A firm’s business-level strategy determines its strategic position —its strategic profile
based on value creation and cost—in a specific product market. A firm attempts to stake
out a valuable and unique position that meets customer needs while simultaneously creating
as large a gap as possible between the value the firm’s product creates and the cost
required to produce it. Higher value tends to require higher cost. To achieve a desired
strategic position, managers must make strategic trade-offs —choices between a cost or
value position. Managers must address the tension between value creation (which tends to
generate higher cost) and the pressure to keep cost in check so as not to erode the firm’s
economic value creation and profit margin. A business strategy is more likely to lead to a
competitive advantage if it allows firms to either perform similar activities differently, or
perform different activities than their rivals that result in creating more value or offering
similar products or services at lower cost.