Strategy Sustainability Through DQE

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
DQE
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
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.
DQE
Elements of successful strategy

Appraisal of the environment Knowledge of own resources & capabilities
Well defined long-term goals
Successful implementation
Successful Strategy
R. Grant Contemporary Strategy Analysis, 2000
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
External environment: Levels

DQE
Macroenvironment
Industry Market Firm
DQE
Macro-environment: PESTEL framework

Economical ()
GNP trends Inflation Unemployment Government stability Taxation policy Trade regulation
Political (P)
Social (S)
Demographics Lifestyle changes Social trends Education levels Consumerism
Technological
Rate of technological changes Technology transfer policy Government and industry spending on research and development
Environmental (E)
Environmental regulation Waste management Energy issues
Legal (L)
Employment Laws Health and safety
DQE
From macro-environment to industry analysis

National/ International Economy
Social & demographical structure
Natural environment
Industry Firm Government environment The macro-environment affects the industry environment which affects the firm R. Grant, Contemporary Strategy Analysis, 2000
Technology
DQE
Porter 5 forces framework +supplements

Suppliers
Bargaining Power
Supplements
Bargaining Power
Threat of
Industry competition Substitutes

Existing competitors
Threat
Potential entrants
Entrance
Bargaining
Power
Buyers
10
The value network: Profitability

DQE High Power of Buyers
NEW ENTRANTS
High Power of suppliers

NEW ENTRANTS
COMPE TITORS SUPPLIERS BUYERS COMPE TITORS BUYERS
SUBSTITUTES Profit Margin for suppliers
SUBSTITUTES
Profit margin for buyers
11
DQE
Critical Success Factors (KSF)

Conditions of success
Customers: Who are they? What do they want?
Competition: What drives competition? How intense is competition? How can we obtain a superior competitive position?
Critical Success Factors
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
13
Firms capital
DQE
Social Capital Natural Capital Customers
Financial Capital
Resources & Capabilities
Knowledge
Human Capital
14
Appraising resources
DQE
Tangible resources
Financial, eg.
Borrowing capacity Internal funds/ generation
Intangible resources
Technology, eg.
Know how, R&D, design Knowledge residing in technical & scientific employees & teams
Physical, eg.
Land & buildings Plant & equipment Technology Raw materials
Reputation
Brands, company reputation, social responsibility, environmental proactiveness, quality
Human resources, eg
Education, training, experience, adaptability
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DQE
Unique resources & capabilities: The base of competitive advantage

Like competitors or easy to imitate
Better than competitors, difficult to imitate
Resources
Threshold resources
Unique resources
DQE
Capabilities
Threshold capabilities
Core competences
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DQE
Evaluating capabilities: The functional approach

Examples of Capabilities Financial management, strategic control, coordination of business units, social responsibility Rapid information transfer Development of new products, design, innovation Flexibility, quality, design, efficiency, eco-efficiency Design, brand management, promotion, environmental marketing Sales responsiveness, efficiency & Towards the Sustainable Region /DQE / 2NOO27I 17 Project by the Structural Fundsservice speed of co-financed distribution, customer
Function Corporate Management
MIS R&D Manufacturing
Marketing Sales & distribution
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
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The value system

DQE
Suppliers Direct suppliers Company & competitors Direct customers Final customers

19
DQE
Linkages capabilities: base of competitive advantage

Activities Example
Linkages
internal
Main-main Main-support Support-support Specifications & control TQM Change of the value chain
Departments coordination Production information systems Innovation, quality through employees suppliers. Distributors with suppliers & distributors delete activities
external
Integration
Internal and/or external
Combination of technology, design, quality, environment
20
DQE
Strategy based on resources & capabilities

Strategy
4. Formulate strategy based on most attractive resources & capabilities
3. Select resources & capabilities with most attractive advantage. Evaluate the sustainability of advantage
2. Evaluate resources and capabilities regarding profit generation possibilities
Competitive advantage
Improve resources & capabilities that constitute the base of strategy leverage R & C investments, cooperation
Evaluation of Resources & Capabilities
1. Identify and classify unique resources & capabilities
Resources & Capabilities
21
DQE
Summarizing external and internal analysis
Analysis SWOT
Strengths Weaknesses Opportunities Threats
internal analysis
external analysis
22
Stakeholders expectations
DQE
Objectives
Understand the meaning of stakeholders Identify how stakeholders expectations can influence strategy
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
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Stakeholders: An example
DQE
Media: -Newspapers -V -Internet
Society
Shareholder s Managers Investor s Partners
Government: -Ministers -Politicians -Regional
Employees
International Organizations: -EU -others
Customer s
Other organizations and bodies: -Unions -Firms associations -environmental Towards the Sustainable Region /DQE / 2NOO27I 25 Project co-financed by the Structural Funds groups
Suppliers
Conflicts of expectations
DQE
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
26
Strategic fit
DQE
Environment
DQE
Resources & capabilities
ERV Congruence: Strategy matching environment, resources, values
Expectations & values
27
Strategic Options
DQE On what basis do we compete? To which direction? Through which method?
Competitive strategies
Low cost-price Differentiation Focus Hybrid
(low cost & differentiation)
Alternative directions
Consolidation Market penetration Product development Market development Diversification - related - unrelated DQE
Methods of development
Internal development Mergers - Acquisitions Alliances Joint ventures
DQE
28
DQE
Elements of successful strategies

Design Quality Environment
Unique DQE combinations
Successful Strategy
29
DQE
Strategic options: DQE
Increasing cost? or source of competitive advantage?
long-term convergence
30
The need for Design strategies

DQE
Social responsibility
Innovation
Aesthetic reasons
Social issues: Cultural features Needs
sustainable growth
Easiness, comfort for the users

31
The need for Quality strategies

DQE
Knowledge, learning Reputation

Companys values
Focus on excellence
Market needs, networks
sustainable growth?
32
DQE
The need for Environmental strategies

Corporate governance
Social responsibility: Society, employees
Reputation
Focus on social issues sustainable growth
Pressures from stakeholders

33
DQE
Environmental Strategies Green Strategies

Actions towards
Regulation Market/Products
Reactive
Protection
Compliance cost
Proactive
Embeddedness
Green differentiation
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.
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DQE

Strategy is the direction and scope of an organization over

Elements of successful strategy

Well defined long-term goals

Strategic Analysis Framework

Strategy formulation Internal analysis Resources & capabilities

Stakeholders expectations Strategy (MOST)

Environment Analysis Opportunities Threats

Analysis of external environment

External environment: Levels

Macro-environment: PESTEL framework

From macro-environment to industry analysis

Social & demographical structure

Porter 5 forces framework +supplements

Industry competition Substitutes

The value network: Profitability

High Power of suppliers

COMPE TITORS SUPPLIERS BUYERS COMPE TITORS BUYERS

SUBSTITUTES Profit Margin for suppliers

Profit margin for buyers

Critical Success Factors (KSF)

Customers: Who are they? What do they want?

Critical Success Factors

Social Capital Natural Capital Customers

Resources & Capabilities

Unique resources & capabilities: The base of competitive advantage

Better than competitors, difficult to imitate

Evaluating capabilities: The functional approach

Function Corporate Management

MIS R&D Manufacturing

Marketing Sales & distribution

The value chain Porter

Firm Infrastructure Human resources management Technology development Procurement

Marketing & Sales

The value system

Linkages capabilities: base of competitive advantage

Internal and/or external

Combination of technology, design, quality, environment

Strategy based on resources & capabilities

4. Formulate strategy based on most attractive resources & capabilities

Evaluation of Resources & Capabilities

1. Identify and classify unique resources & capabilities

Resources & Capabilities

Summarizing external and internal analysis

Media: -Newspapers -V -Internet

Shareholder s Managers Investor s Partners

Government: -Ministers -Politicians -Regional

International Organizations: -EU -others

Resources & capabilities

ERV Congruence: Strategy matching environment, resources, values

Expectations & values

Elements of successful strategies

Unique DQE combinations

Strategic options: DQE

Increasing cost? or source of competitive advantage?

The need for Design strategies

Social issues: Cultural features Needs

Easiness, comfort for the users

The need for Quality strategies

Knowledge, learning Reputation

Market needs, networks

The need for Environmental strategies

Social responsibility: Society, employees

Focus on social issues sustainable growth