The core purpose of business level strategy is to answer a fundamental question: How should a company compete in a given industry or market?
Business-level strategy is a critical component of organisational success, guiding how a firm competes within a specific market. It focuses on creating value for customers while achieving a sustainable competitive advantage. Unlike corporate-level strategy, which deals with overall scope and direction, business-level strategy concentrates on a single business unit or product line.
According to a 2023 report by McKinsey, approximately 70% of companies fail to achieve their strategic goals due to lack of clear competitive positioning and ineffective strategy execution. Furthermore, a study by Harvard Business Review found that organisations with a well-defined business level strategy are 30% more likely to outperform their competitors in profitability and market share.
These figures underscore the critical importance of business level strategy in guiding organisations to achieve competitive advantage, meet customer needs, and sustain growth.
Business-level strategy refers to the actions a company takes to provide value to customers and gain a competitive edge in a particular industry. It involves decisions related to product differentiation, cost leadership, market segmentation, and operational efficiency. The primary aim is to position the business effectively against competitors while meeting customer needs
Read More: Business Level Strategy: The Middle Ground in Organisational Success
Key purposes of business-level strategy
- Achieving competitive advantage: One of the central purposes of business-level strategy is to establish and sustain a competitive advantage. A firm may pursue this through:
- Cost leadership: Offering products or services at a lower cost than competitors while maintaining acceptable quality.
- Differentiation: Providing unique features or superior quality that justify a premium price.
- Focus strategy: Targeting a specific market niche with tailored products or services.
- Enhancing customer value: A well-crafted business-level strategy ensures that a company delivers superior value to its customers. This involves understanding customer needs, preferences, and behaviours, then aligning products, services, and operations accordingly. For example:
- A business may invest in innovation to improve product functionality.
- Another may streamline processes to reduce costs and pass savings to customers.
- Optimising resource allocation: Resources such as financial, human, and operational, are finite. Business-level strategy helps organisations allocate these resources efficiently to maximise returns. By focusing on core competencies and strategic priorities, firms can avoid wasteful spending and direct investments toward high-impact areas.
- Responding to market changes: Markets evolve due to technological advancements, regulatory shifts, and changing consumer demands. A robust business-level strategy enables firms to adapt proactively. For instance:
- A company may diversify its product line to cater to emerging trends.
- Another may adopt digital transformation to improve efficiency and customer engagement.
- Improving operational efficiency: Business-level strategy often involves refining internal processes to enhance productivity and reduce costs. Techniques such as lean management, automation, and supply chain optimisation contribute to operational excellence. Efficient operations not only lower expenses but also improve product quality and delivery times, strengthening competitiveness.
- Driving sustainable growth: While short-term profitability is important, business-level strategy also focuses on sustainable growth. This involves:
- Expanding into new markets while maintaining core strengths.
- Developing long-term customer relationships.
- Investing in innovation to stay ahead of industry trends.
Case study: Apple’s differentiation strategy
Apple Inc. is widely recognised for its differentiation strategy, which centres on delivering innovative, user-friendly products with distinctive design and a tightly integrated ecosystem.
This approach has allowed Apple to establish a strong competitive position in the technology market, particularly within the premium segment.
Apple’s focus on product innovation is evident in its significant investment in research and development (R&D). In 2023, Apple spent approximately $30 billion on R&D, representing around 7% of its total revenue, according to its annual financial report. This investment supports the continuous development of new features, improved hardware, and software integration, which help differentiate Apple products from competitors.
The company’s design philosophy emphasises simplicity, aesthetic appeal, and seamless user experience. For example, the launch of the iPhone in 2007 revolutionised the smartphone market by combining advanced technology with an intuitive interface.
Since then, Apple has maintained its focus on delivering high-quality devices including the iPad, Mac computers, and Apple Watch, all designed to work cohesively within its ecosystem.
Apple’s ecosystem connects devices and services such as iCloud, Apple Music, and the App Store, creating a comprehensive user environment that encourages customer loyalty. This integration also acts as a barrier to switching, as users benefit from a unified experience across multiple products.
The effectiveness of Apple’s differentiation strategy is reflected in its financial performance. As of 2024, Apple holds approximately 55% of the global smartphone market revenue, despite having around 15% of the unit market share, indicating strong pricing power.
Its brand is valued at $544 billion, making it the world’s most valuable brand in 2024 according to Interbrand. Apple consistently commands premium pricing, with the average selling price of iPhones reaching over $900, significantly higher than many competitors.
Final thoughts
The purpose of business-level strategy is to guide firms in achieving competitive advantage, enhancing customer value, and ensuring long-term success. By focusing on differentiation, cost efficiency, and market responsiveness, businesses can navigate industry challenges and sustain growth. Effective strategy implementation requires careful planning, resource allocation, and continuous adaptation to changing conditions. Ultimately, a well-defined business-level strategy is essential for any organisation seeking to thrive in a competitive marketplace.
Himani Verma is a seasoned content writer and SEO expert, with experience in digital media. She has held various senior writing positions at enterprises like CloudTDMS (Synthetic Data Factory), Barrownz Group, and ATZA. Himani has also been Editorial Writer at Hindustan Time, a leading Indian English language news platform. She excels in content creation, proofreading, and editing, ensuring that every piece is polished and impactful. Her expertise in crafting SEO-friendly content for multiple verticals of businesses, including technology, healthcare, finance, sports, innovation, and more.
