Competitive Advantage: Is DQE the base of competitive advantage? 1

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 2

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? 3

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,

The main types of Competitive Advantage 5 Cost advantage Differentiation advantage Competitive advantage Competitive advantage Similar product at lower cost Higher price for unique product

Competitive strategies by Porter 6 Types of competitive advantage Low costDifferentiation Cost leadership Differentiation Industry-wide Niche Focus with low cost Focus with differentiation Market

Competitive strategies extending Porter 7 Types of competitive advantage Low costDifferentiation Cost Leadership Differentiation Industry-wide Niche” Focus with low cost Focus with differentiation Market Hybrid Strategy  “ In-between” there might be a successful strategy (Value for Money)  Hybrid strategies can be more effective

Features of competitive strategies Cost Leadership Efficient scale Standardization Design for low production cost Control of overheads and R&D Avoid marginal customersDifferentiation Quality Innovation Design Credibility Brand name Reputation Environmental posture Customer service Integrated services 8

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 9

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 10

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 11

Sustainable competitive advantage …based on capabilities 12 Innovation Reputation Architecture of relationships Strategic assets DQE J. Kay’

Competitive advantage “map” 13 Customized product Quality Low cost Operational performance Delivery time Creditability Product Service Design Marketing Customer service Customized product Innovative product PrerequisitesElements of differentiation Quality Low cost Oper. performance Delivery time Creditability Product Service Design Marketing Customer service Innovative product Source: “Competitiveness: Strategies of the best UK companies”, Winning DTI-CBI Reputation

Sustainable competitive advantage …reflected on product Quality and quality of customer service Design Innovative product Customized product with integrated services Environmental friendly 14

References R.M. Grant, Contemporary Strategy Analysis, Blackwell Publishers, M.E. Porter, Competitive Advantage, New York: Free Press, J. Kay, Foundations of Corporate Success, Oxford University Press, 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,

References S. Marthur, “How firms compete?” The Journal of General Management, vol.14, no 1, autumn 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, K. Weigelt &C. Camerer, (1988), “Reputation and Corporate Strategy: A review of recent theory and applications”, Strategic Management Journal, 9 16