DQE
Strategy:
Sustainability through DQE
Prof. Spyros Lioukas, Dr Irini Voudouris
Athens University of Economics and Business
Towards the Sustainable Region /DQE / 2NOO27I
Project co-financed by the Structural Funds
1
DQE
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Objectives
Learners will:
understand the meaning of strategy
understand the contribution of strategy to
successful performance
identify the framework for strategic analysis
understand how to control for successful
strategies
identify alternative strategic options
identify how the DQE approach leads to
strategies for sustainability
Towards the Sustainable Region /DQE / 2NOO27I
Project co-financed by the Structural Funds
2
What is Strategy?
DQE
“Strategy is the direction and scope of an organization over
the long term, which achieves competitive advantage for
the organization through its configuration of resources within
a changing environment and to fulfill stakeholders
expectations”.
Johnson & Scholes, “Exploring Corporate Strategy”, 2002.
Towards the Sustainable Region /DQE / 2NOO27I
Project co-financed by the Structural Funds
3
DQE
Elements of successful strategy
Well defined
long-term goals
Appraisal of the
environment
Knowledge of
own resources &
capabilities
Successful implementation
Successful Strategy
R. Grant “Contemporary Strategy Analysis”, 2000
Towards the Sustainable Region /DQE / 2NOO27I
Project co-financed by the Structural Funds
4
Strategic Analysis Framework
DQE
Strategy formulation
Internal analysis
Resources &
capabilities
Stakeholders expectations
Strategy
(MOST)
mission, objectives, strategy, tactics
Environment
Analysis
Opportunities Threats
Strategic options
Evaluation, choice
Strategy implementation
Strategic plan
Actions, programs
Implementation of actions/
programs
Towards the Sustainable Region /DQE / 2NOO27I
5
feedback
Evaluation, Control
Project co-financed by the Structural Funds
DQE
Analysis of external
environment
• Objectives
– Identify the main macro-environmental forces that
influence an industry
– Identify the main structural features of an industry that
influence competition and profitability
• Evaluate the attractiveness of an industry
– Evaluate trends within industries to forecast future
changes in industry profitability
– Identify opportunities
– Identify Critical Success Factors
Towards the Sustainable Region /DQE / 2NOO27I
Project co-financed by the Structural Funds
6
External environment: Levels
DQE
Macroenvironment
Industry
Market
Firm
Towards the Sustainable Region /DQE / 2NOO27I
Project co-financed by the Structural Funds
7
Macro-environment: PESTEL
framework
DQE
• Political (P)
– Government stability
– Taxation policy
– Trade regulation
• Social (S)
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Demographics
Lifestyle changes
Social trends
Education levels
Consumerism
• Environmental (E)
– Environmental regulation
– Waste management
– Energy issues
• Economical (Ε)
– GNP trends
– Inflation
– Unemployment
• Technological
– Rate of technological
changes
– Technology transfer policy
– Government and industry
spending on research and
development
• Legal (L)
– Employment Laws
– Health and safety
Towards the Sustainable Region /DQE / 2NOO27I
Project co-financed by the Structural Funds
8
DQE
From macro-environment to
industry analysis
Social &
demographical
structure
National/
International
Economy
Natural
environment
Industry
Firm
Technology
Government
environment
The macro-environment affects the industry environment which affects the firm
R. Grant, Contemporary Strategy Analysis, 2000
Towards the Sustainable Region /DQE / 2NOO27I
Project co-financed by the Structural Funds
9
Porter 5 forces framework
+supplements
DQE
Suppliers
Bargaining
Supplements
Power
Bargaining Power
Threat of
Industry
competition
Potential
entrants
Entrance
Substitutes
Existing competitors
Bargaining
Threat
Power
Buyers
Towards the Sustainable Region /DQE / 2NOO27I
Project co-financed by the Structural Funds
10
The value network: Profitability
DQE
High Power of Buyers
High Power of suppliers
NEW ENTRANTS
NEW ENTRANTS
COMPETITORS
BUYERS
SUPPLIERS
BUYERS
COMPETITORS
SUBSTITUTES
Profit Margin for suppliers
SUBSTITUTES
Profit margin for buyers
Towards the Sustainable Region /DQE / 2NOO27I
Project co-financed by the Structural Funds
11
DQE
Critical Success Factors
(KSF)
Conditions of success
Customers:
•Who are they?
•What do they want?
Competition:
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What drives competition?
•
How intense is competition?
•
How can we obtain a
superior competitive
position?
Critical Success Factors
Towards the Sustainable Region /DQE / 2NOO27I
Project co-financed by the Structural Funds
12
Internal Analysis
DQE
• Objectives
– Understand the role of resources and capabilities in
strategy formulation
– Identify the resources and capabilities of a firm
– Understand the importance of unique resources and
core competences for competitive advantage creation
and profitability
– Understand the importance of design, quality and
environmental posture as unique resources and
capabilities
Towards the Sustainable Region /DQE / 2NOO27I
Project co-financed by the Structural Funds
13
Firm’s capital
DQE
Social
Capital
Natural
Capital
Customers
Financial
Capital
Resources &
Capabilities
Knowledge
Human
Capital
Towards the Sustainable Region /DQE / 2NOO27I
Project co-financed by the Structural Funds
14
Appraising resources
DQE
• Tangible resources
– Financial, eg.
• Borrowing capacity
• Internal funds/ generation
– Physical, eg.
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Land & buildings
Plant & equipment
Technology
Raw materials
• Intangible resources
– Technology, eg.
• Know how, R&D, design
• Knowledge residing in
technical & scientific
employees & teams
– Reputation
• Brands, company
reputation, social
responsibility,
environmental
proactiveness, quality
• Human resources, eg
– Education, training,
experience, adaptability
Towards the Sustainable Region /DQE / 2NOO27I
Project co-financed by the Structural Funds
15
DQE
Unique resources & capabilities:
The base of competitive advantage
Resources
Like competitors
or easy to imitate
Better than
competitors,
difficult to imitate
Threshold
resources
Unique
resources
DQE
Capabilities
Threshold
capabilities
Core
competences
Towards the Sustainable Region /DQE / 2NOO27I
Project co-financed by the Structural Funds
16
DQE
Evaluating capabilities: The
functional approach
Function
Examples of Capabilities
Corporate Management
Financial management, strategic
control, coordination of business units,
social responsibility
MIS
Rapid information transfer
R&D
Development of new products, design,
innovation
Manufacturing
Flexibility, quality, design, efficiency,
eco-efficiency
Marketing
Design, brand management,
promotion, environmental marketing
Sales & distribution
Sales responsiveness, efficiency &
Towards the Sustainable Region /DQE / 2NOO27I
17
Project
by the Structural
Fundsservice
speed
of co-financed
distribution,
customer
DQE
The value chain
Porter
Support activities
Firm Infrastructure
Human resources management
Technology development
Procurement
Inbound
Logistics
Operations
Outbound
Logistics
Marketing
& Sales
Services
Main activities
Towards the Sustainable Region /DQE / 2NOO27I
Project co-financed by the Structural Funds
18
The value system
DQE
Suppliers
Direct
suppliers
Company &
competitors
Direct
customers
Final
customers
Χ
Υ
Ζ
Ε
Α
Β
Γ
Δ
Towards the Sustainable Region /DQE / 2NOO27I
Project co-financed by the Structural Funds
19
DQE
“Linkages” capabilities: base
of competitive advantage
Linkages
Activities
Example
internal
Main-main
Main-support
Support-support
Departments’ coordination
Production information systems
Innovation, quality through
employees
external
Specifications & control
TQM
Change of the value chain
…suppliers. Distributors
…with suppliers & distributors
…delete activities
Integration
Internal and/or external
Combination of technology,
design, quality, environment
Towards the Sustainable Region /DQE / 2NOO27I
Project co-financed by the Structural Funds
20
DQE
Strategy based on
resources & capabilities
4. Formulate strategy based on
most attractive resources &
capabilities
Strategy
3. Select resources &
capabilities with most attractive
advantage. Evaluate the
sustainability of advantage
Competitive
advantage
2. Evaluate resources and
capabilities regarding profit
generation possibilities
Evaluation of
Resources &
Capabilities
1. Identify and classify unique
resources & capabilities
Improve resources
& capabilities that
constitute the base
of strategy
•leverage R & C
•investments,
cooperation
Resources &
Capabilities
Towards the Sustainable Region /DQE / 2NOO27I
Project co-financed by the Structural Funds
21
DQE
Summarizing external and
internal analysis
Analysis SWOT
– Strengths
– Weaknesses
– Opportunities
– Threats
internal analysis
external analysis
Towards the Sustainable Region /DQE / 2NOO27I
Project co-financed by the Structural Funds
22
Stakeholders expectations
DQE
• Objectives
– Understand the meaning of
stakeholders
– Identify how stakeholders expectations
can influence strategy
Towards the Sustainable Region /DQE / 2NOO27I
Project co-financed by the Structural Funds
23
Organizational Stakeholders
DQE
“Stakeholders are those individuals or
groups who depend on the organisation to
fulfil their own goals and on whom the
organisation depends”
– ..people or groups (internal and external)
which have expectations and potential
influence
Johnson and Scholes, “Exploring Corporate Strategy”,
2005
Towards the Sustainable Region /DQE / 2NOO27I
Project co-financed by the Structural Funds
24
Stakeholders: An example
DQE
Society
Media:
-Newspapers
-ΤV
-Internet
Shareholder
s
Managers
Employees
International
Organizations:
-EU
-others
Government:
-Ministers
-Politicians
-Regional
Customer
s
Investor
s
Partners
Suppliers
Other organizations
and bodies:
-Unions
-Firms associations
-environmental
Towards the Sustainable Region /DQE / 2NOO27I
25
Project co-financed by thegroups
Structural Funds
Conflicts of expectations…
DQE
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•
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…e.g.
Short-term profit and high salaries versus long
term growth
Quality & design versus short-term profit
Environmental posture versus short-term lowercost
Financial independence versus reliance on
external financing in order to grow?
Multinationals: the company versus the host
country
Towards the Sustainable Region /DQE / 2NOO27I
Project co-financed by the Structural Funds
26
Strategic fit
DQE
Resources &
capabilities
Environment
DQE
ERV Congruence:
Strategy matching
environment,
resources, values
Expectations
& values
Towards the Sustainable Region /DQE / 2NOO27I
Project co-financed by the Structural Funds
27
Strategic Options
DQE
On what basis do
we compete?
Competitive
strategies
•Low cost-price
•Differentiation
•Focus
•Hybrid
(low cost & differentiation)
•DQE
To which
direction?
Alternative
directions
•Consolidation
•Market penetration
•Product development
•Market development
•Diversification
- related
- unrelated
•DQE
Through which
method?
Methods of
development
•Internal development
•Mergers
- Acquisitions
•Alliances
•Joint ventures
Towards the Sustainable Region /DQE / 2NOO27I
Project co-financed by the Structural Funds
28
Elements of successful
strategies
DQE
Design
Quality
Environment
Unique DQE combinations
Successful Strategy
Towards the Sustainable Region /DQE / 2NOO27I
Project co-financed by the Structural Funds
29
DQE
Strategic options:
DQE
…Increasing cost?
or
source of competitive advantage?
long-term convergence
Towards the Sustainable Region /DQE / 2NOO27I
Project co-financed by the Structural Funds
30
The need for Design strategies
DQE
Social responsibility
Innovation
Aesthetic
reasons
Social issues:
Cultural features
Needs
sustainable
growth
Easiness, comfort
for the users
Towards the Sustainable Region /DQE / 2NOO27I
Project co-financed by the Structural Funds
31
The need for Quality strategies
DQE
Knowledge, learning
Reputation
Company’s
values
Market needs,
networks
Focus on
excellence
sustainable
growth?
Towards the Sustainable Region /DQE / 2NOO27I
Project co-financed by the Structural Funds
32
DQE
The need for Environmental
strategies
Social responsibility:
Society, employees
Reputation
Corporate
governance
Focus on
social issues
sustainable
growth
Pressures from
stakeholders
Towards the Sustainable Region /DQE / 2NOO27I
Project co-financed by the Structural Funds
33
DQE
Environmental Strategies
“Green Strategies”
Actions towards
Reactive
Regulation
Market/Products
Protection
Compliance
cost
Proactive
Embeddedness
Green
differentiation
Towards the Sustainable Region /DQE / 2NOO27I
Project co-financed by the Structural Funds
34
References
DQE
• Ansoff H. I., “Corporate Strategy”, Mc Graw Hill, 1965.
• Barney J., Academy of Management Executive, 16,2002.
• Johnson G. and Scholes K., Whittington R. , “Exploring
Corporate Strategy, Prentice Hall,7th eds, 2005.
• Grant R., “ Contemporary Strategy Analysis”, Blackwell,
2000.
• Porter M.E., Competitive Advantage, New York: Free
Press, 1985.
• Porter M.E., “What is Strategy?”, Harvard Business
Review, Nov.-Dec. 1996.
Towards the Sustainable Region /DQE / 2NOO27I
Project co-financed by the Structural Funds
35