Laudrup takes his side to St Mary's on Sunday on the back of a 1-0 victory over St Gallen in the Europa League in midweek.
But he feels claims by the likes of Artur Boruc and Victor Wanyama, as well as Southampton boss Mauricio Pochettino, that they are targeting a top-four finish are unrealistic and urged them to lower their expectations.
"It's always good to be ambitious but, of course, I think there are better teams than that," said Laudrup.
"I like the team they have. It's a team who can be in the top 10.
"Those spots - eight, nine and 10 - are the maximum for them and us in terms of what we can go for.
"I still believe you have all the big sides. The Manchester clubs, Chelsea, Arsenal, Tottenham, Liverpool and Everton. That's seven.
"In my opinion, the rest of us play for eighth position and down."
With regard to their own targets, Laudrup is looking to get some points on the board after a difficult run of matches that has seen them restricted to seven points from their opening six matches.
The Welsh side have already faced Manchester United, Tottenham, Liverpool and Arsenal this season and the Dane is now looking forward to facing one of the 'best of the rest'.
"We have to take things step by step," he added.
"We've had a very difficult start. We've played some of the top four and the big teams in the first six games.
"But this is a good test for us on Sunday because Southampton is absolutely one of the best teams of the rest.
"It will be a tough test for us."