Lecture10 strategy

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DQE

Towards the Sustainable Region /DQE / 2NOO27IProject co-financed by the Structural Funds

Strategy:Sustainability through DQE

Prof. Spyros Lioukas, Dr Irini Voudouris

Athens University of Economics and Business

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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

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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.

What is Strategy?

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DQE


Elements of successful strategy

Successful implementation

Well defined long-term goals

Appraisal of the environment

Knowledge of own resources &

capabilities

Successful Strategy

R. Grant “Contemporary Strategy Analysis”, 2000

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DQE


Strategic Analysis Framework

feedback

Strategy formulation

Strategy implementation

Stakeholders expectations

Environment Analysis

Opportunities - Threats

Internal analysisResources & capabilities

StrategyStrategy(MOST)

mission, objectives, strategy, tactics

Strategic optionsEvaluation, choice

Strategic planActions, programs

Evaluation, Control

Implementation of actions/ programs

DQE

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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

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DQE


Macro-Macro-environmentenvironment

IndustryIndustry

MarketMarket

FirmFirm

External environment: Levels

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DQE


Macro-environment: PESTEL framework

• Political (P)– Government stability– Taxation policy– Trade regulation

• Social (S)– 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

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DQE


The macro-environment affects the industry environment which affects the firmR. Grant, Contemporary Strategy Analysis, 2000

From macro-environment to industry analysis

National/ National/ International International

EconomyEconomy

TechnologyTechnologyGovernmentGovernment

Natural Natural environmentenvironment

Social & Social & demographical demographical

structurestructure

Firm

Industry

environment

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DQE


Threat

Threat of

Entrance

Suppliers

Potential entrants

Substitutes

Buyers

Industry competition

Existing competitors

Bargaining Power

Bargaining Power

Supplements

Bargaining Power

Porter 5 forces framework +supplements

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DQE


The value network: Profitability

High Power of Buyers

High Power of suppliers

Profit Margin for suppliers

SUPPLIERS

- TITORS

BUYERS- -

COMPE-

TITORS

BUYERS

NEW ENTRANTS

SUBSTITUTES

NEW ENTRANTS

SUBSTITUTES

Profit margin for buyers

SU

PP

LIE

RS

COMPE

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DQE


Competition: • What drives competition?

• How intense is

competition? • How can we obtain a

superior competitive position?

Customers:•Who are they?•What do they want?

Critical Success Factors

Conditions of success

Critical Success Factors (KSF)

DQE

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DQE


Internal Analysis

• 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

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DQE


Firm’s capital

Natural Capital

Social Capital

Financial Capital

Customers

Human Capital

Knowledge

Resources & Capabilities

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DQE


Appraising resources

• Tangible resources– Financial, eg.

• Borrowing capacity

• Internal funds/ generation

– Physical, eg.• 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

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DQE


Unique resources & capabilities: The base of competitive advantage

Threshold resources

Resources

Like competitors or easy to imitate

Capabilities

Unique resources

Threshold capabilities

Core competences

Better than competitors,

difficult to imitate

DQE

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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 & speed of distribution, customer service

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DQE


Firm Infrastructure

Human resources management

Technology development

Procurement

Main activities

Support activities

Marketing & Sales

ServicesOperations Outbound Logistics

Inbound Logistics

Margin

The value chainPorter

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DQE


The value system

Suppliers Direct suppliers

Company & competitors

Direct customers

Final customers

Χ

Υ

Ζ

Ε

Α

Β

Γ

Δ

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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

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DQE


Strategy based on resources & capabilities

2. Evaluate resources and capabilities regarding profit generation possibilities

1. Identify and classify unique resources & capabilities

Strategy

Resources & Capabilities

Evaluation of Resources & Capabilities

Competitive advantage

3. Select resources & capabilities with most attractive advantage. Evaluate the sustainability of advantage

4. Formulate strategy based on most attractive resources & capabilities

Improve resources & capabilities that constitute the base of strategy

•leverage R & C

•investments, cooperation

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DQE


Summarizing external and internal analysis

Analysis SWOT– Strengths– Weaknesses– Opportunities– Threats

internal analysisinternal analysis

external analysisexternal analysis

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DQE


Stakeholders expectations

• Objectives– Understand the meaning of

stakeholders– Identify how stakeholders expectations

can influence strategy

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DQE


Organizational Stakeholders

“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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DQE


Government:-Ministers-Politicians-Regional

International Organizations:-EU-others

Other organizations and bodies:-Unions-Firms associations-environmental groups

Managers

Shareholders

Employees

Investors

Customers

Partners

Suppliers

Media: -Newspapers-ΤV-Internet

Stakeholders: An example

Society

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DQE


Conflicts of expectations…

…e.g.• Short-term profit and high salaries versus long

term growth• Quality & design versus short-term profit• Environmental posture versus short-term lower-

cost • Financial independence versus reliance on

external financing in order to grow? • Multinationals: the company versus the host

country

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DQE


Strategic fit

EnvironmentResources & capabilities

Expectations& values

ERV Congruence:

Strategy matching environment, resources, values

DQE

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DQE


Strategic Options

Competitive strategies

•Low cost-price

•Differentiation

•Focus

•Hybrid (low cost & differentiation)

•DQE

Alternativedirections

•Consolidation

•Market penetration•Product development•Market development

•Diversification - related

- unrelated•DQE

Methods of development

•Internal development•Mergers

- Acquisitions•Alliances

•Joint ventures

On what basis do we compete?

To which direction?

Through which method?

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DQE


Elements of successful strategies

Unique DQE combinations

DesignQuality

Environment

Successful Strategy

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DQE


Strategic options:DQE

…Increasing cost?or

source of competitive advantage?

long-term convergence

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DQE


Aesthetic reasons

Social issues:Social issues:Cultural featuresCultural features

NeedsNeeds

Social responsibility

sustainable growth

Innovation

Easiness, comfort for the users

The need for Design strategies

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DQE


Company’svalues Focus on Focus on

excellenceexcellence

Knowledge, learning

sustainable growth?

Reputation

Market needs, networks

The need for Quality strategies

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DQE


Corporate governance

Focus on Focus on social issuessocial issues

Social responsibility:Society, employees

sustainable growth

Reputation

Pressures from stakeholders

The need for Environmental strategies

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DQE


Environmental Strategies“Green Strategies”

Compliance cost

Green differentiation

Protection

Embeddedness

Reactive

Proactive

Regulation Market/Products

Actions towards

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DQE


References

• 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.

Lecture10 strategy

Business

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