Question 1: What is a business-level strategy?
A business level strategy is a laid action plan that a business organization puts in place with an intention of gaining a business advantage over other businesses, mainly gaining competitive advantage over its competitors, customer service, and relations. It involves early discovery of the possibility of gaining competitive advantage over others usually using the comparative advantage or strength that the business has. Comparative advantage is of great importance in marketing especially when entering or penetrating into new markets as it involves reducing operational costs (Hanson, 2013).
A strategy in its integrated way is coordination of actions and commitments aimed at discovering a step ahead of others thus having a comparative advantage and thus standing a chance to outdo others in case of competition. Various businesses choose different strategies either aimed at creating an advantage on product differentiation or market service specification. It is thus the duty of a business executives especially the top management to determine the best of customer service or good to offer, the best way of creating this product or service and finally determining the best way to have this product or service equally distributed (Hanson, 2013).
Question 2: What is the relationship between a firm’s customers and its business-level strategy in terms of who, what and how? Why is this relationship important?
A business strategy is put in place to serve the customers. Thus, the customers make the rule or dictate the various strategies that a firm will ever take. A business strategy needs to answer the question of who it should serve usually being the customers. What? The customers’ needs are what a business strategy needs to serve. It is a requirement of the strategy to determine how it will serve these “what” (needs and demands) of customers. The relationship between the customers and business level strategy is of importance in that it the customers who dictate the business of the company or the firm and therefore, the business strategy that predicts the future of the firm need to focus on the customers (Scarbrough, 1996).
Question 3: What are the differences among the cost leadership, differentiation, focused cost leadership, focused differentiation and integrated cost leadership/differentiation business-level strategies?
Cost leadership and focused cost business level strategies use cost as their main basis of creating a competitive advantage over other businesses, cost strategy makes its deliveries in at lower costs relative to its rivals in the industry. However, the two differ in that cost leadership has a broader target unlike the focused cost strategy that is narrow and specific in its target towards achieving a competitive advantage. This requires the business to lay down a cost saving plan that will see the firm producing and delivering products at the lowest cost possible (Pearce, 2009).
Differentiation and focused differentiation employ strategies that create exclusive positive difference of the firm’s products or services. This involves matters of playing with customer's psychology or actual differentiation of products through reporting, blending and may be branded. Focus differentiation is narrow in its scope while differentiation is broad.
Integrated cost leadership/differentiation uses both product or service differentiation and cost saving techniques under a competitive scope (in between broad and narrow in achieving business competitive advantage.
Question 4: What are the specific risks associated with using each business-level strategy?
Competitive risks of cost leadership strategy
- It is easy for competitor to copy and thus implement the same cost strategy.
- Customers’ knowledge of differentiation may cost the cost reduction in their expenses.
- Competitors’ creativity and innovation might render the methods of production and delivery of goods and services outdated thus risking the firm.
Competitive risks of focus strategies
- The firm (Focuser) risks being out focused by its competitors.
- A broad scope competitor may pursue the niche market of the firm (Focuser).
- The customers served by the firm (Focuser) in the niche market may turn to broader markets.
Competitive risks of the integrated cost leadership/differentiation strategy
- The firm might be compromised of neither being most differentiated nor the lowest cost.
- The firm can also get it financially being stuck in the middle.
Hanson, D., Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2013). Strategic management: Competitiveness and globalisation.
Pearce, R., & Papanastassiou, M. (2009). The strategic development of multinationals. Basingstoke: Palgrave Macmillan.
Scarbrough, H. (1996). The management of expertise. New York: St. Martin's Press.