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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? – … a basis for the firm’s long term success? – …

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

product

for unique product

The main types of Competitive Advantage

advantage advantage Competitive Competitive
advantage
advantage
Competitive
Competitive
Higher price Similar at lower cost
Higher price
Similar
at lower cost
Cost advantage Cost advantage
Cost advantage
Cost advantage
Differentiation advantage Differentiation advantage
Differentiation advantage
Differentiation advantage

Competitive strategies by Porter

Market

Market

Types of

Types

of competitive

competitive advantage

advantage

Low cost

Differentiation

Industry-wide

Niche

Differentiation Cost leadership Focus with low cost Focus with differentiation
Differentiation
Cost leadership
Focus with
low cost
Focus with
differentiation

Competitive strategies

extending Porter

Industry-wide

Market

Market

Niche”

Types of

Types

of competitive

competitive advantage

advantage

Low cost

Differentiation

Cost Leadership Differentiation Hybrid Strategy Focus with Focus with differentiation low cost
Cost Leadership
Differentiation
Hybrid Strategy
Focus with
Focus with
differentiation
low cost

In-between” there might be a successful strategy (Value for Money) Hybrid strategies can be more effective

Features of competitive strategies

Cost

Cost Leadership

Leadership

Differentiation

Differentiation

Efficient scale

Standardization

Design for low

 Efficient scale  Standardization  Design for low production cost

production cost

Quality

Innovation

Design

 Q uality  Innovation  D esign

Credibility

Control of overheads

Brand name

and R&D

Reputation

Avoid marginal

customers

Environmental posture

Customer service

 

Integrated services

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

Sustainable competitive advantage …based on capabilities

Innovation

Reputation

Architecture of

relationships

Strategic

assets

DQE
DQE

Competitive advantage “map”

Source: “Competitiveness: Strategies of the best UK companies”, Winning DTI-CBI

Prerequisites Elements of differentiation Quality Quality
Prerequisites
Elements of differentiation
Quality
Quality

Low cost Operational performance Delivery time

Competitive advantage “map” Source: “Competitiveness: Strategies of the best UK companies”, Winning DTI-CBI Prerequisites Elements of

Low cost

Competitive advantage “map” Source: “Competitiveness: Strategies of the best UK companies”, Winning DTI-CBI Prerequisites Elements of
Competitive advantage “map” Source: “Competitiveness: Strategies of the best UK companies”, Winning DTI-CBI Prerequisites Elements of

Oper. performance

Delivery time

Creditability

Competitive advantage “map” Source: “Competitiveness: Strategies of the best UK companies”, Winning DTI-CBI Prerequisites Elements of

Creditability

Product Service

Competitive advantage “map” Source: “Competitiveness: Strategies of the best UK companies”, Winning DTI-CBI Prerequisites Elements of

Product Service

Design Design Marketing Customer service Marketing Customer service
Design
Design
Marketing
Customer service
Marketing
Customer service

Customized product

Competitive advantage “map” Source: “Competitiveness: Strategies of the best UK companies”, Winning DTI-CBI Prerequisites Elements of

Customized product

Reputation Innovative product

Competitive advantage “map” Source: “Competitiveness: Strategies of the best UK companies”, Winning DTI-CBI Prerequisites Elements of

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, 7 th 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