BUSINESS LEVEL STRATEGY

Article Summary Written by: Zubair Ahmed Memon

Article source: https://www.albany.edu/faculty/es8949/bmgt481/lecture4.html

Submitted to:
Sir Adnan Kehar
 The most important factor for the success of any business is strategy. Strategy is concerned
with making choices among two or more alternatives. While selecting a strategy, the firm decides
to pursue one course of action instead of others given its resources and capabilities in order to gain
strategic competitiveness and earn above average returns. The decision is influenced by
opportunities and threats in the firm’s external environment.
There are four types of strategies that help companies to establish a competitive advantage
over its competitors. Firms can also decide to compete in a broad market or a focused market.
Further article discuss another strategy called integrated cost leadership/differentiation strategy.
Cost Leadership Strategy:
Companies may compete for a huge customer base through their price. Price is based on
internal efficiency to lower the cost of product that leave a margin to earn above average returns
and customer can afford to buy their products. Continuous efforts to lower costs against the
competitor is very important for becoming a successful cost leader. (Kia automobile)

Several factors contribute to cost leadership:

 Developing state of art efficient facilities
 Control on production and overhead costs
 Decreasing cost of sales, R&D, and service.

Differentiation Strategy:
In this strategy value is given to customers through special and unique features of
companies’ products. This might be high quality, unique features, innovation, technology, creating
valuable brand etc. (Intel, Mercedes Benz)

Focused Low Cost Strategy:

Organizations not only compete on price, and produce goods or services that serve the
needs of a particular competitive segment. (Ford automobile)

Focused Differentiation (niche marketing):

Other firms implement the focused differentiation strategy. In this strategy, companies
compete based on differentiation and but also focus on a particular segment of market to provide
their goods and services. (Porsche automobile)

Integrated cost leadership/differentiation strategy:

Generally, most consumers want to pay a low price for products with some highly
differentiated features. Because of these customer expectations, a number of firms engage in
primary and support activities that allow them to simultaneously pursue low cost and
differentiation. Firm seeking to do this use the integrated cost leadership/differentiation strategy.

The objective of using this strategy is to efficiently produce products with some
differentiated features. Efficient production is the source of maintaining low costs while
differentiation is the source of creating unique value. Firms that successfully use the integrated
cost leadership/differentiation strategy usually adapt quickly to new technologies and rapid
changes in their external environments. (Toyota automobile)