This document discusses business level strategies that companies can pursue to gain a competitive advantage. It examines the core strategies of cost leadership, differentiation, and focus. Cost leadership involves having the lowest costs, differentiation involves unique products/services, and focus involves targeting a niche market. The document also discusses evaluating strategies based on appropriateness, feasibility, and desirability. Finally, it provides examples of companies using different strategies, such as Tesla pursuing focus on electric vehicles and Cell C pursuing cost leadership in the telecom industry.

1. BMNG 7312
BUSINESS LEVEL STRATEGY

2. OVERVIEW
This chapter reviews the strategic methods a company should adopt to be
able to compete in the business industry. This chapter examines the
principle of business level strategies which deal with an organisation's
plan to compete successfully.
The chapter will also examine the core business level strategies needed
to be implemented in the competition. Which does include choosing an
appropriate tactic against its rivals to have a better competitive
advantage.

3. BUSINESS LEVEL STRATEGIES
Business level strategies detail actions taken to provide value to
customers and gain a competitive advantage by exploiting core
competencies in specific, individual product or service markets. Business-
level strategy addresses the question of how a firm will compete in a
particular industry.

4. HOW TO EVALUATE A STRATEGY
Strategy evaluation is as significant as strategy formulation because it
throws light on the efficiency and effectiveness of the comprehensive
plans in achieving the desired results.
Thompson and Martin offered three considerations to evaluate a strategy
which are likely to conflict. These considerations concern
appropriateness, feasibility and desirability.

5. EVALUATING STRATEGIES
• Appropriateness:
~Often referred to as the suitability of the strategy.
~A strategy chosen by an organisation should be appropriate, both internally and
externally.
~Concerned with key issues of the organisation being addressed by the strategy in
place.
~Tools used to test a strategy for appropriateness include: SWOT, Decision tree and
Scenarios

6. EVALUATING STRATEGIES CONT.
• Feasibility:
~Is the organisations ability to carry out the proposed strategies.
~Evaluation is based on the finance and resource availability and its
ability to meet the industry and customer demands

7. EVALUATING STRATEGIES CONT.
• Feasibility cont.:
Question to ask when considering the feasibility of a strategies:
~Is the strategy capable of achieving the objectives that it addresses?
~Would it be effective and efficient?
~Are there sufficient resources to implement this strategy?

8. EVALUATING STRATEGIES CONT.
• Desirability:
Relates to assessing the ability of the strategy to produce results in either
the short or the longer term, concerns being the priorities of the
organisation
~Desirability relates to the risk in terms of vulnerability and timing.

9. CHOOSING A STRATEGY
~Usually companies pursue business strategies to gain a competitive advantage
which directly helps them identify their direct and indirect competitors.
~A company may choose to work on any of the 3 basic form.
~Generic competitive approaches are:
-Cost leadership
-Differentiation
-Focus
These approaches are referred to as generic, because all businesses can use
them.

10. COST LEADERSHIP
Overall cost leadership is a strategy that is built on low input costs. The savings
from the lower costs are then transferred to a large, price sensitive market.
~ Cost leadership strategies aim to build and sustain their competitive advantage
by reducing its costs.
~A Cost leadership business isn't searching for leader differentiation because of
their low level of product differentiation.
~Through cost-leadership strategies companies can achieve their positioning
from their product
~The advantages of a lower cost base give the organisation an edge over its
competitors.

11. DISADVANTAGE OF THE COST LEADERSHIP
The main disadvantage that cost leadership in strategies is when rivals
develop a strategy that can enter the market, lower their prices an beat
the leading company in the market.

12. DIFFERENTIATION
Differentiation is built on producing goods and services which are unique
and valued.
~There is a smaller target market that is willing to pay.
~Aim is to achieve higher market share than its competitors.
~This strategy is also referred to as the premium strategy.

13. DIFFERENTIATION STRATEGY CONT.
• Factors impacting on success of differentiation strategies:
~Clear identification of customers
~Understanding what is valued by customers or
~What customers are willing to pay for
~Clear identification of competitors
~Ease of imitation

14. DISADVANTAGES OF DIFFERENTIATION
STRATEGIES
~Threat of imitation by competitors.
~Importance of differentiation diminishes as customers become more
price sensitive.
~Threat of charging a price higher than the market will bear.

15. FOCUS STRATEGY
~A focus strategy is followed when the organisation focuses on a specific
niche in the marketplace, and develops its competitive advantage by
offering products especially developed for the niche.
~A focus strategy aimed at securing a competitive edge based either on
low cost or offering best value, becomes increasingly attractive when the
target market niche is big enough to be profitable and offers good growth
potential.
~The focus strategy offers protection to the organisationin terms of its
rivals to the extent that it can provide a product or service they cannot.

16. DISADVANTAGES OF THE FOCUS STRATEGY
~Produces in small volumes, its production costs often exceed those of a
low-cost organisation.
~Higher costs can also reduce profitability if a company is forced to invest
heavily in developing a distinctive competency to compete with a
differentiated organisation.
~The focus niche can suddenly disappear because of technological
change or changes in consumers’ tastes.

17. FIVE(5) COMPANY'S PURSUING BUSINESS LEVEL
STRATEGIES
Focus strategy: TESLA competes only ecological vehicles that produce
full electrical vehicles with no gas emission and maintenance service.
TESLA seeks for premium electrical niche market.
Differentiation strategy: BMW and Mercedes-Benz are commanded
premium price, because their target market seeks for prestige and quality
Differentiation strategy: BMW doesn't only offer prestige cars, they
attempt be as modern and more sophisticated as they can, by being
leaders in offering new technology and innovation in their industry

18. FIVE(5) COMPANY'S PURSUING BUSINESS LEVEL
STRATEGIES CONT.
Cost leadership strategy: Khulula.com, their choice of business level
strategy is a low-cost provider strategy. They aim to serve a large market
that is price sensitive.
Cost leadership strategy: Cell C network provider uses the low-cost
provider strategy. Cell C provides network to a large amount of people in
S.A and they always aim to be the best network provider, they seek to
achieve a lower price than competitors while maintaining a similar value
product or service to that offered by competitors with a large market size.

19. DIFFERENTIATION AND COST LEADERSHIP
Michael Porter’s stated in his book, Competitive Advantage, “Becoming
stuck in the middle is often a manifestation of a firm’s unwillingness to
make choices about how to compete. It tries for competitive advantage
through every means and achieved none, because achieving different
types of competitive advantage usually requires inconsistent actions.”

20. REFERENCES
• Differentiate your business. 2016. Differentiation And Cost Leadership Or Cost
Leadership?. [online].Available at:
http://www.differentiateyourbusiness.co.uk/differentiation-and-cost-leadership-or-cost-
leadership [Accessed 20 July 2016].
• Louw, L and Venter. P. 2013. Strategic management developing sustainability in Southern
Africa. 3nd edition. Oxford University Press.
• MSG. Strategic Management Process. 2016. online. Available at:
http://www.managementstudyguide.com/strategic-management-process.htm [Accessed
date 20 July 2016].
• Strategic Management: Evaluation and Execution. 2012. Available at:
http://2012books.lardbucket.org/books/strategic-management-evaluation-and-
execution/s09-selecting-business-level-strat.html. [Accessed date: 19 July 2016].