DQE Towards the Sustainable Region /DQE / 2NOO27I Project co-financed by the Structural Funds 1 Strategy: Sustainability through DQE Prof. Spyros Lioukas, Dr Irini Voudouris Athens University of Economics and Business

DQE Towards the Sustainable Region /DQE / 2NOO27I Project co-financed by the Structural Funds 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

DQE Towards the Sustainable Region /DQE / 2NOO27I Project co-financed by the Structural Funds 3 “ 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”, What is Strategy?

DQE Towards the Sustainable Region /DQE / 2NOO27I Project co-financed by the Structural Funds 4 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

DQE Towards the Sustainable Region /DQE / 2NOO27I Project co-financed by the Structural Funds 5 Strategic Analysis Framework feedback Strategy formulation Strategy implementation Stakeholders expectations Environment Analysis Opportunities - Threats Internal analysis Resources & capabilities Strategy (MOST) mission, objectives, strategy, tactics Strategic options Evaluation, choice Strategic plan Actions, programs Evaluation, Control Implementation of actions/ programs DQE

Towards the Sustainable Region /DQE / 2NOO27I Project co-financed by the Structural Funds 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

DQE Towards the Sustainable Region /DQE / 2NOO27I Project co-financed by the Structural Funds 7 Macro- environment Industry Market Firm External environment: Levels

DQE Towards the Sustainable Region /DQE / 2NOO27I Project co-financed by the Structural Funds 8 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

DQE Towards the Sustainable Region /DQE / 2NOO27I Project co-financed by the Structural Funds 9 The macro-environment affects the industry environment which affects the firm R. Grant, Contemporary Strategy Analysis, 2000 From macro-environment to industry analysis National/ International Economy Technology Government Natural environment Social & demographical structure Firm Industry environment

DQE Towards the Sustainable Region /DQE / 2NOO27I Project co-financed by the Structural Funds 10 Threat Threat of Entrance Suppliers Potential entrants Substitutes Buyers Industry competition Existing competitors Bargaining Power Supplements Bargaining Power Porter 5 forces framework +supplements

DQE Towards the Sustainable Region /DQE / 2NOO27I Project co-financed by the Structural Funds 11 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 SUPPLIERS COMPE

DQE Towards the Sustainable Region /DQE / 2NOO27I Project co-financed by the Structural Funds 12 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

Towards the Sustainable Region /DQE / 2NOO27I Project co-financed by the Structural Funds 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

DQE Towards the Sustainable Region /DQE / 2NOO27I Project co-financed by the Structural Funds 14 Firm’s capital Natural Capital Social Capital Financial Capital Customers Human Capital Knowledge Resources & Capabilities

DQE Towards the Sustainable Region /DQE / 2NOO27I Project co-financed by the Structural Funds 15 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

DQE Towards the Sustainable Region /DQE / 2NOO27I Project co-financed by the Structural Funds 16 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

Towards the Sustainable Region /DQE / 2NOO27I Project co-financed by the Structural Funds 17 Evaluating capabilities: The functional approach FunctionExamples of Capabilities Corporate ManagementFinancial management, strategic control, coordination of business units, social responsibility MISRapid information transfer R&DDevelopment of new products, design, innovation ManufacturingFlexibility, quality, design, efficiency, eco-efficiency MarketingDesign, brand management, promotion, environmental marketing Sales & distributionSales responsiveness, efficiency & speed of distribution, customer service

DQE Towards the Sustainable Region /DQE / 2NOO27I Project co-financed by the Structural Funds 18 Firm Infrastructure Human resources management Technology development Procurement Main activities Support activities Marketing & Sales Services Operations Outbound Logistics Inbound Logistics Margin The value chain Porter

DQE Towards the Sustainable Region /DQE / 2NOO27I Project co-financed by the Structural Funds 19 The value system Suppliers Direct suppliers Company & competitors Direct customers Final customers Χ Υ Ζ Ε Α Β Γ Δ

DQE Towards the Sustainable Region /DQE / 2NOO27I Project co-financed by the Structural Funds 20 “Linkages” capabilities: base of competitive advantage LinkagesActivitiesExample internalMain-main Main-support Support-support Departments’ coordination Production information systems Innovation, quality through employees externalSpecifications & control TQM Change of the value chain …suppliers. Distributors …with suppliers & distributors …delete activities IntegrationInternal and/or externalCombination of technology, design, quality, environment

DQE Towards the Sustainable Region /DQE / 2NOO27I Project co-financed by the Structural Funds 21 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

DQE Towards the Sustainable Region /DQE / 2NOO27I Project co-financed by the Structural Funds 22 Summarizing external and internal analysis Analysis SWOT –Strengths –Weaknesses –Opportunities –Threats internal analysis internal analysis external analysis external analysis

DQE Towards the Sustainable Region /DQE / 2NOO27I Project co-financed by the Structural Funds 23 Stakeholders expectations Objectives –Understand the meaning of stakeholders –Identify how stakeholders expectations can influence strategy

DQE Towards the Sustainable Region /DQE / 2NOO27I Project co-financed by the Structural Funds 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

DQE Towards the Sustainable Region /DQE / 2NOO27I Project co-financed by the Structural Funds 25 Government: -Ministers -Politicians -Regional International Organizations: -EU -others Other organizations and bodies: -Unions -Firms associations -environmental groups Managers Shareholder s Employees Investor s Customer s Partners Suppliers Media: -Newspapers -ΤV -Internet Stakeholders: An example Society

DQE Towards the Sustainable Region /DQE / 2NOO27I Project co-financed by the Structural Funds 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

DQE Towards the Sustainable Region /DQE / 2NOO27I Project co-financed by the Structural Funds 27 Strategic fit Environment Resources & capabilities Expectations & values ERV Congruence: Strategy matching environment, resources, values DQE

Towards the Sustainable Region /DQE / 2NOO27I Project co-financed by the Structural Funds 28 Strategic Options 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 On what basis do we compete? To which direction? Through which method?

DQE Towards the Sustainable Region /DQE / 2NOO27I Project co-financed by the Structural Funds 29 Elements of successful strategies Unique DQE combinations Design Quality Environment Successful Strategy

DQE Towards the Sustainable Region /DQE / 2NOO27I Project co-financed by the Structural Funds 30 Strategic options: DQE …Increasing cost? or source of competitive advantage? long-term convergence

DQE Towards the Sustainable Region /DQE / 2NOO27I Project co-financed by the Structural Funds 31 Aesthetic reasons Social issues: Cultural features Needs Social responsibility sustainable growth Innovation Easiness, comfort for the users The need for Design strategies

DQE Towards the Sustainable Region /DQE / 2NOO27I Project co-financed by the Structural Funds 32 Company’s values Focus on excellence Knowledge, learning sustainable growth? Reputation Market needs, networks The need for Quality strategies

DQE Towards the Sustainable Region /DQE / 2NOO27I Project co-financed by the Structural Funds 33 Corporate governance Focus on social issues Social responsibility: Society, employees sustainable growth Reputation Pressures from stakeholders The need for Environmental strategies

DQE Towards the Sustainable Region /DQE / 2NOO27I Project co-financed by the Structural Funds 34 Environmental Strategies “Green Strategies” Compliance cost Green differentiation Protection Embeddedness Reactive Proactive RegulationMarket/Products Actions towards

DQE Towards the Sustainable Region /DQE / 2NOO27I Project co-financed by the Structural Funds 35 References Ansoff H. I., “Corporate Strategy”, Mc Graw Hill, Barney J., Academy of Management Executive, 16,2002. Johnson G. and Scholes K., Whittington R., “Exploring Corporate Strategy, Prentice Hall,7 th eds, Grant R., “ Contemporary Strategy Analysis”, Blackwell, Porter M.E., Competitive Advantage, New York: Free Press, Porter M.E., “What is Strategy?”, Harvard Business Review, Nov.-Dec