Strategy begins by identifying what the system can sustain, not by writing down what management would like to happen.
The argument.
Most strategic language starts with aspiration: grow this category, enter that market, build a direct channel, become premium. Economics starts one step earlier. Which constraints bind, and which desired outcomes are mutually compatible?
A price point constrains allowable cost. A retailer margin constrains contribution. A cash-conversion cycle constrains growth. A platform concentration constrains bargaining power. A production system constrains assortment. These are not implementation details that follow strategy; together they define the feasible strategy set.
This is why the useful question is often not “What should we do?” but “What can be true at the same time?” If the desired combination is impossible, management has to change a constraint rather than demand harder execution.
Good strategy is consequently less theatrical than most planning exercises. Find the binding constraint, calculate the trade, and spend capital where it changes the feasible set.
Return to the Economics Office index, or read Fourth Derivative in the Free Public Library.