Dominique Worthen

BUAD 460

R.McFarland

1. Define strategy and business-level strategy. What is the difference between these two
concepts?
Strategy refers to the direct and combined set of actions and commitments designed to
exploit the core competencies of a firm or organization in order to attain a competitive
advantage. This is the umbrella term of all levels of strategy which an organization
operates in be it business level strategy or corporate level strategy. On the end, business
level strategy refers to an integrated and coordinated set of commitments and actions a
firm implements to attain competitive advantage by utilizing core competences in a
specific product market. The business level strategy is the heartbeat of an organization
and it spells out how it plans to compete in a specific product market. They key
difference between strategy and business level strategy is that strategy is the umbrella
term of all strategies, whereas, business strategy has a great degree of specificity of the
area or areas it seeks to address. Business level strategy addresses issues like who the
firm seeks to serve in a particular market, what are the dying needs for its targeted
customers, and how the firm aims to address those needs in particular.
2.When a firm chooses a business-level strategy, it must answer the questions "Who?
What? And How?" What are these questions and why are they important?
By formulating a business level strategy a firm tackles the question of who will be
served. This question is important as it defines its targeted market, by zeroing on the
specific group of people or organizations the firms seeks to serve the firm is defining its
targeted market. After defining who the firm seeks to serve, the next question to be
answered is what the needs of those particular group of customers are. By defining what
the needs are the firm understand better what it needs to produce in order to meet the
needs of the people it seeks to serve. The third question answered by business level
strategy is how the firms seeks to address those needs facing its targeted market. Thus,
the business level strategy is at the heart of a firms strategy as it spells out the actions
and procedures a firm needs to execute in order to meet the needs of its target market.
3. Discuss how a cost leadership strategy can allow a firm to earn above-average returns
in spite of strong competitive forces. Address each of the five competitive forces.
Cost leadership strategy is one of the five main strategies that fall under the business
level strategy umbrella; the five strategies are cost leadership, differentiation, focused
cost leadership, focused differentiation, and integrated cost leadership/differentiation.
Cost leadership strategy refers to an integrated set of actions taken to produce goods and
services with attributes acceptable to customers at the lowest cost as compared to
competition. With cost leadership rivalry is limited because other competitors cannot
implement price competition as a competing tool because of the low margins which
might prove unattractive. The bargaining power of buyers is high under cost leadership as
customers have the ability to lobby for lower prices. This phenomenon is made possible
by the broad customer base usually targeted by cost leadership implementers. However, it
is important to note that buyers cannot force the cost leader to lower price to such an
extent that they cannot earn above average returns. One of the most important features of
the cost leader is that they constitute a great customer base of their suppliers, suppliers of

firms thus may have not have significant bargaining power to cost leaders. Concerning
the threat of product substitutes, a cost leader can only be worried about a substitute if it
has attributes and being offered at a lower cost than its product. Lastly, concerning
potential new entrants there exist little threat to cost leaders for new players if they
continue to lower their costs and offer their goods at lower prices.
4.Describe the risks of a differentiation strategy.
One of the greatest risks that comes with the differentiation strategy is that consumers
may deem the price differential between the cost leaders product and the differentiator
product is too large. This may prompt customers shunning the differentiator product
suffering declining demand and eventually the firm failing to earn above average returns.
Furthermore, another risk of differentiation strategy is that customers may find the
differentiator product to be no longer offering value for which they are prepared to pay a
premium price. This is mainly competition would have caught up with the differentiators
product and offered another better product. Lastly, the differentiation strategy can be
undermined by competitors offering counterfeit products which may undermine the
market of the differentiator product. However, this the problem of counterfeit products
can be countered by trademark and patents which can protect the differentiator product
from competition.
5.How do focused differentiation and focused cost leadership strategies differ from their
non-focused counterparts?
Focused differentiation and focused cost leadership refer to a set of actions that are
implemented to produce goods or services that serve the needs of a specific targeted
competitive segment. Focused strategies target a specific market and there are
concentrated on the customers they seek to serve as opposed to the non-focused strategies
which targets a broader customer base as opposed to focused strategies which target a
narrower competitive segment. In addition, there will be more volatility in the nonfocused strategies as opposed to the focused strategies due to the size and depth of the
different markets pursued by the two classes of strategies Thus, the main difference
between focused and non-focused strategies is the broadness of the customer base they
seek to serve. Focused strategies are much narrower than their non-focused strategies.
6.Describe the additional risks undertaken by firms pursuing a focus strategy.
Focused strategies face three main risks; firstly the threat from other competitors
challenging the narrower market which the focuser is targeting. By bringing competition
to the focuser competition may outwit it and see its customer base diminish. In addition,
other firms may join the focus strategy market and compete the profits away from the
focuser. By outcompeting the focuser in a narrow market it makes the segment
unattractive to the focuser because diminished margins brought about by the additional
competition. Lastly, the customers in the narrower focused market may progress their
tests and flavors towards the more broad industry segment, this means the focuser will
have to compete within a broadened market and at that point the strategy seizes to

focused. In conclusion, firms, pursuing a focus strategy must be versatile in their

approach and stay in line with their customers needs in order to stay relevant.