=Paper=
{{Paper
|id=Vol-2030/HAICTA_2017_paper22
|storemode=property
|title=Business Strategies and Competitive Advantage through Green Entrepreneurship and Sustainable Environmental Management
|pdfUrl=https://ceur-ws.org/Vol-2030/HAICTA_2017_paper22.pdf
|volume=Vol-2030
|authors=Michalis Skordoulis,Spyros Galatsidas,Garyfallos Arabatzis
|dblpUrl=https://dblp.org/rec/conf/haicta/SkordoulisGA17
}}
==Business Strategies and Competitive Advantage through Green Entrepreneurship and Sustainable Environmental Management==
https://ceur-ws.org/Vol-2030/HAICTA_2017_paper22.pdf
Business Strategies and Competitive Advantage through
Green Entrepreneurship and Sustainable Environmental
Management
Michalis Skordoulis1, Spyros Galatsidas1, Garyfallos Arabatzis1
1
Democritus University of Thrace, Orestiada, Greece, e-mails: msrkodoulis@gmail.com;
sgalatsi@fmenr.duth.gr; garamp@fmenr.duth.gr
Abstract. Both environmental sustainability and the production of green
products are strategies that are dictated by the need for environmental
protection and modern business management practices, but still they are not
widely applied. Adopting such strategies gives businesses the ability to operate
more efficiently and develop a competitive advantage. This article proposes the
theoretical development of a strategic framework using operations research
models and business management tools aiming to develop a competitive
advantage through sustainable environmental management.
Keywords: Environmental sustainability, competitive advantage, green
products, operations research, green entrepreneurship.
1 Introduction
Worrying phenomena such as the climate change, the increase in average
temperatures and the greenhouse gases emissions lead to increasingly negative
environmental and economic impacts, which need to be treated effectively
(Papageorgiou et al., 2015). This relationship between economic development,
energy consumption, gas emissions and their negative implications is analyzed in
several studies (Chalikias & Ntanos, 2015; Ntanos et al, 2015). In recent decades,
businesses have been faced with a set of new challenges in environmental
management. In addition, the need for environmentally friendly products becomes
increasingly imperative as consumers’ exhibit increased awareness towards
environmental issues and renewable energy sources (Chalikias et al., 2010a, b;
Kolovos et al., 2011; Ntanos et al., 2016).
Thus, from the beginning of the 1990s, the goal is to create a sustainable future
(Hutchinson, 1992). A number of researchers (Nidumolu et al., 2009; Arabatzis et al.,
2015; Ojo et al., 2015) state that the inclusion of sustainable environmental
management in a business’s strategy can be an core source for developing a
competitive advantage which is the ultimate goal of each business (Wheelen &
Hunger, 2012).
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The current environment in which businesses are required to operate is very
dynamic, similar to the environment of a battle. For the analysis of such
environments, operations research models have been developed and can be applied in
the case of enterprises (Chalikias & Skordoulis, 2014; Chalikias & Skordoulis,
2016).
The purpose of this paper is to propose the theoretical basis for the development of
a framework analyzing business competition by using operations research models
and aiming to create competitive advantage by using modern management tools.
2 Sustainable environmental management and competitive
advantage
In recent years, more and more businesses are turning to practices aiming at
environmental protection and sustainability. On the one hand, this trend stems from
the increasing pressure from stakeholders, such as environmental organizations,
consumers and regulators. In this sense, environmental sustainability could be the
most important challenge of corporate social responsibility. On the other hand, the
trend towards integrating sustainable management of the environment into business
strategy has to do with its contribution to competitive advantage creation.
Corporate social responsibility is inseparably linked to environmental protection.
Corporate social responsibility contributes to corporate image strengthening, to
favorable taxation promotion, to relations with the stakeholders strengthening as well
as to better risk management and security (Urip, 2010). Consequently, actions related
to environmental protection and can be expressed through corporate social
responsibility framework can lead to higher economic returns and as far as it is
concerned to the establishment of a competitive advantage (Urip, 2010; Skordoulis et
al. 2013).
According to Danjelico and Pujari (2010), sustainable environmental management
is linked to the competitive advantage of a business by reducing the use of energy,
raw materials and pollutants. According to them, the production of green products,
i.e. products produced by methods that minimize the burden on the environment
(Ottman et al., 2006).
Wu and Lin (2016) report that green product production contributes to minimizing
the environmental impact of products throughout their lifetime, including purchasing
raw materials, manufacturing, selling, consumption and disposal after use.
According to a framework proposed by Rohm and Montgomery (2010), revenue
growth, risk reduction and cost reduction will increase business profitability and lead
to a sustainable competitive advantage.
More specifically, a strong emphasis on sustainability leads to the development of
more eco-efficient products, strengthens co-operation with environmental regulators
and reduces the environmental impact of business operations.
In addition, new technological capabilities are created to help measure and analyze
environmental impacts more effectively.
206
Furthermore, by producing more eco-efficient products, higher value can be
provided to an increasing number of green consumers, which will lead to increased
sales.
Moreover, a better and more efficient co-operation with environment regulators
will be archived through the production of green products. This will reduce business
risk, since eco-friendly and safe products will reduce the potential risk of
environmental liability and consumers. This reduced risk will have a positive impact
on capital costs. In turn, actions to reduce production processes impact on the
environment will lead to direct cost savings of fuel, water, electricity and waste
disposal (Berry & Rondinelly, 1998).
It is a fact that the cost of organizing a business to operate with a focus on
sustainable environmental management can be considered quite high. However,
businesses should not perceive the adoption of sustainable environmental
management practices as unnecessary costs; they should perceive them as long-term
investments that eventually lead to the development of a competitive advantage
(Becker-Olsen et al., 2006).
3 Business competition analysis with operations research models
and strategy formulation
During the World Wars, mathematical models were widely used in combats. These
models aimed at solving various optimization problems related to the ongoing war
operations. By the end of the wars, these models were applied with to business cases,
since business competition is very similar to battlefields combats.
Such models based on differential equations have been applied in business cases
such as marketing strategy analysis (Taoka, 1997), oligopoly competition strategies
(Fruchter & Kalish, 1997), products development based on customers’ needs
(Fehlmann, 2008), advertising costs (Chintagunta & Vilcassim, 1992; Chalikias &
Skordoulis, 2014; Chalikias et al. 2016) and supply chains (Chalikias & Skordoulis,
2016).
Unlike traditional static models that can only explain competition in a market,
operations research models such as Lanchester’s combat model can not only be used
in the multidimensional analysis of a market but also in the prediction of tis future
sizes based on competition data (Fehlmann, 2008).
In such a case, the competition between two businesses could be analyzed by a
system of differential equations as the following one:
⎡ dx (1)
⎢ dt = −ay + f (t)
⎢
⎢ dy = − bx + g(t)
⎢⎣ dt
Where x (t) and y (t) would be the operating income for each one of the two
competitors, f (t) and g (t) the rate at which they increase or decrease affected by one
207
or more variables in each model. Such variables would be advertising costs, supplies
at points of sale, or environmental investments.
Having analyzed the competition with an operations research model it is possible
to point out the strengths and weaknesses of a business against competition as well as
the points that need to be improved (Fehlmann, 2008).
Once the strengths, weaknesses and the points to be improved have been recorded,
the next step is to develop the appropriate business strategy. For this purpose, tools of
modern business administration can be used.
Such a tool is the Quality Function Deployment (QFD) method, which aims to
integrate customers’ needs and requirements at the development of a product
(Felhmann, 2008; Chaudha et al., 2011). The QFD method can indicate to a business
where and how to focus as well as the impacts on competition (Salari & Bhuiyan,
2016).
Fig. 1. Quality Function Deployment framework.
Environmental sustainability through the QFD method means that a business
should operate environmentally responsible (Dai & Blackhurst, 2012) and should
therefore translate environmental requirements into processes; this strategy would
possibly result in the potential development of a competitive advantage as already
discussed.
208
Another tool that could be used to achieve environmental sustainability is the
Balanced Scorecard (BSC), the basic idea of which is that the effective use of
investment funds is no longer the only determinant of developing a competitive
advantage, but there are other factors as well such as human capital, knowledge
creation and customer orientation (Kaplan & Norton, 2005).
In order to apply BSC method to an environmental sustainability strategy, the
proper business units should be selected, the environmental aspects must identified,
and the relationship between the environmental aspects and the business strategy
should be analyzed (Figgie Et al., 2002).
By adding the environmental dimension to BSC, in addition to its existing ones, a
business can translate its environmental strategy into a set of performance and
requirements measures (Sidiropoulos et al., 2004). The elements that may include the
environmental dimension of a BSC are presented in the table below.
Table 1. Proposed BSC framework for the environmental dimension (Sidiropoulos et al.,
2004).
Processes Products
Resources Wastes
• Energy • Gas emission • Recyclable parts percent
• Water • Liquid wastes • Non-recyclable parts life cycle
• Raw material • Solid wastes • Products life cycle
• Dangerous • Substitutes number
wastes
Based on the above framework, the environmental dimension of BSC can be used
to model different events to provide the ability to run, analyze and evaluate different
scenarios (Sidiropoulos et al., 2004).
4 Conclusions
The fact that many businesses do not yet consider environmental sustainability as a
priority (Kaebernick et al., 2003) gives to those who integer it into their strategies the
chance to develop a competitive advantage. This will be the results of both the
benefits provided by an environmental sustainability strategy (Kim & Mauborgne,
2005) and, a so-called “blue ocean” strategy which is an innovative approach that
enables development in new fields of a market where there are still few potential
competitors (Nidumolu et al., 2009).
From the above analysis, it is obvious that integrating environmental requirements
into business strategy leads to a sustainability framework that can be reflected by the
development of a competitive advantage by improving efficiency, reducing costs and
risks and increasing compatibility with customers’ and regulations’ requirements.
Developing an environmental sustainability strategy through operations research
models and business management tools is more effective than traditional ways since
it takes into account all possible variables and it is possible to predict the results by
209
creating, running and evaluating different scenarios (White & Lee, 2009; Paucar-
Caceres & Espinosa, 2011).
Therefore, a business strategy that includes environmental sustainability will be
more effective when it is based on operations research model and business tools such
as the QFD method, as this will provide a better understanding of the competition
and the requirements. Moreover, the analysis of as many scenarios as possible
including different variables will become feasible.
A strategic approach as described above will result in significant changes in the
structure, the mission, the vision and the purpose of any business that will adopt it.
Such a strategy can ultimately enhance the reputation and results of a business in a
constantly changing market that creates new challenges.
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