Final answer:
A firm's strategy is how it plans to gain competitive advantages by effectively combining inputs to create valuable outputs, encompassing manufacturing and services, and considering market and governmental influences.
Step-by-step explanation:
The term firm's strategy is often defined as its theory about how to gain competitive advantages. The discussions in this book about the theory of the firm suggest that a firm's strategy is specifically tailored to how it can outperform competitors by combining various inputs like labor, capital, land, and materials more effectively to produce valuable outputs. Whether these outputs are goods or services, the key is that they must be more valuable than the inputs to guarantee success. This includes manufacturing as well as services like transportation, distribution, and sales. Understanding how to maximize efficiencies in production, how to innovate, and how to scale effectively are all critical strategy considerations for a firm. Moreover, the strategy should take into account market conditions, competition levels, and the potential impact of government intervention on large-scale production and competition.