STRATEGIC MANAGEMENT

BBPS4103
BBPS4103

MOHAMED SHAHIM
BHRM BATCH 05

S130802180
FACULTY OF BUSINESS MANAGEMENT
VILLA COLLEGE

MOHAMED SHAHIM
STRATEGIC MANAGEMENT

S1308021850
BBPS4103

1 Table of Contents
2

ABSTRACT .......................................................................................................................................... 2

INTRODUCTION ................................................................................................................................ 3
3.1

DIFFERENT LEVELS OF STRATEGIES .................................................................................. 3

3.1.1

Corporate Level Strategy: - This is mainly concerned with the overall purpose and the

scope of the organization in order to achieve the stakeholders expectations. It is also often stated as
the Mission Statement. ....................................................................................................................... 4
3.1.2

Business Level Strategy: - This is mainly about the strategic decisions to be made

regarding the choice of the products, and how to meet the needs and demands of the customers. In
short, business level strategy is about how a business competes successfully in a popular market. .... 4
3.1.3

Operational/ Functional Level Strategy: - Operational or Functional level strategy mainly

deals with the issues of the resources, processes and the people of the organization. .......................... 4
4

EXPLANATIONS OF BUSINESS LEVEL STRATEGIES ................................................................ 5

4.1

MICHAEL PORTERS GENERIC MODEL STRATEGY ......................................................... 6

4.1.1

COST LEADERSHIP STRATEGY ..................................................................................... 6

4.1.2

DIFFERENTIATION STRATEGY ..................................................................................... 8

4.1.3

FOCUS STRATEGIES ....................................................................................................... 11

JUSTIFICATION OF THE EXAMPLES OF BUSINESS LEVEL STRATEGIES .......................... 13

5.1

COST LEADERSHIP ................................................................................................................. 13

5.2

DIFFERENTIATION STRATEGY ........................................................................................... 13

5.3

COST FOCUS STRATEGY ....................................................................................................... 14

5.4

DIFFERENTIATION FOCUS STRATEGY.............................................................................. 14

SUMMARY ........................................................................................................................................ 15

References ........................................................................................................................................... 16

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2 ABSTRACT
This assignment is a part of the final mark up for the Strategic Management Module. In
this assignment, I will be discussing about the definitions of the strategic management and strategy.
Furthermore, different levels of Strategies and a brief explanation of those strategies will be
highlighted with their examples. A justification of the strategy to the business given in the
examples will be highlighted as well followed by a summary of the whole essay to end the
assignment.

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3 INTRODUCTION
Strategic management is the set of managerial decision and action that determines the long-run
performance of a corporation. It includes environmental scanning (both external and internal),
strategy formulation (strategic or long range planning), strategy implementation, and evaluation
and control. The study of strategic management therefore emphasizes the monitoring and
evaluating of external opportunities and threats in lights of a corporations strengths and
weaknesses (David Hunger).

The term strategic management is mainly the scope of strategic decision making activity
in an organization. Strategic management or strategy is a concept that has evolved over and over
and is being said that it will continue to evolve. Hence, the term strategic management and strategy
has several meanings and interpretation depending on the author and the sources.
According to Johnson and Scholes in their book, Exploring Corporate Strategy, defines the
strategy as, the direction and scope of an organization over the long-term, which achieves the
advantage for the organization through its configuration of resources within a challenging
environment, to meet the needs of the markets and to fulfil the stakeholder expectations.
Hence, a strategy can be defined as the actions and resources that are needed to achieve a
specific long-term goals or objectives of an organization.

3.1 DIFFERENT LEVELS OF STRATEGIES

There are different levels of strategies. And strategy of a specific organization changes
based on the levels of the strategy. The three main levels of strategy are; corporate level, business
level and functional or operational level.

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3.1.1 Corporate Level Strategy: - This is mainly concerned with the overall purpose and the scope of
the organization in order to achieve the stakeholders expectations. It is also often stated as the
Mission Statement.

3.1.2 Business Level Strategy: - This is mainly about the strategic decisions to be made regarding the
choice of the products, and how to meet the needs and demands of the customers. In short, business
level strategy is about how a business competes successfully in a popular market.

3.1.3 Operational/ Functional Level Strategy: - Operational or Functional level strategy mainly deals
with the issues of the resources, processes and the people of the organization.

Figure 1: Different Levels of Strategies 1

Image Source: http://www.slideshare.net/chitrangtandel/different-levels-of-strategy

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4 EXPLANATIONS OF BUSINESS LEVEL STRATEGIES

Every organizations vision and mission should be focused on satisfying the needs and
wants of the customers. This is done through business level strategies. Business level strategy
mainly focuses on the strategic decisions to be made regarding the choice of the products, and how
to meet the needs and demands of the customers. This strategy also is concerned with the
organizations or the businesss position in the industry relative to other competitors in the market.
Business level strategy is also focused on three main elements when it comes to satisfying the
customer needs and preferences. They are;
1. Who will be served,
2. What needs have to be met, and
3. How those needs will be satisfied.
And in a business level strategy, the senior management of every organization is highly
focused on the above three elements.
Business strategic model can be better understood with the work of the Harvard Business
School Professor, Professor Michael Porters Generic Model.

Figure 2: Michael Porters Generic Model Strategies 2

Image Source: http://vitalsix.co.uk/business-strategy-whats-yours-2/

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4.1 MICHAEL PORTERS GENERIC MODEL STRATEGY

According to Porter, two competitive dimensions are the key to business-level strategy.
The two dimensions that the Porter mentioned are;
1. Firms or Businesss Source of Competitive Advantage: - It involves whether a
business tries to gain edge on competitors by minimizing the cost or by coming up
with a new product that will attract the customers.
2. Firms or Businesss Scope of Operations: - It involves whether the business tries
to target customers in general or whether the business is seeking to attract a specific
group of customers.
Depending on the above two dimensions of Michael Porters Generic Model, we can tell
whether a business is targeting a customers or whether it targets a specific customer group. The
above two dimensions are further classified into four dimensions. They are called the Four Generic
Business Model Strategies. It is very important to understand the difference between the four
generic business model strategies. Because each strategy focusses on different value schemes to
its customers. Meaning that Businesses use either one of the strategies to achieve the competitive
advantage over their rival businesses in the market.

4.1.1 COST LEADERSHIP STRATEGY

Cost leadership can be defined as the strategy where the businesses compete for a wide
customer group based on the price. According to (Nielson, 2013), Cost leadership is about
organizing all your resources around producing goods and services at the lowest cost possible. By
having the lowest costs associated with providing your products, you put your business in the

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unique position of being able to charge your customers the lowest price in the market for those
products.
Cost leadership can be applicable or valuable only if the buyers or the customers do not
value the differentiation very much or if the customers are price sensitive and if the other
competitors in the market will not immediately match lower prices. Even if a company follows the
cost leadership strategy, the company will be able to achieve the competitive advantage if there
are no changes in the customer tastes, preferences, technology and the exogenous price or the cost
and if the activities taken by the business to achieve the low costs are rare and costly to imitate.
4.1.1.1 WALMART
An example of a company following the Cost Leadership Strategy is the Walmart. They
are the worlds largest company that used the cost leadership strategy to attain that position. Even
their advertising slogan says Save Money. Live Better.

Other examples of companies that cost leadership strategy to achieve the competitive
advantage includes the following.

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4.1.1.2 Southwest Airlines: - Southwest Airlines Co. is said to be the major U.S. airline and the
world's largest low-cost carrier.
4.1.1.3 Barnes & Noble: - Barnes & Nobles is a retailing company. They are a Fortune 500
company, the largest retail bookseller in the United States, and the leading retailer of
content, digital media and educational products in the USA.

4.1.1.4 IKEA: - IKEA is a multinational group of companies that designs and sells ready-toassemble furniture, appliances, small motor vehicles and home accessories. As of January
2008, it is the world's largest furniture retailer.

4.1.2 DIFFERENTIATION STRATEGY

Unlike a company following a cost leadership strategy, a company following
differentiation strategy attempts to convince customers to pay a premium price for its good or
services by proving them with a unique and desirable features. Main purpose of differentiation
strategy is to offer the customers something with a good value that will provide something special
to the customers.
According to Michael Porter, if a company is using the differentiation strategy, the
company is competing based on the uniqueness rather than the price and they are seeking to attract
a broader market in the industry. Companies that use differentiation strategy uses a technique of
promoting their products by saying that the cheaper products are much more likely to have
problems.
According to (Nielson, 2013), if a company is planning to move forward with the
differentiation strategy, the company should keep in mind the following important points.
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Benefit Leadership means signing up for a constant innovation: - This means that the brand
or the product or the service promised or the provided must be continually kept in order to
achieve the sustain growth and the profitability.
Providing superior benefits alone can very difficult to maintain: - This means that due to
the uniqueness and the quality of the product, providing superior benefits over a long-term
can be very challenging due to the intense competition.
Providing different benefits requires more creativity but can be easier to maintain over a
long-term: - This basically means that the company should provide the customers with
something that hasnt been provided or tried before and something that has a lower
competition.
Providing uniquely superior benefits; a combination of superior and different benefits, is
difficult to do but highly valuable when achieved: - this means that the company should
always provide the customers with something superior than what is in the market and
something with different benefits that has a low competition. This will help the company
to achieve the competitive advantage over other companies in the market and this will help
the company to be superior over other companies even though their prices are premium.
4.1.2.1 APPLE
Think Different, and thats how they became the worlds
number one computer company. As we all know, Apple is
widely considered as the company of innovation and creativity
par excellence. Apple was no the first company to achieve the
champion innovation in the computer industry; several other companies has been designing and
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MOHAMED SHAHIM
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BBPS4103

introducing computer systems and software for several years. And then with the help of their
new design and marketing strategies and the new trend in their technology, despite the price of
the products of the Apple, number of customers raised.
Other examples of the companies that have achieved competitive advantage over the
market includes;
4.1.2.2 ROLEX: - Rolex enjoys an unrivalled reputation throughout the world for quality and
precision in luxury watchmaking.
4.1.2.3 CANON: - Canon is a Japanese multinational corporation specialized in the manufacture
of imaging and optical products, including cameras, camcorders, photocopiers, steppers,
computer printers and medical equipment. Canon began to invest more and more in both
product development in order to differentiate their product and in expanding their
marketing and sales staff and they achieved the competitive market over others.
4.1.2.4 NIKE: - Nike is an American multinational corporation that is engaged in the design,
development, manufacturing and worldwide marketing and selling of footwear, apparel,
equipment, accessories and services. Nike became the world leader in this market b taking
customer perceptions to heart and continually producing products that separate itself from
the pack.

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4.1.3 FOCUS STRATEGIES

Companies that follows focus strategies concentrate on particular market of products, by
understanding the dynamics of that market and the unique needs of customers within it. And then
they develop uniquely low cost or well specified products for the market. Because they serve
customers in their market uniquely well, they tend to build strong brand loyalty amongst their
customers. This makes their particular market segment less attractive to competitors (Mind Tools,
n.d.).

Focus strategy is further classified into Cost Focus Strategy and Differentiation Focus
Strategy. Either the company use the cost focus strategy or differentiation focus strategy, the key
to make a success of a generic focus strategy is to ensure that you are adding something extra as a
result of serving only that market place. This means that your adding something extra can either
be reducing cost or to increase differentiation.
4.1.3.1 COST FOCUS STRATEGY
Companies that mainly target on the cost focus strategy seeks the smallest buyers in a
market that purchase in small quantities that industry-wide competitors cannot serve them at the
same lowest cost.
4.1.3.1.1 IKEA
An example of a company that uses cost focus strategy can be IKEA. IKEA is a global
furniture retailer that provides the customers with affordable solutions for better living through
the cost focus leadership strategy. They offer the customers with home furnishings that combine
good design, function, and a good quality with affordable, low prices than the competitive
companies in the market.

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4.1.3.2 DIFFERENTIATION FOCUS STRATEGY

Companies that follow differentiation focused strategy must be producing products that are
customized for small market segments. Their products can be successful when either the quantities
involves are too small for the industry-wide competitors to handle economically or when the extent
of the customization requested is beyond the capabilities of the industry-wide differentiator.
4.1.3.2.1 LAMORGHINI
Automobili Lamborghini S.p.A. is an Italian brand and manufacturer of luxury sports cars
and, formerly, SUVs, which is owned by the Volkswagen Group through its subsidiary brand
division Audi. They compete in the tiny super car category with prices starting at $150,000 and
running as high as $600,000. These cars considered to be more than just transportation.

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5 JUSTIFICATION OF THE EXAMPLES OF BUSINESS

LEVEL STRATEGIES
5.1 COST LEADERSHIP
According to (Hudson, 2006), Walmart has the broadest customer base of any firm in the
United States. Approximately one hundred million Americans visit a Walmart in a typical week.
Furthermore, according to (Nielson, 2013) Walmart stores are not nearly as nice as Targets and
their store brand is arguably inferior to Targets store brands. But thats okay because what
Walmart cant do in providing benefits they may make up for in everyday low prices.
Furthermore, the companys slogans such as Always Low Prices and Save Money. Live
Better communicate Walmarts emphasis on price slashing to potential customers.
A company is said to have achieved a cost leadership strategy when that company has wide
number of customers and that the company is selling its products at a cheaper rate than the
competing companies in the market. And looking at the Walmarts background and their current
status, it is very clear that they are a cost leadership champion the market.

5.2 DIFFERENTIATION STRATEGY

Apple and Dell are the only ones in this industry making money. They make it by
being Wal-Mart. We make it by innovation Steve Jobs.
Differentiation strategy can be defined as where a company organizing all its resources
around the goal of providing a product that is unique in its quality relative to the competition. And
one way to achieve superior over the competitors is to beat them with the innovation. Despite the
price of Apple products compared to other products, according to (Eckel, 2011) Apple even
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smoked Microsoft when it comes to market value, steamrolling to a market capitalization of billion
versus Microsoft's comparably anemic $205 billion.

5.3 COST FOCUS STRATEGY

IKEA is one company that offers low-cost, modular furniture assembled by the customers,
using their unique way which is using self-service as an alternative to having sales associates
follow and pressure the customers to buy their products. IKEA has different varieties of products.
Different varieties with various designs with respect to the customers specific needs and wants in
a price which is pretty much lower than the competitive companies in the market.

5.4 DIFFERENTIATION FOCUS STRATEGY

Differentiation focus strategy mainly focuses on the production of customized products for
a smaller market or a targeted market.
Lamborghini differentiates on several levels from their competitors. This has led, the
Lamborghini being able to create a brand image that is very strong and one that brings to mind
quality, long lasting cars when a potential customer sees it.

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6 SUMMARY
Strategic management mainly deals with the strategic decision making of an organization
or a business. Strategic management is classified into mainly three different categories; corporate
level strategy, business level strategy and functional or operational level strategy. Business level
strategies are used by all the businesses inorder to achieve a competitive place in the market
industry.
According to Michael Porters Generic Model Strategy, business level strategy is further
classified into three main strategies depending on the businesss source of competitive advantage
and the businesss scope of operations. The three main strategies of Business level strategies are
cost leadership strategy, differentiation strategy and focus strategy.
Firstly, a cost leadership strategy is where a business compete for a wide customer group
based on the price. An example of a company that uses cost leadership strategy is Walmart.
Secondly, Apple is an example of a differentiation strategy. Apple is considered as a company that
uses differentiation strategy is because despite the price of their products their market level
compared to the competing companies are high. Finally, a company that uses focus strategy either
use a cost focus strategy or a differentiation focus strategy. A cost focus strategy is where
producing products of a particular company is customized for small market segments. IKEA is an
example for a company that uses a cost focus strategy. Lamborghini is a world-wide well known
car product for its higher price and the quality and the looks of their products. Lamborghini is said
to be using a differentiation focus strategy to achieve their competitive market by focusing on the
production of customized products for a smaller market or a targeted market.

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7 References
Barnat, R. (n.d.). Strategic Management: Formulation and Implementation. Retrieved March 4,
2015, from introduction-to-management: http://www.introduction-tomanagement.24xls.com/en202
David Hunger, T. L. (n.d.). Basics concepts of strategic management. Essentials of Strategic
Management, 3-5.
Eckel, E. (2011, August 26). Steve Jobs: 10 historic achievements. Retrieved from Tech
Republic: http://www.techrepublic.com/blog/10-things/steve-jobs-10-historicachievements/
Hudson, A. Z. (2006). Managing Wal-Mart: How US-store chief hopes to fix Wal-Mart. Wall
Street Journal.
Nielson, J. (2013, October 21). The Two Business Strategies: Cost Leadership and Benefit
Leadership [And Where Michael Porter Missed The Mark]. Retrieved from The
Innovative Manager: http://www.theinnovativemanager.com/the-two-business-strategiescost-leadership-and-benefit-leadership-and-where-michael-porter-missed-the-mark/#
Riley, J. (2015, February 14). What is Strategy? . Retrieved from Tutor2u:
http://tutor2u.net/business/strategy/what_is_strategy.htm
Sridharan, M. (2014, February 10). Do it like Apple: differentiate or die! Retrieved from
outsource magazine: http://outsourcemagazine.co.uk/do-it-like-apple-differentiate-or-die/
Tools, M. (n.d.). Porter's Generic Strategies - Choosing Your Route to Success. Retrieved March
4, 2015, from Mind Tools: http://www.mindtools.com/pages/article/newSTR_82.htm

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