Strategy strategy value Strategy Dynamics Strategy Statics industry business market Description Strategy (with a Capital S) is the intellectual discipline sometimes called Strategic Management. I define it: the study of the fundamental determinants of potential business value.

The set of conditions needed for persistent differential returns. Power requires both a Benefit, something that materially increases cash flow, and a Barrier, conditions such that all the value to the firm of the Benefit is not arbitraged out by competition.

Strategy (with a lower case s) is the path to potential value for a strategically separate business. I define it: a route to continuing Power in significant markets.

The fundamental enterprise value of an activity. This is reflected ex post as generation of accessible returns to an owner (free cash flow). It is investors' expectation of the stream of these returns discounted over time that determines value ex ante.

The study of strategy development over time.

The study of strategic position at a single point in time.

The group of businesses whose products have a high degree of substitutability.

A strategically separate economic activity. By strategically separate I mean that its Power position is largely orthogonal to the Power position of other activities the firm pursues.

The revenue attributable to all firms in an industry.

7 POWERS industry economics competitive position Surplus Leader Margin Description The economic structure of a particular industry. For example, with fixed-cost-driven Scale Economies, this is measured by the magnitude of the fixed cost relative to the company's overall financials.

A characterization of a company position in the metric relevant to Power. For example, with Scale Economies it is relative scale compared to the largest competitor.

The profit margin a Power holder will achieve if pricing is such that a competing firm with no Power has zero profits.

This is not necessarily an expected equilibrium but rather is a good marker of the leverage possessed by the Power holder.

This would equal m in the Fundamental Equation of Strategy if the firm without Power experienced competitive arbitrage that resulted in its earning just its cost of capital and that the cost of capital for the firm with Power was equal to the cost of capital of the firm without Power.

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