OxfordAQA A-Level Business: Strategic positioning: Choosing how to compete (9725) – Revision Notes

These notes condense section 3.4.2, Strategic positioning: Choosing how to compete, in the 9725 specification for OxfordAQA International AS and A-level Business, Version 1.1 (International AS exams May/June 2027 onwards, International A-level exams May/June 2028 onwards). Every point here is International A-level only; Unit 4: Business strategy is the paper that examines it. They are written for 9725; anyone completing the older 9625 course should revise from their own specification. Start with the study guide, which explains each point in full with worked examples.

Also useful: 9725 checklist · practice questions · OxfordAQA A-level Business hub · Free 10-minute diagnostics · related A-level topics: SWOT analysis and Porter’s five forces

The spec points in one table

Spec point (3.4.2)	One-line summary
Purpose and value of market mapping	Plot rivals on two customer-relevant features to see positions, close rivals and gaps
Choosing a strategic position	Decide the mix of benefits offered and price charged compared with rivals
Low cost versus differentiation	Win on lower costs, or on being different in ways customers will pay for
Influences on the choice	Strengths, customers, rivals, industry forces, objectives, finance, environment
Functional implications	Each position needs matching marketing, operations, finance and HR
Benefits of competitive advantage	Higher margins, loyalty, bargaining power, reinvestment, growth
Difficulties of maintaining it	Imitation, changing tastes, technology, entrants, rising costs, complacency

Key definitions

• Strategic positioning: the long-term choice of how a business will compete against rivals in its chosen market.
• Market map: a diagram placing competing brands or firms on two axes that matter to customers (for example, price and perceived quality).
• Low cost strategy: aiming to produce a similar product at lower cost than rivals, then either undercutting their price or matching it for a wider margin.
• Differentiation strategy: making the product distinct in ways customers value so that it can command a higher price or stronger loyalty.
• Competitive advantage: an edge over rivals, from lower costs or greater benefits, that lets the business earn above-average profit or win more customers.

Market mapping in steps

1. Choose two features customers use to compare products (price, quality, convenience, style).
2. Score each competitor, ideally from customer research rather than managers’ opinion.
3. Plot them; group close rivals.
4. Look for gaps and for firms that seem out of line (high price, low benefits).
5. Test any gap: is there demand, and can it be served at a profit?

Value: fast, visual, shows rivals and gaps, guides positioning. Limits: only two variables, a gap may have no demand, perceptions differ by segment and change, opinion-based maps may be biased.

Worked reminder. Two car washes in Pebblerow: Brightsuds charges £9, scores 5.0 for quality; a hand-wash rival charges £15 and scores 8.0. Nothing sits at around £12 with a score near 7. That is a possible gap, not proof of a market.

Benefits and price: the positions

Benefits vs rivals	Price vs rivals	Position
Similar	Lower	Low price
Fewer	Lower	Budget
More	Similar	Better value
More	Higher	Premium / differentiated
More	Lower	More for less (hard to fund)
Same or fewer	Higher	Overpriced (fails unless customers lack choice)

Rule of thumb: a price above rivals needs benefits customers can see and believe.

Low cost vs differentiation

	Low cost	Differentiation
Source of edge	Scale, efficiency, bulk buying, simple range	Design, quality, brand, service, innovation
Advantages	Survives price wars; wide appeal; scale deters entrants; suits downturns	Higher unit margin; loyal, less price-sensitive buyers; brand hard to copy
Disadvantages	Thin margins need volume; can be undercut; cost cuts may hurt quality and morale	Costly to build and keep; customers may not value extras; features copied; vulnerable in recession

Must-know distinction: low cost is about the cost base; low price is a choice the low cost firm may or may not make. Matching rivals’ prices with lower costs gives a higher margin per unit.

Worked reminder. Two mid-range Pebblerow car washes both charge £12 a wash. One has a cost of £7.50 per wash; a rival with 20% lower costs (£6.00) earns £6.00 a wash instead of £4.50 at the same price.

Influences on the choice

• Internal: core strengths and skills, scale, technology, brand reputation, finance available, objectives (growth and share vs margin).
• External: customers’ price sensitivity and incomes, rivals’ positions (market map), strength of the five forces, the economy, technology, regulation.

Method for “which position should X choose?”:

1. Identify what the firm is genuinely better at (costs or benefits).
2. Check what the target customers value and can afford.
3. Check where rivals already sit.
4. Test the numbers: contribution per unit, volume needed, effect of a price war.
5. Judge, naming the one or two factors that decide it for this firm.

Functional implications

Function	Low cost	Differentiation
Marketing	Price-focused promotion, wide distribution, narrow range	Brand and quality message, selective channels, wider or premium range
Operations	Standardisation, high capacity use, lean methods, bulk purchasing	Quality systems, innovation, flexible or tailored production, research and development
Finance	Capital for capacity and automation; strict cost control	Funding for research, design and promotion; needs premium margins
Human resources	Lean staffing, multi-skilling, cost-conscious pay	Skilled staff, training, retention, possibly higher pay

Competitive advantage

Benefits: higher margins; loyal customers and steadier sales; more power over suppliers and distributors; profit to reinvest; a base for growth.

Difficulties of maintaining it: rivals imitate or patents expire; tastes change; technology makes a feature standard or cuts rivals’ costs; entrants and substitutes; rising input costs; complacency and loss of key staff.

Protecting it: keep innovating, build a brand, protect ideas legally, secure supply, invest in staff skills, keep cutting costs. Each costs money, so weigh the cost against how long the advantage is likely to last.

Quick self-test

1. State the purpose of a market map.
2. Give two limitations of market mapping.
3. Explain the difference between a low cost strategy and a low price.
4. A car wash charges £12 and has a cost of £7.50 per wash. It sells 2,400 washes a month. Calculate monthly contribution.
5. A rival also charges £12 but has a cost of £5.80 per wash. By what percentage is its contribution per wash higher than the firm in question 4?
6. Which benefits-price position is least likely to survive in a competitive market, and why?
7. A premium valet costs £15 when the market average is £12. Calculate the price premium as a percentage.
8. Give two human resources implications of a differentiation strategy.
9. Give two reasons why a competitive advantage is hard to maintain.
10. Why might a recession favour a low cost position?
11. Suggest two ways a business could protect a competitive advantage.

Answers

1. To show where competitors are positioned on two customer-relevant features, so the business can spot close rivals and gaps and plan its own position.
2. Any two: only two variables; a gap may lack demand or profit; perceptions differ by segment and change; maps based on opinion may be biased.
3. Low cost means the firm’s costs are below rivals’. It may pass this on as a lower price, or keep the price at rivals’ level and earn a wider margin.
4. (12 − 7.50) × 2,400 = 4.50 × 2,400 = £10,800.
5. Rival contribution = 12 − 5.80 = £6.20. (6.20 − 4.50) ÷ 4.50 × 100 = 37.8% higher.
6. Same or fewer benefits at a higher price: customers can get as much or more elsewhere for less, so they switch unless they have no choice.
7. (15 − 12) ÷ 12 × 100 = 25%.
8. Any two: recruit skilled staff; more training; focus on retention; possibly higher pay or incentives tied to quality.
9. Any two: rivals copy; tastes change; new technology; new entrants or substitutes; rising costs; complacency.
10. Falling incomes make customers more price-sensitive, so they trade down to cheaper options and value low prices more than extras.
11. Any two: keep innovating; build a strong brand; protect ideas with patents or trademarks; secure exclusive supply; train and retain the staff whose skills create the edge.

Where marks are usually lost

• Defining a market map but not saying what a manager would do with it.
• Claiming a gap on a map is automatically profitable.
• Using “low cost” and “low price” as if they mean the same thing.
• Listing benefits of differentiation without evidence that the case customers will pay for them.
• Giving functional implications in general terms, not tied to the firm in the case.
• Calculating profit for one option only, or comparing options on revenue rather than profit.
• Naming difficulties of keeping an advantage without explaining how each would cut profit for this business.
• Concluding with “it depends” and no stated deciding factor.

Official syllabus

OxfordAQA International AS and A-level Business (9725) specification, Version 1.1, for International AS exams May/June 2027 onwards and International A-level exams May/June 2028 onwards. Published by OxfordAQA.