decision PC 1–46
The Value of Cost Leadership 111
Cost Leadership and Environmental Threats 112
Strategy in Depth: The Economics of Cost Leadership 113
Cost Leadership and Sustained Competitive
Advantage 114
The Rarity of Sources of Cost Advantage 114
The Imitability of Sources of Cost Advantage 115
 Contents    xi

Organizing to Implement Cost Leadership 119 Compensation Policies and Implementing Cost
Strategy in the Emerging Enterprise: The Oakland A’s: Leadership Strategies 124
Inventing a New Way to Play Competitive Baseball 120
Summary 124
Organizational Structure in Implementing Cost
Challenge Questions 125
Leadership 121
Problem Set 126
Management Controls in Implementing Cost
End Notes 127
Leadership 123

Chapter 5 Product Differentiation 128

Opening Case: Who Is Victoria, and What Is Her Organizing to Implement Product Differentiation 147
Secret? 128 Organizational Structure and Implementing Product
What Is Product Differentiation? 130 Differentiation 148
Bases of Product Differentiation 131 Management Controls and Implementing Product
Research Made Relevant: Discovering the Bases of Product Differentiation 148
Differentiation 133 Strategy in the Emerging Enterprise: Going in Search
Product Differentiation and Creativity 136 of Blue Oceans 149
Compensation Policies and Implementing Product
The Value of Product Differentiation 137 Differentiation Strategies 152
Product Differentiation and Environmental
Threats 137 Can Firms Implement Product Differentiation
Strategy in Depth: The Economics of Product and Cost Leadership Simultaneously? 152
Differentiation 138 No: These Strategies Cannot Be Implemented
Product Differentiation and Environmental Simultaneously 153
Opportunities 139 Yes: These Strategies Can Be Implemented
Simultaneously 154
Product Differentiation and Sustained Competitive
Advantage 140 Summary 155
Rare Bases for Product Differentiation 140 Challenge Questions 156
Ethics and Strategy: Product Claims and the Ethical Problem Set 157
Dilemmas in Health Care 141 End Notes 158
The Imitability of Product Differentiation 142

End-of-Part 2 Cases
Case 2–1: Airasia X: Can the Low Cost Model go Case 2–3: The Levi’s Personal Pair Proposal PC 2–43
Long Haul? PC 2–1 Case 2–4: Papa John’s International, Inc. PC 2–53
Case 2–2: Ryanair—The Low Fares Airline:
Whither Now? PC 2–17
xii    Contents

Part 3: Corporate Strategies 

Chapter 6 Vertical Integration 160

Opening Case: Outsourcing Research 160 Ethics and Strategy: The Ethics of Outsourcing 173
What Is Corporate Strategy? 162 The Imitability of Vertical Integration 175

What Is Vertical Integration? 162 Organizing to Implement Vertical Integration 176

Organizational Structure and Implementing Vertical
The Value of Vertical Integration 163 Integration 176
Strategy in Depth: Measuring Vertical Integration 164 Strategy in the Emerging Enterprise: Oprah, Inc. 177
Vertical Integration and the Threat of Management Controls and Implementing Vertical
Opportunism 165 Integration 178
Vertical Integration and Firm Capabilities 167 Compensation in Implementing Vertical Integration
Vertical Integration and Flexibility 168 Strategies 179
Applying the Theories to the Management of Call
Centers 170 Summary 181
Research Made Relevant: Empirical Tests of Theories Challenge Questions 183
of Vertical Integration 170 Problem Set 183
Integrating Different Theories of Vertical End Notes 184
Integration 172
Vertical Integration and Sustained Competitive
Advantage 172
The Rarity of Vertical Integration 173

Chapter 7 Corporate Diversification 186

Opening Case: The Worldwide Leader 186 Ethics and Strategy: Globalization and the Threat
What Is Corporate Diversification? 188 of the Multinational Firm 208
Types of Corporate Diversification 188 Corporate Diversification and Sustained Competitive
Limited Corporate Diversification 189 Advantage 209
Related Corporate Diversification 190 Strategy in Depth: Risk-Reducing Diversification
Unrelated Corporate Diversification 191 and a Firm’s Other Stakeholders 210
The Value of Corporate Diversification 191 The Rarity of Diversification 211
What Are Valuable Economies of Scope? 191 The Imitability of Diversification 212
Research Made Relevant: How Valuable Are Economies Summary 213
of Scope, on Average? 192 Challenge Questions 214
Strategy in the Emerging Enterprise: Gore-Tex and Guitar Problem Set 214
Strings 199 End Notes 216
Can Equity Holders Realize These Economies of Scope
on Their Own? 207
 Contents    xiii

Chapter 8 Organizing to Implement Corporate Diversification 218

Opening Case: And Then There Is Berkshire Allocating Corporate Capital 235
Hathaway 218 Transferring Intermediate Products 236
Organizational Structure and Implementing Corporate Strategy in the Emerging Enterprise: Transforming Big
Diversification 220 Business into Entrepreneurship 239
The Board of Directors 221 Compensation Policies and Implementing Corporate
Strategy in Depth: Agency Conflicts Between Managers Diversification 240
and Equity Holders 223 Ethics and Strategy: Do CEOs Get Paid Too Much? 240
Research Made Relevant: The Effectiveness of Boards
Summary 242
of Directors 224
Challenge Questions 242
Institutional Owners 225
Problem Set 243
The Senior Executive 226
End Notes 244
Corporate Staff 227
Division General Manager 229
Shared Activity Managers 230
Management Controls and Implementing Corporate
Diversification 231
Evaluating Divisional Performance 232

Chapter 9 Strategic Alliances 246

Opening Case: Breaking Up Is Hard to Do: The Imitability of Strategic Alliances 261
Apple and Samsung 246 Ethics and Strategy: When It Comes to Alliances,
What Is a Strategic Alliance? 248 Do “Cheaters Never Prosper”? 262

How Do Strategic Alliances Create Value? 249 Organizing to Implement Strategic

Strategic Alliance Opportunities 249 Alliances 265
Strategy in Depth: Winning Learning Races 252 Explicit Contracts and Legal Sanctions 266
Research Made Relevant: Do Strategic Alliances Equity Investments 266
Facilitate Tacit Collusion? 255 Firm Reputations 267
Joint Ventures 268
Alliance Threats: Incentives to Cheat on Strategic Trust 269
Alliances 256
Adverse Selection 257 Summary 270
Moral Hazard 257 Challenge Questions 271
Holdup 258 Problem Set 271
Strategy in the Emerging Enterprise: Disney and Pixar 259 End Notes 272
Strategic Alliances and Sustained Competitive
Advantage 260
The Rarity of Strategic Alliances 260
xiv    Contents
C h a p t e r 1 0   Mergers and Acquisitions 274
Opening Case: The Google Acquisition Machine
What Are Mergers and Acquisitions? 276
The Value of Mergers and Acquisitions 277
Mergers and Acquisitions: The Unrelated Case 277
Mergers and Acquisitions: The Related Case 278
What Does Research Say About Returns to Mergers
and Acquisitions? 282
Strategy in the Emerging Enterprise: Cashing Out 283
Why Are There So Many Mergers and Acquisitions? 284
Strategy in Depth: Evaluating the Performance Effects
of Acquisitions 286
Mergers and Acquisitions and Sustained Competitive
Advantage 287
Valuable, Rare, and Private Economies of Scope 288
Valuable, Rare, and Costly-to-Imitate Economies
of Scope 289
Chapter 11 International Strategies 306
Opening Case: The Baby Formula Problem 306
Strategy in the Emerging Enterprise: International
Entrepreneurial Firms: The Case of Logitech 308
The Value of International Strategies 309
To Gain Access to New Customers for Current
­Products or Services 310
Internationalization and Firm Revenues 310
Strategy in Depth: Countertrade 314
Internationalization and Product Life Cycles 315
Internationalization and Cost Reduction 316
To Gain Access to Low-Cost Factors of
Production 316
Raw Materials 316
Labor 316
Ethics and Strategy: Manufacturing Tragedies and
International Business 317
Technology 318
To Develop New Core Competencies 319
Learning from International Operations 319
Leveraging New Core Competencies in Additional
Markets 321
To Leverage Current Core Competencies in New
Ways 321
274 Unexpected Valuable Economies of Scope Between
Bidding and Target Firms 290
Implications for Bidding Firm Managers 290
Implications for Target Firm Managers 295
Organizing to Implement a Merger or
Acquisition 296
Post-Merger Integration and Implementing a
Diversification Strategy 297
Special Challenges in Post-Merger Integration 297
Research Made Relevant: The Wealth Effects
of Management Responses to Takeover Attempts 298
Summary 302
Challenge Questions 303
Problem Set 303
End Notes 304
To Manage Corporate Risk 321
Research Made Relevant: Family Firms in the Global
Economy 322
The Local Responsiveness/International Integration
Trade-Off 323
The Transnational Strategy 325
Financial and Political Risks in Pursuing International
Strategies 325
Financial Risks: Currency Fluctuation and
Inflation 325
Political Risks 326
Research on the Value of International Strategies 328
International Strategies and Sustained Competitive
Advantage 329
The Rarity of International Strategies 329
The Imitability of International Strategies 330
The Organization of International Strategies 332
Becoming International: Organizational Options 332
Summary 337
Challenge Questions 338
Problem Set 339
End Notes 340
 Contents    xv

End-of-Part 3 Cases
Case 3–1: eBay’s Outsourcing Strategy PC 3–1 Case 3–5: Aegis Analytical Corporation’s Strategic
Case 3–2: National Hockey League Enterprises Alliances PC 3–44
Canada: A Retail Proposal PC 3–14 Case 3–6: McDonald’s and KFC: Recipes for Success
Case 3–3: Starbucks: An Alex Poole Strategy in China PC 3–54
Case PC 3–19
Case 3–4: Rayovac Corporation: International
Growth and Diversification Through
Acquisitions PC 3–32

Appendix: Analyzing Cases and Preparing for Class Discussions 343

Glossary 347
Company Index 355
Name Index 358
Subject Index 363
Preface
The first thing you will notice as you look through this edition of our book is that it con-
tinues to be much shorter than most textbooks on strategic management. There is not the
usual “later edition” increase in number of pages and bulk. We’re strong proponents of the
philosophy that, often, less is more. The general tendency is for textbooks to get longer and
longer as authors make sure that their books leave out nothing that is in other books. We
take a different approach. Our guiding principle in deciding what to include is: “Does this
concept help students analyze cases and real business situations?” For many concepts we
considered, the answer is no. But, where the answer is yes, the concept is in the book.

New to This Edition

This edition includes many new chapter-opening cases, including:

• Chapter 1: A case on the video app “Angry Birds”

• Chapter 2: A case on the music streaming industry
• Chapter 3: A case on how Google keeps going
• Chapter 8: A case on Berkshire-Hathaway’s corporate strategy
• Chapter 9: A case on the alliance between Apple and Samsung
• Chapter 10: A case on Google’s acquisition strategy
• Chapter 11: A case on the infant formula business in China

All the other opening cases have been reused and updated, along with all the examples
throughout the book.
Two newer topics in the field have also been included in this edition of the book: the
business model canvas (in Chapter 1) and blue ocean strategies (in Chapter 5).
This edition features several new and updated cases, including:

• You Say You Want a Revolution: Soda Stream International

• True Religion Jeans: Will Going Private Help It Regain Its Congregation?
• Walmart: Walmart Stores, Inc., in 2013
• Air Asia X: Can the Low Cost Model Go Long Haul?
• RyanAir—The Low Fares Airline: Whither Now?
• Papa John’s International, Inc.
• e-Bay’s Outsourcing Strategy
• National Hockey League Enterprises Canada: A Retail Proposal
• Starbucks: An Alex Poole Strategy Case
• Rayovac Corporation: International Growth and Diversification Through Acquisitions

VRIO Framework and Other Hallmark Features

One thing that has not changed in this edition is that we continue to have a point of view
about the field of strategic management. In planning for this book, we recalled our own
educational experience and the textbooks that did and didn’t work for us then. Those few
that stood out as the best did not merely cover all of the different topics in a field of study.
They provided a framework that we could carry around in our heads, and they helped us
xvi  
 Preface    xvii

to see what we were studying as an integrated whole rather than a disjointed sequence of
loosely related subjects. This text continues to be integrated around the VRIO framework.
As those of you familiar with the resource-based theory of strategy recognize, the VRIO
framework addresses the central questions around gaining and sustaining competitive
advantage. After it is introduced in Chapter 3, the VRIO logic of competitive advantage is
applied in every chapter. It is simple enough to understand and teach yet broad enough to
apply to a wide variety of cases and business settings.
Our consistent use of the VRIO framework does not mean that any of the concepts
fundamental to a strategy course are missing. We still have all of the core ideas and theories
that are essential to a strategy course. Ideas such as the study of environmental threats,
value chain analysis, generic strategies, and corporate strategy are all in the book. Because
the VRIO framework provides a single integrative structure, we are able to address issues
in this book that are largely ignored elsewhere—including discussions of vertical integra-
tion, outsourcing, real options logic, and mergers and acquisitions, to name just a few.
We also have designed flexibility into the book. Each chapter has four short sections
that present specific issues in more depth. These sections allow instructors to adapt the
book to the particular needs of their students. “Strategy in Depth” examines the intellectual
foundations that are behind the way managers think about and practice strategy today.
“Strategy in the Emerging Enterprise” presents examples of strategic challenges faced by
new and emerging enterprises. “Ethics and Strategy” delves into some of the ethical dilem-
mas that managers face as they confront strategic decisions. “Research Made Relevant”
includes recent research related to the topics in that chapter.
We have also included cases—including many new cases in this edition—that pro-
vide students an opportunity to apply the ideas they learn to business situations. The cases
include a variety of contexts, such as entrepreneurial, service, manufacturing, and interna-
tional settings. The power of the VRIO framework is that it applies across all of these set-
tings. Applying the VRIO framework to many topics and cases throughout the book leads
to real understanding instead of rote memorization. The end result is that students will find
that they have the tools they need to do strategic analysis. Nothing more. Nothing less.

Supplements
At the Instructor Resource Center, at www.pearsonhighered.com/irc, instructors can download
a variety of digital and presentation resources. Registration is simple and gives you immediate
access to all of the available supplements. As a registered faculty member, you also can receive
immediate access to and instructions for installing course management content on your campus
server. In case you ever need assistance, our dedicated technical support team is ready to help
with the media supplements that accompany this text. Visit http://247.pearsoned.custhelp.com
for answers to frequently asked questions and toll-free user support phone numbers.
The following supplements are available for download to adopting instructors:

• Instructor’s Manual
• Case Teaching Notes
• Test Item File
• TestGen® Computerized Test Bank
• PowerPoint Slides

Videos
Videos illustrating the most important subject topics are available in two formats:
• ON DVD—available for in classroom use by instructors, includes videos mapped to
Pearson textbooks.
xviii    Preface

• IN MyLab—available for instructors and students, provides round-the-clock in-

stant access to videos and corresponding assessment and simulations for Pearson
textbooks.
Contact your local Pearson representative to request access to either format.

Other Benefits

Element Description Benefit Example

Chapter We have chosen firms that are familiar to most stu- By having cases tightly 2–3
Opening dents. Opening cases focus on whether or not Rovio linked to the material,
Cases Entertainment, Ltd.—maker of the popular video game students can develop
“Angry Birds”—can sustain its success, how Ryanair has strategic analysis skills
become the lowest cost airline in the world, how Victoria’s by studying firms
Secret has differentiated its products, how ESPN has ­familiar to them.
diversified its operations, and so forth.
Full Length This book contains selective, part-ending cases that Provides a tight link to PC 1–1–
Cases underscore the concepts in each part. This provides a tight chapter concepts, PC 1–10
link to the chapter concepts to reinforce understanding of facilitating students’
recent research. These are 1) decision oriented, 2) recent, ability to apply text
3) ­student-recognized companies, and 4) cases where the ideas to case analysis.
data are only partly analyzed.
Strategy in For professors and students interested in understanding Customize your course 223
Depth the full intellectual underpinnings of the field, we have as desired to provide
included an optional Strategy in Depth feature in every enrichment material for
chapter. Knowledge in strategic management continues to advanced students.
evolve ­rapidly, in ways that are well beyond what is
normally ­included in introductory texts.
Research The Research Made Relevant feature highlights very Shows students the 47
Made current research findings related to some of the strategic evolving nature of
Relevant topics discussed in that chapter. strategy.
Challenge These might be of an ethical or moral nature, forcing Requires students to 125
Questions students to apply concepts across chapters, apply concepts think critically.
to themselves, or extend chapter ideas in creative ways.
Problem Problem Set asks students to apply theories and tools from the Sharpens quantitative 157–158
Set chapter. These often require calculations. They can be thought skills and provides a
of as homework assignments. If students struggle with these bridge between
problems they might have trouble with the more complex chapter material and
cases. These problem sets are largely diagnostic in character. case analysis.
Ethics and Highlights some of the most important dilemmas faced by Helps students make 208
Strategy firms when creating and implementing strategies. better ethical decisions
as managers.
Strategy in A growing number of graduates work for small and This feature highlights 53
the Emerging ­medium-sized firms. This feature presents an extended the unique challenges of
Enterprise example, in each chapter, of the unique strategic problems doing strategic analysis
facing those employed in small and medium-sized firms. in emerging enterprises
and small and medium-
sized firms.
Acknowledgments
Obviously, a book like this is not written in isolation. We owe a debt of gratitude to all those
at Pearson who have supported its development. In particular, we want to thank Stephanie
Wall, Editor-in-Chief; Dan Tylman, Acquisitions Editor; Sarah Holle, Program Manager;
Erin Gardner, Marketing Manager; Judy Leale, Project Manager Team Lead; and Karalyn
Holland, Senior Project Manager.
Many people were involved in reviewing drafts of each edition’s manuscript. Their
efforts undoubtedly improved the manuscript dramatically. Their efforts are largely un-
sung but very much appreciated.
Thank you to these professors who participated in manuscript reviews:

Yusaf Akbar—Southern New Hampshire University

Joseph D. Botana II—Lakeland College
Pam Braden—West Virginia University at Parkersburg
Erick PC Chang—Arkansas State University
Mustafa Colak—Temple University
Ron Eggers—Barton College
Michael Frandsen—Albion College
Swapnil Garg—University of Florida
Michele Gee—University of Wisconsin, Parkside
Peter Goulet—University of Northern Iowa
Rebecca Guidice—University of Nevada Las Vegas
Laura Hart—Lynn University, College of Business & Management
Tom Hewett—Kaplan University
Phyllis Holland—Valdosta State University
Paul Howard—Penn State University
Richard Insinga—St. John Fisher College
Homer Johnson—Loyola University Chicago
Marilyn Kaplan—University of Texas at Dallas
Joseph Leonard—Miami University
Paul Maxwell—St. Thomas University, Miami
Stephen Mayer—Niagara University
Richard Nemanick—Saint Louis University
Hossein Noorian—Wentworth Institute of Technology
Ralph Parrish—University of Central Oklahoma
Raman Patel—Robert Morris College
Jiten Ruparel—Otterbein College
  xix
xx    Acknowledgments

Roy Simerly—East Carolina University

Sally Sledge—Christopher Newport University
David Stahl—Montclair State University
David Stephens—Utah State University
Philip Stoeberl—Saint Louis University
Ram Subramanian—Grand Valley State University
William W. Topper—Curry College
Thomas Turk—Chapman University
Henry Ulrich—Central Connecticut State (soon to be UCONN)
Floyd Willoughby—Oakland University

Reviewers of the Fourth Edition

Terry Adler—New Mexico State University

Jorge Aravelo—William Patterson University
Asli M. Arikan—The Ohio State University
Scott Brown—Chapman University
Carlos Ferran—Governors State University
Samual Holloway—University of Portland
Paul Longenecker—Otterbein University
Shelly McCallum—Saint Mary’s University
Jeffrey Stone—CAL State–Channel Islands
Edward Taylor—Piedmont College
Les Thompson—Missouri Baptist University
Zhe Zhang—Eastern Kentucky University

All these people have given generously of their time and wisdom. But, truth be told,
­everyone who knows us knows that this book would not have been possible without
Kathy Zwanziger and Rachel Snow.
Author Biographies
Jay B. Barney
Jay Barney is a Presidential
Professor of strategic manage-
ment and the Lassonde Chair of
Social Entrepreneurship of the
Entrepreneurship and Strategy
Department in the David Eccles
Business School, The University
of Utah. He received his Ph.D.
from Yale and has held faculty
appointments at UCLA, Texas
A&M, and OSU [The Ohio State
University]. He joined the faculty at The University of Utah
in summer of 2013. Jay has published more than 100 journal
articles and books; has served on the editorial boards of
Academy of Management Review, Strategic Management
Journal, and Organization Science; has served as an associ-
ate editor of The Journal of Management and senior editor
at Organization Science; and currently serves as co-editor
at the Strategic Entrepreneurship Journal. He has received
William S. Hesterly
William Hesterly is the Associate
Dean for Faculty and Research
as well as the Dumke Family
Endowed Presidential Chair in
Management in the David Eccles
School of Business, University
of Utah. After studying at
Louisiana State University, he
received bachelors and masters
degrees from Brigham Young
University and a Ph.D. from the
University of California, Los Angeles. Professor Hesterly has
been recognized multiple times as the outstanding teacher
in the MBA Program at the David Eccles School of Business
and has also been the recipient of the Student’s Choice
Award. He has taught in a variety of executive programs
for both large and small companies. Professor Hesterly’s
research on organizational economics, vertical integration,
honorary doctorate degrees from the University of Lund
(Sweden), the Copenhagen Business School (Denmark),
and the Universidad Pontificia Comillas (Spain) and has
been elected to the Academy of Management Fellows and
Strategic Management Society Fellows. He has held hon-
orary visiting professor positions at Waikato University
(New Zealand), Sun Yat-Sen University (China), and Peking
University (China). He has also consulted for a wide vari-
ety of public and private organizations, including Hewlett-
Packard, Texas Instruments, Arco, Koch Industries Inc., and
Nationwide Insurance, focusing on implementing large-scale
organizational change and strategic analysis. He has received
teaching awards at UCLA, Texas A&M, and Ohio State. Jay
served as assistant program chair and program chair, chair
elect, and chair of the Business Policy and Strategy Division.
In 2005, he received the Irwin Outstanding Educator Award
for the BPS Division of the Academy of Management, and
in 2010, he won the Academy of Management’s Scholarly
Contribution to Management Award. In 2008, he was elected
as the President-elect of the Strategic Management Society,
where he currently serves as past-president.
organizational forms, and entrepreneurial networks has ap-
peared in top journals including the Academy of Management
Review, Organization Science, Strategic Management Journal,
Journal of Management, and the Journal of Economic Behavior
and Organization. Currently, he is studying the sources of
value creation in firms and also the determinants of who
captures the value from a firm’s competitive advantage.
Recent papers in this area have appeared in the Academy of
Management Review and Managerial and Decision Economics.
Professor Hesterly’s research was recognized with the
Western Academy of Management’s Ascendant Scholar
Award in 1999. Dr. Hesterly has also received best paper
awards from the Western Academy of Management and the
Academy of Management. Dr. Hesterly currently serves as
the senior editor of Long Range Planning and has served on
the editorial boards of Strategic Organization, Organization
Science, and the Journal of Management. He has served as
Department Chair and also as Vice-President and President
of the faculty at the David Eccles School of Business at the
University of Utah.
  xxi
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PA R T

1 THE TOOLS OF
STRATEGIC ANALYSIS
 CHAPTER
What Is Strategy
1 and the Strategic
Management Process?
L E A R N I N G O B J E C T I V E S After reading this chapter, you should be able to:

1. Define strategy. 5. Explain the difference between emergent and intended

strategies.
2. Describe the strategic management process.
6. Discuss the importance of understanding a firm’s
3. Define competitive advantage and explain its relation- strategy even if you are not a senior manager in a
ship to economic value creation. firm.
4. Describe two different measures of competitive
advantage.

MyManagementLab®
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Over 10 million students improved their results using the Pearson MyLabs.
Visit mymanagementlab.com for simulations, tutorials, and end-of-chapter problems.

Why Are These Birds So Angry?

Rarely can the beginning on an entire industry be traced to a single event on a specific day. But
this is the case with the smart phone applications industry.
On June 29, 2007, Apple first introduced the iPhone. A central feature of the iPhone was
that it would be able to run a wide variety of applications, or “apps.” And, most importantly for
the evolution of the apps industry, Apple decided that while it would evaluate and distribute
these applications—through the online Apple App Store—it would not develop them. Instead,
Apple would “crowd source” most applications from outside developers.
And, thus, the smart phone applications industry began. By April 24, 2009, iPhone users had
downloaded more than 1 billion apps from the Apple App Store. During 2012, more than 45.6 billion
smart phone apps were downloaded from all sources, generating revenues in excess of $25 billion.
Projections suggest double-digit growth in this industry for at least another five years.
Of course, much has changed since 2007. For example, Apple now has six competitors
for its Apple App Store, including Amazon App Store, Google Play Store, BlackBerry World, and
Windows Phone Store. Some of these stores distribute apps for non-Apple phone operating sys-
tems developed by Google (Android), BlackBerry, and Windows. But all of these distributors have
adopted Apple’s original model for developing applications: mostly outsource it to independent
development companies.
These development companies fall into four categories: (1) Internet companies—including
Google—who have developed smart phone versions of popular Internet sites—including, for

2
Another random document with
no related content on Scribd:
 So the youth allowed himself to be persuaded, and he became,
under the man’s instruction, such a clever thief that nothing was safe
from him which he had once made up his mind to have.
Meanwhile the second brother had met a man who put the same
question to him as to whither he was going and what he intended to
do.
“I don’t know yet,” answered the youth.
“Then come with me and be a star-gazer,” the man advised. “It is
the grandest trade in the world, for you gain the power to see
everything.”
The youth was pleased with the idea, and he became such an
expert star-gazer that, when he finished his apprenticeship, his
master gave him a telescope, and said, “With this you can see all
that happens in the sky and on the earth, and nothing can remain
hidden from you.”
The third brother was taken in hand by a huntsman, and received
such instruction in the art of shooting that he became a first-rate
marksman. When he had learned all there was to learn and was
ready to depart, his master presented him with a gun, and said,
“Whatever you aim at with this gun you will hit without fail.”
The youngest brother met a man who asked him if he would like to
be a tailor.
“I don’t know about that,” said the youth. “I haven’t much fancy for
sitting cross-legged from morning till night, and everlastingly pulling a
needle in and out.”
“There, there!” said the man, “you don’t know what you are talking
about. You will find that tailoring as I teach it is easy. It will be
pleasant to you and win you honor.”
The youth allowed himself to be persuaded, and went with the
man, who taught him tailoring very thoroughly. At length the time
came for him to depart, and his master gave him a needle and said,
“With that you will be able to stitch anything, even a thing as tender
as an egg-shell, or one as hard as steel, and no seam will be visible
after you are through.”
On the very day that the four years agreed on came to an end the
four brothers met at the place where they had parted, and after
embracing each other they hurried home to their father.
“Well,” said he, quite pleased to see them, “so the wind has blown
you back to me.”
They sat under a big tree in the yard and told him all that had
happened to them. When they finished, their father said, “Now I will
put your accomplishments to the test, and see what you can do.”
He looked up into the tree and said to his second son: “There is a
chaffinch’s nest up there on the topmost branch. Tell me how many
eggs there are in it.”
The star-gazer took his telescope, looked through it, and said,
“There are five.”
“Fetch the eggs down,” said the father to his eldest son, “and be
careful not to disturb the mother bird, who is sitting on them.”
The cunning thief climbed the tree, and removed the five eggs
from underneath the bird so deftly that she never noticed what he
had done, and he brought them down to his father. The father took
them and put one on each corner of a table, and the fifth in the
middle, and said to the huntsman, “You must cut all those eggs in
half at one shot.”
The huntsman aimed and divided each egg in half at one shot, as
his father desired. He certainly must have had some of the powder
that shoots round a corner. The eggs had little birds in them, and the
neck of each had been severed by the bullet.
“Now it is your turn,” said the father to the fourth son. “I expect you
to sew the birds and the shells together so they will be none the
worse for that shot.”
The tailor produced his needle, and stitched away as his father
had desired. When he finished the task, the thief climbed the tree
with the eggs, and put them back under the bird without her
perceiving him. The bird continued to sit on the eggs, and a few days
later the fledgelings crept out of the shells. Each had a red streak
round its neck where the tailor had sewn them together, but were
none the worse otherwise.
“I can certainly praise your skill,” said the father to his sons. “You
have used your time well while you have been away, and you have
all acquired very useful knowledge.”
Not long after this a great lamentation was made in the country
because the king’s daughter had been carried away by a dragon.
The king was overcome by grief and sorrowed for her day and night,
and he had it proclaimed that whoever rescued the princess should
have her for his wife.
The four brothers said to one another, “This will be an opportunity
for us to show what we can do;” and they agreed to sally forth
together to deliver the princess.
“I will soon discover where she is,” said the star-gazer.
He looked through his telescope, and said: “I see her already. She
is a long way from here, sitting on a rock in the middle of the sea,
and the dragon is there watching her.”
Then they went to the king, who, at their request, furnished them
with a ship, in which they sailed away over the sea till they
approached the rock. The princess was sitting there, and the dragon
was asleep with his head on her lap.
“I dare not shoot,” said the hunter, “for fear I should kill the
princess as well as the dragon.”
“Then I will try my luck,” said the thief, and he rowed a boat to the
rock and took the princess away so lightly and stealthily that the
monster continued to sleep and snore.
The thief got the princess safely on board the ship, and, full of joy,
the brothers spread the sails to the wind, and steered for the open
sea. But the dragon soon awoke, and when he realized that the
princess was gone, he started in pursuit of the ship, flapping through
the air at his best speed, snapping his tail savagely, and foaming at
the mouth with rage. Just as he was hovering over the ship about to
plunge down on it, the huntsman took aim with his unerring gun and
shot the dragon through the heart. The monster was killed instantly,
but his huge body fell on the ship and smashed it to pieces.

The brothers and the princess managed each to grasp a plank and
thus kept themselves afloat. They were in great straits, but the tailor
was equal to the emergency. With his wonderful needle he sewed
together the planks on which he and his companions were sustaining
themselves, and then they paddled about and collected all the other
floating fragments of the ship. The tailor stitched them together so
cleverly that in a short time the ship was seaworthy once more, and
they sailed happily home.
When the king saw his dear daughter again, he was very glad, and
said to the four brothers, “One of you shall marry her, but you must
settle among yourselves which one that shall be.”
They discussed the matter with a good deal of warmth, for each
pressed his own claims. The star-gazer said: “Had I not discovered
the princess all your doings would have been in vain. Therefore, she
is mine.”
The thief said: “What would have been the good of discovering her
if I had not stolen her away from the dragon? So she is mine.”
The huntsman said: “But you all would have been destroyed by
the monster had not my ball reached his heart. So she must be
mine.”
“That is all very fine,” said the tailor, “but if it had not been for my
sewing the wreck together, you would all have been miserably
drowned. Therefore the princess is mine.”
When they had all voiced their claims to the princess, the king
said: “Each of you is equally entitled to her, but since you cannot all
have her, none of you shall have her. Instead, I will reward you each
with half a province.”
The brothers were quite satisfied with this decision, and said, “It is
better so than that we should quarrel.”
So each of them received half a province, and they lived happily in
the home of their father the rest of their days.
 THE YOUTH WITHOUT FEAR

T
HERE was once a father who had two sons. One was
ambitious, and sensible, and clever enough to do almost
anything. But the younger one was so stupid he made no
progress at all. When people saw how useless he was, they said,
“His father will have plenty of trouble with him.”
If there was any task that needed doing, it fell to the lot of the elder
son, who never failed to do his work faithfully and well, unless his
father asked him to fetch something in the evening after dark. Then,
if the errand would compel him to pass through the churchyard or
along a dismal stretch of roadway, he would say: “Oh no, father, I
cannot go! I am afraid. It would make me shiver and shake.”
Occasionally when the household gathered around the fire after
supper, with very likely the company of a neighbor or two, some one
would tell a ghost story which would cause the listeners’ flesh to
creep, and they would exclaim, “How you make me shiver!”
The youngest son, however, as he sat in the corner and heard
these exclamations, could not imagine what was meant. “There’s
something queer about it,” said he. “They say: ‘It makes me shiver! It
makes me shiver!’ But it doesn’t make me shiver a bit. Shivering is
an accomplishment I don’t understand.”
One day his father said to him, “Listen, you lad in the corner there,
you are growing big and strong. You must learn some trade by which
to get a living. See how your brother works, but you are not worth
your salt.”
 “Well, father,” he responded, “I am quite ready to learn something.
With what shall I begin? I would very much like to learn how to shiver
and shake, for about that I know nothing.”
The elder son laughed when he heard him speak thus. “Good
heavens!” he thought, “what a simpleton my brother is! He will never
be good for anything as long as he lives.”
His father sighed and said, “What shivering means you may learn
easily enough, but such knowledge will not help you any in getting
your bread.”
Soon afterward the sexton called at the house, and the father
confided to him his anxiety about his younger son. “It is quite
evident,” said he, “that the lad will never be any credit to us. Would
you believe that when I asked him how he was going to earn his
living, he said he would like to learn to shiver and shake?”
“If that’s what he wants to learn,” said the sexton, “we can easily
gratify him. I can teach him that myself. Just let him serve me for a
while and I’ll put the polish on him.”
The father was pleased, for he thought, “Anyhow the lad will gain
something by the experience.”
So the sexton took the youth home with him, and he had to ring
the church bells. A few days passed, and the sexton woke him at
midnight and told him to get up and go to the church tower to ring the
bells. “You shall soon be taught how to shiver and shake,” thought
the sexton as he hastened to the belfry ahead of the lad, and crept
stealthily up the stairs.
The youth arrived a few minutes later and stumbled along up the
stairway in the darkness. He was about to grasp the bell rope when
he observed a white figure standing at the head of the stairs. “Who is
there?” he called out, but the figure neither stirred nor spoke.
“Answer!” cried the lad, “or get out of the way. You have no
business here in the night.”
But the sexton wanted the boy to think he was a ghost, and he did
not stir.
 The lad called out a second time: “What do you want here? Speak,
if you are an honest fellow, or I’ll throw you down the stairs.”
“He never would dare undertake such a thing,” thought the sexton.
So he made no sound and stood as still as if he were made of stone.
Once more the lad threatened the shrouded figure, and as he got
no answer he sprang forward and threw the ghost down the stairs.
The apparition bumped along down the steps and lay motionless in a
corner. Then the lad rang the bells, walked home, and without saying
a word to anybody went to bed. Soon he was fast asleep.
The sexton’s wife waited a long time for her husband, but he did
not come, and at last she became anxious and woke up the lad. “Do
you know what has become of my husband?” she asked. “He went
up into the church tower in front of you.”
“No,” answered the lad; “but there was somebody standing at the
head of the stairs in the belfry, and as he would neither reply nor go
away, I thought he was a rogue and I threw him downstairs. Go and
see if he was your husband. I should be sorry if he was.”
The woman hurried away and found the sexton moaning with a
broken leg. She carried him home, and the first thing in the morning
hastened with loud cries to the lad’s father. “Your son has brought a
great misfortune on us,” she said. “He has thrown my husband
downstairs and broken his leg. Take the good-for-nothing wretch
away out of our house.”
The father was horrified. He went back with her and gave the lad a
good scolding. “What is the meaning of this inhuman prank?” he
said. “The evil one must have put it into your head.”
“Father,” responded the lad, “I am quite innocent. He stood there
in the dark like a man with some wicked purpose. I did not know who
he was, and I warned him three times to speak or to go away.”
“Alas!” said his father, “you bring me nothing but disaster. Get out
of my sight. I will have nothing more to do with you.”
“To travel elsewhere is just what I wish,” said the lad, “for I hope
that will lead to my learning how to shiver and shake. I want at least
to have that accomplishment to my credit.”
“Learn what you like,” said his father. “It’s all the same to me. Here
are fifty silver pieces for you. Go out into the world, but tell no one
whence you come, or who your father is, for you would only bring me
to shame.”
“Just as you please, father,” said the lad. “If that is all you want I
can easily fulfil your desire.”
So the lad put his fifty silver pieces into his pocket and betook
himself to the highroad. As he tramped along he said over and over,
“Oh that I could learn to shiver! Oh that I could learn to shake!”
A man overtook him and heard the words he was saying. They
went on together till they came to a gallows whereon seven men
were hanging. “Sit down here,” said the man, “and when night comes
you will learn to shiver and shake.”
“If nothing more than that is needed,” said the lad, “I shall be well
pleased; and I promise you, in case I learn to shiver so speedily, that
you shall have the fifty silver pieces now in my pocket. Come back to
me early tomorrow morning.”
Then the lad sat down beside the gallows. It grew cold after
sundown, and a sharp wind blew and made the bodies on the
gallows swing back and forth with a dismal creaking of the ropes by
which they were suspended. “Poor fellows!” said the lad, “I am none
too warm down here in a sheltered nook on the ground, and you
must have a chilly time of it up aloft there.”
Then he curled up and went to sleep. Next morning the man who
had been his companion on the day before came and said, “Well, I
suppose you know now what shivering means.”
“No,” said the lad, “how could I learn it? Those fellows on the
gallows never opened their mouths.”
The man saw that he would get no silver pieces, and he went
away, saying, “Never before in my life did I meet such a person as
that.”
 Soon afterward the lad resumed his travels, and again began
saying to himself: “Oh that I could learn to shiver! Oh that I could
learn to shake!”
A carter, who chanced to be on the road, heard his plaint, and
asked, “Who are you?”
“I don’t know,” said the youth.
“Who is your father?” the carter questioned.
“That I must not say,” was the lad’s response.
“What is it you are grumbling about to yourself as you walk along?”
the carter inquired.
“Ah,” said the youth, “I wish to learn what shivering is, but no one
can teach me.”
“Nonsense!” said the carter. “Just you come with me and I’ll see
that your desire is gratified.”
So the youth went with the carter, and in the evening they reached
an inn and arranged to stay there for the night. “Oh that I could learn
to shiver! Oh that I could learn to shake!” sighed the youth as he sat
down to wait for supper.
The landlord laughed, and said, “If that’s what you want, you can
have plenty of opportunity for learning here.”
“Hold your tongue,” said the landlady. “Many an imprudent fellow
has paid the penalty for his curiosity with his life already. It would be
a sin and a shame not to have this stranger’s bright eyes see the
light of day again.”
But the youth said: “However difficult it may be to learn what
shivering is, the lesson is one I am eager to learn. I left my home to
seek such knowledge.”
He would not be put off with evasions, and at last the landlord told
him that not far distant stood an enchanted castle, and that any one
who stayed there over night would surely learn to shiver. Moreover,
the king had promised his daughter in marriage to the man who
would spend three nights in the castle, and every one said she was
the most beautiful young lady the sun ever shone on. Such a vigil
would break the spell that was on the castle, and he who
accomplished this would become master of a great treasure hidden
there and guarded by evil spirits. But many, aspiring to win the
princess and the treasure and the renown, had gone into the castle,
and not one had ever come out.
The next morning the youth went to the king, and said, “By your
leave, I would like to pass three nights in the enchanted castle.”
His request was granted, though with some reluctance, for the
king took a fancy to the lad, and was sorry to think of his probable
fate.
When night came, the youth went to the castle, made a bright fire
in one of the rooms, and sat down beside it. “Oh, if I could only
shiver!” said he, “but I doubt if I can learn how even here.”
At midnight he got up from where he was sitting and freshened the
fire. Suddenly some creatures in a corner of the room began to
shriek, “Mew, mew! how cold we are!”
“Simpletons!” he exclaimed, “what are you screeching for? If you
are cold, come and warm yourselves by the fire.”
Immediately two big black cats sprang forth from the gloomy
corner and sat down one on each side of him. They stared at him
with wild, fiery eyes until they had warmed themselves, and then
said, “Comrade, shall we have a game of cards?”
“Certainly,” he replied, “but show me your paws first.”
They each lifted a front foot and stretched out their claws.
“Why,” said he, “what long nails you’ve got! Wait a bit. I must cut
them for you.”
He picked up a sword he had brought with him, but instead of
cutting their nails he seized each cat in turn by the scruff of the neck
and killed it by thrusting his sword through its body. That done, he
dragged them to a window and heaved them out. But no sooner had
he got rid of these cats and was about to sit down by his fire again
than crowds of dogs, all jet black, swarmed out of every nook and
corner of the room. They howled horribly and trampled on his fire,
and tried to put it out.
For a time he looked quietly on, but at last he got angry, took up
his sword, and cried, “You rascally pack, away with you!” and he let
fly among them right and left. Some of them escaped, and the rest
he struck dead and threw out of the window.
When he finished, he returned to the fire, scraped the embers
together, and set it to blazing. At the far side of the room was a big
bed, and he went and lay down on it, intending to sleep the
remainder of the night. But just as he was closing his eyes the bed
began to move. It crossed the room, went out at a door, and soon
was tearing round and round the castle. “Very good,” he said, “the
faster the better!”
 The bed careered along as if it were drawn by six horses.
Sometimes it was in the castle, sometimes outside, and the way it
jolted over the thresholds and jigged up and down the stairs was
very surprising, to say the least. Suddenly it went hop, hop, hop, with
more violence than ever, and turned topsy-turvy so that it lay on the
lad like a mountain. But he pitched the pillows and blankets into the
air, and soon he had disencumbered himself and got on his feet.
“Now some one else may ride,” said he, and he made his way back
to his fire and lay down on the hearth and went to sleep.
In the morning the king came to the castle and found the youth
stretched out on the floor. He thought the ghosts had killed him, and
he said, “It is a pity that such a vigorous, handsome fellow should
thus perish.”
But the youth heard him and sat up, saying, “It has not come to
that yet.”
The king was much surprised, and asked him how he had fared.
“Very well,” he answered. “One night is gone, and I expect to get
safely through the others.”
Presently he returned to the inn. The landlord opened his eyes
when he saw him, and said: “I never thought to behold you alive
again. Have you learned how to shiver yet?”
“No,” replied the lad, “it’s all in vain.”
The second night he went again to the castle, started a fire, and
sat down by it and began his old song, “Oh if I could only learn to
shiver!”
At midnight he commenced to hear a ringing, rattling noise, first
soft, but increasing till there was a great uproar. Then there was a
sudden silence. At last, with a loud scream, half a man’s body came
tumbling down the chimney and rolled out on the floor in front of the
lad. “Hello!” he said, “here is only half a man. This is not enough.”
The rattling and ringing were renewed, and soon, amidst shrieks
and howls, the other half fell down.
“Wait a moment,” said the youth, “and I’ll poke up the fire.”
 When this was done, and he looked around, the two halves had
joined themselves together, and a hideous man sat on the bench.
“We didn’t bargain for that,” said the lad. “The bench is mine.”
He went to sit down, and the man tried to push him out of the way.
Then the youth became angry and flung the man aside and sat down
in his usual seat. Presently more men fell down the chimney, one
after the other, and they fetched with them nine thigh bones and two
skulls, and began to play skittles. The youth felt inclined to join in the
sport, and he called out, “I say, can I play too?”
“Certainly,” said they.
“Then here goes!” he cried. “The more, the merrier!”
He played with them till ten o’clock, when they disappeared. So he
lay down, and soon was fast asleep.
Next morning the king again came to see him, and said, “Well,
how did you get on this time?”
“I have been playing skittles,” he answered.
“Didn’t you learn to shiver?” the king asked.
“Not I,” he responded. “I only made merry.”
On the third night he once more was in the enchanted castle
sitting on his bench by the fire. “Oh, if I could only learn to shiver!” he
said, in great vexation.
When it grew late, six tall men came in carrying a coffin. “Hello
there!” said he, “set down your burden and make yourselves
comfortable.”
They put the coffin on the floor and he went to it and removed the
lid. Inside lay a man. He felt of the man’s hands and face. They were
as cold as ice. “I will soon see whether there is any life left in you,”
said he, and he picked up the man and sat down with him close by
the fire and rubbed his arms to make the blood circulate.
After a time the man grew warm and began to move. “There,” said
the youth, “you see I have got you warmed at last.”
 But the man rose up and cried, “Now I will strangle you!”
“What!” exclaimed the youth, “is that all the thanks I get? Back you
go into your coffin then.”
So saying, he grasped him, threw him in, and fastened down the
lid. Then the six men carried the coffin away. “Oh, deary me!” sighed
the youth, “I shall never learn to shiver if I stop here all my life.”
Just then a huge man entered the room. He was frightful to look
at, very old, with a long white beard. “You miserable wretch!” he
cried, “now you shall learn what shivering is, for you shall die.”
“Not so fast,” said the youth. “If I am to die, some one must kill
me.”
“I will make short work of you,” declared the old monster.
“Softly, softly!” said the lad. “Don’t boast. Very likely I am stronger
than you are.”
“We shall see about that,” said the old man. “Come with me.”
Then he led the way through numberless dark passages to a
smithy, took a sledge hammer, and with one blow struck an anvil
down into the earth so it was nearly buried out of sight.
“I can better that,” affirmed the youth, and he went to another
anvil, took an ax, and with one blow split the anvil half in two.
The old man had come so near to watch that his beard had
dropped down on the anvil, and it was wedged into the crevice by
the blow of the ax. “Now I have you,” said the youth, “and you will be
the one to die.”
Then he seized an iron rod and belabored the old man till the
sufferer shrieked for mercy and promised him great riches if he
would stop. So the lad pulled out the ax, and the released captive led
the way back into the castle and showed the youth three chests of
gold in the cellar. “One is for the poor,” he said, “one is for the king,
and one is for you.”
The clock struck twelve just as the old man finished speaking, and
he disappeared and left the youth alone in the dense darkness of the
cellar. “I must manage to get out somehow,” said the lad, and he
groped about till he found his way back to the room where he had his
fire. There he lay down and went to sleep.
Next morning the king came and said, “Surely you have now
learned to shiver.”
“No,” said the youth, “a coffin was brought to me containing a man
who was nearly frozen, and when I revived him he wanted to
strangle me. Afterward, an old man came who wanted to kill me, but
I got the better of him, and he showed me a lot of gold. However, no
one can show me what shivering means.”
Then the king said, “You have broken the spell on the castle, and
you shall be made a prince and marry my daughter.”
“That is all very fine,” said the youth, “but still I don’t know what
shivering is.”
The gold was brought out from the castle cellar, and the marriage
was celebrated; but happy as the youth now was, and much as he
loved his bride, there yet remained one cause for discontent, and he
was always saying: “Oh that I could learn to shiver! Oh that I could
learn to shake!”
This became quite a source of vexation to his wife as time went
on, and at last her waiting-woman said, “I will help you to teach him
the meaning of shivering.”
She went out to a brook that ran through the garden, and got a pail
of cold water full of little fishes. At night, when the prince was asleep,
his wife took off the coverings and poured the cold water over him.
The little fishes flopped all about him. Then he woke up and cried,
“Oh, how I am shivering, dear wife, how I am shivering! Now I know
what shivering is!”
 THE WONDERFUL TURNIP

T
HERE were once two brothers who were soldiers, and one had
become an officer and grown rich. The other remained a
common soldier and was poor. At last the poor one, with the
hope to improve his fortune, took off his soldiering coat and became
a farmer. He ploughed a small field and sowed turnip seed. The seed
came up, and the farmer soon observed that one turnip was growing
much faster than any of the others. It grew till he thought it would
never get done growing, and at the end of the season, when he
uprooted it, that one turnip filled a cart and required two oxen to draw
it. Truly it was the queen of turnips, and its like had never been seen
before, nor ever will be again. The farmer knew not what to do with
it, and was uncertain whether it would bring good fortune or bad.
“If I sold it I should not get much money for it,” said he. “As for
eating it, the ordinary turnips would do as well for that. I think I will
take it to the king.”
So away he went, with oxen dragging the cart that contained the
turnip, and in due time he arrived at court and presented the turnip to
the king.
 “What an extraordinary object!” the king exclaimed. “I have seen
many marvels, but never anything so remarkable as this. You must
be a child of good luck, whether you raised this turnip from seed or
found it full grown.”
“Oh no!” said the farmer, “lucky I certainly am not. For many years
I was a poor soldier, but recently I hung my uniform on a nail, and
now I till the earth. I have a brother who is rich and well known to
you, my lord king; but I, because I have nothing, am forgotten by all
the world.”
Thereupon the king pitied him and said, “You shall be poor no
longer;” and he presented him with gold, land, flocks, and herds that
made him richer than his brother.
When the brother heard what had happened he was envious and
pondered how he might gain a like treasure for himself. Presently he
took jewels and swift horses and gave them to the king. “If my
brother got so much for a single turnip,” thought he, “what will I not
get for these beautiful things?”