Competitive Advantage:Is DQE the base of competitive advantage? Prof. Spyros Lioukas, Dr Irini Voudouris Athens University of Economics and Business
Objectives: Learners will • Understand the meaning of competitive advantage • Understand what are the main types of competitive advantage • Identify “how” competitive advantage may be created • Recognize the basis of sustainable competitive advantage • Distinguish the “new” bases of competitive advantage • Identify how the DQE approach enhances the creation of sustainable competitive advantage
What is Competitive advantage? • … a basis for the firm’s long term success? • … a basis for value creation? • Do we really know where it resides? • Can it be sustainable?
What is Competitive advantage? “When two or more firms compete within the same market, one firms possesses a competitive advantage over its rivals when it earns a persistently higher rate of profit (or has the potential to earn a persistently higher rate of profit)” R. M. Grant, 2000
Cost advantage Similar product at lower cost Competitive advantage Higher price for unique product Differentiation advantage The main types of Competitive Advantage
Competitive strategies by Porter Types of competitive advantage Low cost Differentiation Industry-wide Differentiation Cost leadership Market Niche Focus with low cost Focus with differentiation
Competitive strategies extending Porter Types of competitive advantage Low cost Differentiation Industry-wide Differentiation Cost Leadership Hybrid Strategy Market Niche” Focus with differentiation Focus with low cost • “In-between” there might be a successful strategy (Value for Money) • Hybrid strategies can be more effective
Cost Leadership Efficient scale Standardization Design for low production cost Control of overheads and R&D Avoid marginal customers Differentiation Quality Innovation Design Credibility Brand name Reputation Environmental posture Customer service Integrated services Features of competitive strategies
Sustainable competitive advantage • What is meant by sustainable competitive advantage? • Durable • Valuable to the firm • Exploiting weaknesses and neutralizing threats • Unique • Difficult for competitors to imitate • Not easily substitutable
May competitive advantage be sustainable? • Increased competition leads to decrease of differences in competitive advantage • Standardization/ mass production of unique features: What can be left for differentiation? • Unique features of differentiation become prerequisites for survival • Dynamism & complexity of the environment
How can competitive advantage be sustainable? • The firm must seek competitive advantage in combining resources & capabilities • Develop resources and capabilities, which are rare, valuable, non-tradable, • Make those resulting competences sustainable by precluding imitation or substitution by competitors • The firm must offer competitive products
Innovation Reputation DQE Architecture of relationships Strategic assets Sustainable competitive advantage…based on capabilities J. Kay’
Competitive advantage “map” Source: “Competitiveness: Strategies of the best UK companies”, Winning DTI-CBI Prerequisites Elements of differentiation Quality Quality Low cost Low cost Operational performance Oper. performance Delivery time Delivery time Creditability Creditability Product Service Product Service Design Design Marketing Marketing Customer service Customer service Customized product Customized product Reputation Reputation Innovative product Innovative product
Sustainable competitive advantage …reflected on product • Quality and quality of customer service • Design • Innovative product • Customized product with integrated services • Environmental friendly
References • R.M. Grant, Contemporary Strategy Analysis, Blackwell Publishers, 2000. • M.E. Porter, Competitive Advantage, New York: Free Press, 1985. • J. Kay, Foundations of Corporate Success, Oxford University Press, 1995. • G. Johnson, K. Scholes & R. Whittington, Exploring Corporate Strategy, Prentice Hall, 7th eds, 2005 • C. Prahalad & G. Hamel, “The core competences of the corporation”, Harvard Business Review, vol. 28, n.3, may-june, 1990.
References • S. Marthur, “How firms compete?” The Journal of General Management, vol.14, no 1, autumn 1988. • F. Tilley, P. Hooper & L. Walley, “Sustainability and competitiveness: Are there mutual advantages for SMEs?”, in J. Oswald & F. Tilley, Competitive Advantage in SMEs: Organising for innovation and change, Wiley, 2003. • K. Weigelt &C. Camerer, (1988), “Reputation and Corporate Strategy: A review of recent theory and applications”, Strategic Management Journal, 9