BMNG7312 Group 9 (Waterfall Campus)

1. Bmng7312
Work package 1
Learning unit 1
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2. GROUP 9
• Chad Buchner
• Candice Seekola
• Isa Quibe
• Dlamini Seluleko
• Tamsyn Scholtz
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4. a) Explain where the choice of
business level strategy fits into the
strategic management process
Business level strategy is defined as a plan of action which
managers adopt to use resources and distinctive competencies
to gain a competitive advantage.
Porter’s generic strategies consist of 3 types of business level
strategies, namely:
• Overall Cost leadership
• Differentiation
• Focus

5. • Overall Cost Leadership
The aim of overall cost leadership is to outperform
competitors by doing everything to produce goods
and services at the lowest possible cost.

6. Differentiation
This refers to the ability to satisfy a
customers need by offering unique
products or services.

7. Focus
Focus is aimed at serving the needs of a
limited customer group or segment.

8. Strategic Management Process
The strategic management process is the way in
which an organisation defines its strategy.
It is a continuous process in which the organisation
decides to implement a select few strategies, details
the implementation plan and keeps appraising the
progress and success of implementation through
regular assessment (MBA Skool.com, 2011-2016).

9. The strategic management process consists of
4 components, these are:
• Environmental scanning
• Strategy formulation
• Strategy implementation
• Strategy evaluation

10. At the business unit level, the strategic management issues
have less to do with the coordination of operating units and
place more focus on developing and being able to sustain a
competitive advantage for the goods which are being
produced and the services which are being offered.
The strategy formulation phase of the strategic management
process at this level deals with positioning the business
against rivals, anticipating changes in demand and
influencing the nature of competition (QuickMBA, 1999-2010).
The choice of which generic strategy to use must be linked
to the components of the strategic management process
and the best alterative to achieve competitive advantage
must be identified.

11. b) Provide detailed examples of 5
companies pursuing the various
business level strategies
OVERALL COST LEADERSHIP
1) Wal-Mart
Wal-Mart uses their everyday low prices to offer cheaper rates on
products compared to their competitors on a continuous basis. They
source products from cheap, local suppliers and this allows them to
sell their products at a lower price whilst making a high volume of
profits (Scilly, 2016).

12. 2) IKEA
IKEA is able to keep their prices low by sourcing their products in low- wage
countries and offering a basic level of service. They do not assemble or deliver
furniture and this allows them to keep costs at a minimum while offering stylish
furniture (Scilly, 2016).
Differentiation
3) T-Mobile
T-Mobile aims directly at customers biggest pain points and away from the
size of their network. They also allow customers with unlocked phones to
switch to T-Mobile. They cater to a small audience which is made up of young,
urban people who do not wish to be ‘owned’ by their service provider (Shepard,
2014).

13. 4) Whole Foods
Whole foods has been successful in differentiating themselves from their
competitors through promoting an eco-friendly lifestyle by getting rid of
plastic bags in 2008, collaborating with ‘Top Chef’ to promote their food
products, having a mix of tech savvy and traditional marketing and
branding approach and they even run blogs and have an app (Shepard,
2014).
Focus
5) Pepsico
Pepsico provides a scope for greater knowledge of a market segment
and it makes entry into a new market less costly and easier. This
business benefits from specialisation, however, one of the risks include
changes in the target market which the business is aimed at (SlideShare,
2016).

14. c) Provide an explanation of how you
would evaluate the choice of strategy
in an organisation
Some key factors to consider when evaluating strategy choices in an
organisation include the following:
• Internal Consistency
• External Environment
• Strategic Advantages
• Feasibility

15. Internal Consistency
The internal consistency evaluation verifies whether its approach
reinforces the aspects of existing structures. The specified targets have to
match the organisations overall goals and therefore, the internal
objectives of the business must match.
External Environment
This evaluation assesses the extent to which the strategy addresses
customers, competitors and regulatory bodies within the market
environment.

16. Strategic Advantages
This evaluation compares the costs related to activities, the benefits
and what strategic advantages the strategy predicts.
Feasibility
The feasibility evaluation checks whether resources, personnel and
staff expertise are adequate. It makes a comparison between what is
available and what the strategy needs for its implementation as well as
identifying any new issues that may arise as a result of doing the work.
(Markgraf, 2016)

17. D) Differentiate between the
business level strategies and explain
why some of these strategies work
better in certain types of
competitive conditions than others.

18. Different Business Level Strategies:
• Cost leadership / Low Cost Provider Strategy
• Best Value Strategy
• Differentiation Strategy

19. Cost leadership / Low Cost Provider Strategy
This strategy can be successful if:
- There is a large market
- The market is price sensitive
- The market is open to lower quality products.
Mr. Price is an example of a company which uses cost leadership as a strategy.
The aim of the cost leadership strategy is to reduce cost and undercut competitors
through achieving economies of scale and operational efficiency.

20. Best Value Strategy
The best value strategy seeks to achieve similar perceived
product quality, however, at a lower cost than its competitors.
Offshoring production to other countries with lower labour costs
is an example of reducing costs.

21. Differentiation Strategy
The aim of differentiation strategy is to drive
competitive advantage by creating a unique product /
service.
Uniqueness may be from the product itself, or the
brand. It is something that the consumer values.

22. E) The pitfalls associated with each
of the business level strategies

23. Pitfall of Cost Leadership
A potential pitfall associated with this strategy is that
due to the low price offered to customers, the products
may be perceived as poor quality which may reduce the
volume of sales.

24. Pitfalls of Best Value Strategy
Price wars should be avoided as margins will the
be reduced for all competitors which has the
potential of killing the market.

25. Pitfalls of a Differentiation Strategy
The uniqueness of a product or service should
not be easily copied as foreign businesses will
replace these products when entering the
market.

26. F) Explain whether organizations can combine cost
leadership and differentiation strategies.
Explain why or why not.
It is possible for organisations to pursue either a
differentiation or cost leadership strategy so long as the
overall strategy provides a competitive advantage.

27. REFERENCES
• MbaSkool.com. 2011-2016. Strategic Management Process. [online]. Available at:
http://www.mbaskool.com/business-concepts/marketing-and-strategy-terms/7247-
strategic-management-process.html [Accessed 19 July 2016].
• QuickMBA. 1999-2010. Hierarchical levels of strategy. [online]. Available at:
http://www.quickmba.com/strategy/levels/ [Accessed 20 July 2016].
• Scilly, M. 2016. Examples of cost leadership and strategy marketing. [online]. Available
at: http://smallbusiness.chron.com/examples-cost-leadership-strategy-marketing-
12259.html [Accessed 20 July 2016].
• Shepard, B. 2014. 12 Companies that brilliantly differentiated themselves from the
competition. [online]. Available at: http://blog.hubspot.com/insiders/branding-
differentiation [Accessed 20 July 2016].
• SlideShare. 2011. Porter’s generic strategies with examples. [online]. Available at:
http://www.slideshare.net/dipalij07/porters-generic-strategies-with-examples [Accessed
21 July 2016].
• Markgraf, B. 2016. How to evaluate business strategies. [online]. Available at:
http://smallbusiness.chron.com/evaluate-business-strategies-52661.html [Accessed 21
July 2016].
• BUSINESS MANAGEMENT 3B Module Guide 2016. (2014). 1st ed. pp.18 - 21.