Final answer:
Strategy is about deciding what an organization will do and will not do, and is essential for setting a company's direction, dealing with complex decisions, and managing future expectations that affect its financial market performance.
Step-by-step explanation:
Strategy, as defined in your text, is not just about ensuring profitability or providing earnings forecasts. Rather, it is about deciding what the organization will do and what it will not do. Strategy is crucial for setting the direction of a company. It involves identifying the problems that need solving and developing a plan to address them, whether it's choosing to spend on a new plant, embarking on a research and development project, or figuring out the best way to achieve a political goal like winning an election.
Developing a strategy includes weighing multiple goals, considering imperfect information, and making judgements that can impact future earnings and the willingness of investors to provide financial capital. The complexity of acting strategically in a business environment is compounded by the fact that what matters for predicting whether the stock price of a company will do well is not solely based on actual future profits, but also on the current expectations of analysts and investors. Therefore, the chosen strategy has far-reaching implications for the company's future performance and how it is perceived in the financial markets.