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

This guide teaches 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). It follows the revised 9725 content only; if you are finishing the older 9625 course, work from your own 9625 specification instead. Everything here sits in 3.4 Business strategy, so it is International A-level only.

Shorter recap: revision notes · Practice set of original questions, fully answered · OxfordAQA A-level Business hub · 9725 checklist · Free 10-minute diagnostics

What this section covers

Spec point (3.4.2)	What you must be able to do	Stage
Purpose and value of market mapping	Build and read a market map; judge what it can and cannot tell a manager	International A-level only
Choosing a strategic position	Explain how a business competes in terms of the benefits it offers and the price it charges	International A-level only
Low cost versus differentiation	Weigh up the advantages and disadvantages of each	International A-level only
Influences on the choice of positioning strategy	Explain the internal and external factors behind the choice	International A-level only
Implications for functional areas	Analyse what each strategy means for marketing, operations, finance and human resources	International A-level only
Benefits of a competitive advantage	Explain why an advantage over rivals matters	International A-level only
Difficulties of maintaining a competitive advantage	Explain why advantages fade and assess what a firm can do	International A-level only

Exam route. All of 3.4 is examined in Unit 4: Business strategy, a written exam of 1 hour 45 minutes worth 80 marks and 30% of the International A-level. It has two compulsory sections, each built on one case study with five short answer and extended response questions worth 40 marks. Because the specification builds in some synoptic assessment, answers here can call on AS positioning (3.1.2.3), SWOT analysis and Porter’s five forces. At AS, positioning was a marketing decision; here it is a long-term choice for the whole business that shapes every function.

1. Market mapping: purpose and value

A market map (also called a perceptual map or positioning map) plots the brands or businesses in a market against two features that matter to customers, such as price and quality. Positions come from customer research or managers’ judgement.

Purpose:

• show where each competitor is positioned and which ones are closest rivals
• reveal gaps: combinations of features that no business offers
• check whether customers see the firm the way the firm intends
• support decisions on launching, repositioning or targeting a segment

Worked example 1: reading a market map

Glimmerbay has five swimming schools for children. A local survey asked parents to score each school’s overall benefits (teaching quality, class size, facilities) out of 10.

School	Price per 30-minute lesson	Benefits score
Splashbright	£14	8.6
Finwise Academy	£16	7.0
Ripple Kids	£11	7.4
Aquanest	£9	6.1
Council pool	£6	5.2

Plot price on one axis and benefits score on the other. Then calculate price per benefit point to compare value:

Splashbright     14 ÷ 8.6 = £1.63 per point
Finwise Academy  16 ÷ 7.0 = £2.29 per point
Ripple Kids      11 ÷ 7.4 = £1.49 per point
Aquanest          9 ÷ 6.1 = £1.48 per point
Council pool      6 ÷ 5.2 = £1.15 per point

What the map shows.

• Finwise charges the most but scores below Splashbright and Ripple Kids. It looks poor value, so it is exposed if parents compare.
• No school offers a score above 8 for less than £12. A new entrant, or Ripple Kids upgrading, could aim at that gap.
• The council pool is the low price option; Aquanest sits close to it at a higher price.

Judgement. The gap is worth filling only if enough parents want it and a school can serve it profitably; the map alone cannot show that.

Value and limitations of market mapping.

Value	Limitations
Quick, visual picture of the competition	Only two variables; real choices involve many
Highlights gaps and close rivals	A gap may exist because there is no demand, or no profitable way to serve it
Based on customer views, if built from research	Perceptions vary by segment and change over time
Helps plan positioning and repositioning	If based on managers’ opinion, it may reflect bias, not customers

2. Choosing a strategic position: benefits and price

A business can choose how to compete by deciding what benefits it offers (quality, features, design, service, convenience, brand) and what price it charges compared with rivals. Common positions:

Position	Benefits vs rivals	Price vs rivals	Likely outcome
Low price, standard benefits	Similar	Lower	Wins price-sensitive buyers; needs low costs to stay profitable
Budget	Fewer	Lower	Basic product for buyers who want the cheapest option
Better value	More	Similar	Attracts customers from rivals; costs may rise
Premium (differentiated)	More	Higher	Higher margin per unit; needs a real reason to pay more
More for less	More	Lower	Strong appeal but hard to fund for long
Overpriced	Same or fewer	Higher	Customers leave unless they have no alternative

A business can only charge more than rivals if customers believe they receive more.

3. Low cost versus differentiation

These are the two broad ways to gain an edge.

Low cost strategy. The business aims to have lower costs than rivals for a similar product. It can then either charge a lower price and win volume, or charge the same price as rivals and earn a higher margin. Low cost does not have to mean low price.

Differentiation strategy. The business makes its product different from and better than rivals’ in ways customers value, so it can charge a higher price or win loyalty at a similar price.

	Low cost	Differentiation
Advantages	Can survive price wars; appeals to the many price-sensitive buyers; scale may create a barrier to entry; works well when incomes fall	Higher price and margin per unit; loyal customers are less price-sensitive; harder for rivals to copy a strong brand
Disadvantages	Thin margins need high volume; a rival with even lower costs can undercut you; cost cutting may damage quality or staff morale; a cheap image is hard to change later	Costly design, marketing and quality control; customers may not value the extras enough; rivals can copy features; demand can fall in a downturn

Worked example 2: comparing the two strategies

Larchpoint Bikes is launching an e-bike range and must choose a position.

	Low cost option	Differentiated option
Price	£900	£1,450
Variable cost per bike	£640	£960
Expected annual sales	6,000	3,000
Fixed costs	£1,100,000	£1,050,000

Low cost:        (900 − 640) × 6,000 − 1,100,000   = £460,000
                 margin = 460,000 ÷ 5,400,000 × 100 = 8.5%
Differentiated:  (1,450 − 960) × 3,000 − 1,050,000 = £420,000
                 margin = 420,000 ÷ 4,350,000 × 100 = 9.7%

Now test each against a threat. Suppose a rival starts a price war:

Low cost option must cut price 5% to £855:
  (855 − 640) × 6,000 − 1,100,000 = £190,000  (profit falls 58.7%)
Differentiated option keeps its price but loses 5% of sales:
  (1,450 − 960) × 2,850 − 1,050,000 = £346,500  (profit falls 17.5%)

Judgement. The low cost option makes more profit in the base case, but its low contribution per bike (£260 against £490) leaves it badly exposed to price cuts. The better choice depends on whether Larchpoint really can produce more cheaply than rivals and how price-sensitive e-bike buyers are.

4. Influences on the choice of positioning strategy

• The firm’s strengths and resources. Large scale and efficient operations suit low cost; design skills, patents or a strong brand suit differentiation. A SWOT analysis helps here.
• Customers. If buyers are price-sensitive (price elastic demand) or incomes are falling, low cost appeals. If they value quality, image or service, differentiation fits.
• Competitors’ positions. A market map shows which positions are crowded. Copying the market leader’s position rarely works without a cost or quality edge.
• Industry forces. Powerful buyers and many substitutes push margins down, making cost control vital; high entry barriers can protect a differentiated position.
• Objectives. A growth or market share objective points towards low cost and volume; a profit margin objective may favour differentiation.
• Finance. Building scale and building a brand both need investment; what the firm can fund limits the choice.
• External environment. The economy, technology and regulation shift what customers will pay for.

5. Implications for functional areas

A position only works if every function supports it.

Function	Low cost	Differentiation
Marketing	Price-led promotion; wide distribution; limited product range	Brand building; promotion stresses quality or features; selective distribution
Operations	High capacity use, standardised processes, lean production, bulk buying	Quality assurance, innovation, flexible or customised production, research and development
Finance	Investment in capacity and automation; tight budgets and cost monitoring	Investment in research, design and promotion; needs higher margins to cover them
Human resources	Efficient staffing, possibly lower skill roles, multi-skilling	Skilled, well-trained staff; recruitment and retention matter more; may need higher pay

6. Competitive advantage

A competitive advantage is an advantage over rivals that lets a business earn higher profits or win more customers, because it offers better value through lower costs or greater benefits.

Benefits of a competitive advantage:

• higher margins (from a price premium or lower costs) and so more profit
• customer loyalty, which steadies sales and lowers marketing cost per sale
• more bargaining power with suppliers and distributors
• retained profit to reinvest, which can extend the advantage
• a stronger position from which to grow into new markets or products

Difficulties of maintaining a competitive advantage:

• Imitation. Rivals copy features, processes or prices; patents expire.
• Changing customer tastes. What customers valued may stop mattering.
• New technology can remove a cost advantage or make a feature standard.
• New entrants and substitutes offer customers other ways to meet the need.
• Rising costs or loss of a key supplier erode a cost advantage.
• Complacency inside the business, and loss of the staff whose skills created the edge.

Worked example 3: an advantage that fades

Sablewick makes chilli sauce from chillies grown on its own farm, giving a flavour customers rate highly. It charges £1.20 a bottle more than rival sauces and sells 85,000 bottles a year. Two rivals then source similar chillies and copy the recipe style. Sablewick’s premium falls to £0.45 and sales drop to 78,000 bottles.

Extra revenue from premium before = 1.20 × 85,000 = £102,000
Extra revenue from premium after  = 0.45 × 78,000 = £35,100
Fall = 102,000 − 35,100 = £66,900
     = 66,900 ÷ 102,000 × 100 = 65.6%

Analysis. Most of the advantage’s value vanished once its source was copied. Advantages rivals cannot easily copy (a protected brand, unique know-how, exclusive supply) last longer. Sablewick could build a brand around its own farm or launch new flavours regularly, each with a cost to weigh up.

Common errors

• Treating “low cost” as the same as “low price”. A low cost firm can match rivals’ prices and keep a higher margin.
• Saying a market map “proves” a gap should be filled. It shows a gap, not demand or profit.
• Ending a positioning answer without a judgement that weighs risk, not just base-case profit.

Next steps

For quick recall use the revision notes, apply them in the practice questions, and use OxfordAQA A-level Business exam preparation for case study technique. For AS positioning, see the AS marketing guide.

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.