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Strategy: Sustainability through DQE

Strategy: Sustainability through DQE. Prof. Spyros Lioukas, Dr Irini Voudouris Athens University of Economics and Business. Objectives. Learners will: understand the meaning of strategy understand the contribution of strategy to successful performance

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Strategy: Sustainability through DQE

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  1. Strategy:Sustainability through DQE Prof. Spyros Lioukas, Dr Irini Voudouris Athens University of Economics and Business

  2. 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

  3. What is Strategy? “Strategy is the direction and scope of an organization over the long term, which achieves competitive advantage for the organization through its configurationof resources within a changing environment and to fulfill stakeholders expectations”. Johnson & Scholes, “Exploring Corporate Strategy”, 2002.

  4. Elements of successful strategy Knowledge of own resources & capabilities Well defined long-term goals Appraisal of the environment Successful implementation Successful Strategy R. Grant “Contemporary Strategy Analysis”, 2000

  5. Stakeholders expectations Strategy formulation Internal analysis Resources & capabilities EnvironmentAnalysis Opportunities - Threats Strategy (MOST) mission, objectives, strategy, tactics Strategic options Evaluation, choice Strategy implementation Strategic plan Actions, programs Implementation of actions/ programs feedback Evaluation, Control Strategic Analysis Framework DQE

  6. 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

  7. External environment: Levels Macro-environment Industry Market Firm

  8. 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 Macro-environment: PESTEL framework

  9. National/ International Economy Social & demographical structure Natural environment Industry Firm Technology Government environment From macro-environment to industry analysis The macro-environment affects the industry environment which affects the firm R. Grant, Contemporary Strategy Analysis, 2000

  10. Suppliers Supplements BargainingPower Industry competition Threat of Entrance Potential entrants Substitutes Threat Existing competitors BargainingPower Buyers Porter 5 forces framework +supplements BargainingPower

  11. High Power of Buyers High Power of suppliers NEW ENTRANTS NEW ENTRANTS - COMPE TITORS - BUYERS BUYERS SUPPLIERS - SUPPLIERS COMPE - TITORS SUBSTITUTES SUBSTITUTES Profit Margin for suppliers Profit margin for buyers The value network: Profitability

  12. Critical Success Factors (KSF) Conditions of success • Competition: • What drives competition? • How intense is competition? • How can we obtain a superior competitive position? • Customers: • Who are they? • What do they want? DQE Critical Success Factors

  13. 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

  14. Firm’s capital Social Capital Natural Capital Customers Resources & Capabilities Financial Capital Knowledge Human Capital

  15. 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 Appraising resources

  16. Better than competitors, difficult to imitate Like competitors or easy to imitate Unique resources Threshold resources Resources Core competences Capabilities Threshold capabilities Unique resources & capabilities: The base of competitive advantage DQE

  17. Evaluating capabilities: The functional approach

  18. The value chain Porter Support activities Firm Infrastructure Human resources management Technology development Procurement Margin Outbound Logistics Inbound Logistics Operations Marketing & Sales Services Main activities

  19. The value system Direct suppliers Suppliers Company & competitors Direct customers Final customers Χ Υ Ζ Ε Α Β Γ Δ

  20. “Linkages” capabilities: base of competitive advantage

  21. 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 • Improve resources & capabilities that constitute the base of strategy • leverage R & C • investments, cooperation Competitive advantage 2. Evaluate resources and capabilities regarding profit generation possibilities Evaluation of Resources & Capabilities 1. Identify and classify unique resources & capabilities Resources & Capabilities

  22. Summarizing external and internal analysis Analysis SWOT • Strengths • Weaknesses • Opportunities • Threats internal analysis external analysis

  23. Stakeholders expectations • Objectives • Understand the meaning of stakeholders • Identify how stakeholders expectations can influence strategy

  24. 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

  25. Stakeholders: An example Society Media: -Newspapers -ΤV -Internet Government: -Ministers -Politicians -Regional Shareholders Managers Investors Employees Partners Customers Suppliers Other organizations and bodies: -Unions -Firms associations -environmental groups International Organizations: -EU -others

  26. 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

  27. Strategic fit Resources & capabilities Environment DQE Expectations & values ERV Congruence: Strategy matchingenvironment, resources, values

  28. Strategic Options On what basis do we compete? To which direction? Through which method? • Competitive • strategies • Low cost-price • Differentiation • Focus • Hybrid • (low cost & differentiation) • DQE • Alternative • directions • Consolidation • Market penetration • Product development • Market development • Diversification • - related • - unrelated • DQE • Methods of • development • Internal development • Mergers • - Acquisitions • Alliances • Joint ventures

  29. Elements of successful strategies Quality Design Environment Unique DQE combinations Successful Strategy

  30. Strategic options:DQE …Increasing cost? or source of competitive advantage? long-term convergence

  31. The need for Design strategies Social responsibility Innovation Social issues: Cultural features Needs Aesthetic reasons sustainable growth Easiness, comfort for the users

  32. The need for Quality strategies Knowledge, learning Focus on excellence Reputation Company’s values sustainable growth? Market needs, networks

  33. The need for Environmental strategies Corporate governance Social responsibility: Society, employees Focus on social issues Reputation sustainable growth Pressures from stakeholders

  34. Actions towards Regulation Market/Products Compliance cost Protection Reactive Proactive Green differentiation Embeddedness Environmental Strategies “Green Strategies”

  35. 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.

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