Chapter 3


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Chapter 3

  1. 1. Strategic Planning
  2. 2. Strategic Management <ul><li>Strategic Human Resource Management </li></ul><ul><ul><li>Involves aligning initiatives involving how people are managed with organizational mission & objectives </li></ul></ul><ul><li>Strategic Management Process </li></ul><ul><ul><li>Determining what needs to be done to achieve corporate objectives over 3 - 5 years </li></ul></ul><ul><ul><li>Examining organization & competitive environment </li></ul></ul><ul><ul><li>Establishing optimal fit between organization & its environment </li></ul></ul><ul><ul><li>Reviewing & revising strategic plan </li></ul></ul>1 –
  3. 3. Models of Strategy <ul><li>Industrial Organization (O/I) Model </li></ul><ul><ul><li>External environment is primary determinant of organizational strategy rather than internal decisions of managers </li></ul></ul><ul><ul><li>Environment presents threats & opportunities </li></ul></ul><ul><ul><li>All competing organizations control or have equal access to resources </li></ul></ul><ul><ul><li>Resources are highly mobile between firms </li></ul></ul><ul><ul><li>Organizational success is achieved by </li></ul></ul><ul><ul><ul><li>Offering goods & services at lower costs than competitors </li></ul></ul></ul><ul><ul><ul><li>Differentiating products to bring premium prices </li></ul></ul></ul>1 –
  4. 4. Models of Strategy <ul><li>Resource-Based View (RBV) </li></ul><ul><ul><li>An organization’s resources & capabilities, not external environmental conditions, should be basis for strategic decisions </li></ul></ul><ul><ul><li>Competitive advantage is gained through acquisition & value of organizational resources </li></ul></ul><ul><ul><li>Organizations can identify, locate & acquire key valuable resources </li></ul></ul><ul><ul><li>Resources are not highly mobile across organizations & once acquired are retained </li></ul></ul><ul><ul><li>Valuable resources are costly to imitate & non-substitutable </li></ul></ul>1 –
  5. 5. Contrasting the Two Approaches <ul><li>Research provides support for both positions </li></ul><ul><li>What drives strategy? </li></ul><ul><ul><li>I/O: External considerations </li></ul></ul><ul><ul><li>RBV: Internal considerations </li></ul></ul><ul><li>I/O: Strategy drives resource acquisition </li></ul><ul><li>RBV: Strategy determined by resources </li></ul>1 –
  6. 6. The Process of Strategic Management <ul><li>Mission statement </li></ul><ul><li>Environmental analysis </li></ul><ul><li>Organizational self-assessment </li></ul><ul><li>Establishing goals & objectives </li></ul>1 –
  7. 7. Exhibit 3-1 Process of Strategic Management 1 –
  8. 8. Mission Statement <ul><li>Explains purpose & reason for existence </li></ul><ul><li>Usually very broad </li></ul><ul><li>No more than a couple of sentences </li></ul><ul><li>Serves as foundation for everything organization does </li></ul>1 –
  9. 9. Solectron Mission Statement <ul><li>“ Our mission is to provide worldwide responsiveness to our customers by offering the highest quality, lowest total cost, customized, integrated, design, supply-chain and manufacturing solutions through long-term partnerships based on integrity and ethical business practices.” </li></ul>1 –
  10. 10. Analysis of Environment <ul><li>Critical components of external environment </li></ul><ul><ul><li>Competition </li></ul></ul><ul><ul><li>Industry structure </li></ul></ul><ul><ul><li>Government regulations </li></ul></ul><ul><ul><li>Technology </li></ul></ul><ul><ul><li>Market trends </li></ul></ul><ul><ul><li>Economic tends </li></ul></ul>1 –
  11. 11. Organization Self-Assessment <ul><li>Identify primary strengths & weaknesses </li></ul><ul><li>Find ways to capitalize on strengths </li></ul><ul><li>Find ways to improve or minimize weaknesses </li></ul><ul><li>Examine resources </li></ul><ul><ul><li>Physical </li></ul></ul><ul><ul><li>Human </li></ul></ul><ul><ul><li>Technological </li></ul></ul><ul><ul><li>Capital </li></ul></ul>1 –
  12. 12. Organization Self-Assessment <ul><li>Examine internal management systems </li></ul><ul><ul><li>Culture </li></ul></ul><ul><ul><li>Organization structure </li></ul></ul><ul><ul><li>Power dynamics & policy </li></ul></ul><ul><ul><li>Decision-making processes </li></ul></ul><ul><ul><li>Past strategy & performance </li></ul></ul><ul><ul><li>Work systems </li></ul></ul>1 –
  13. 13. Establishing Goals & Objectives <ul><li>Goals should be: </li></ul><ul><ul><li>Specific </li></ul></ul><ul><ul><li>Measurable </li></ul></ul><ul><ul><li>Flexible </li></ul></ul>1 –
  14. 14. Corporate Strategies: Growth <ul><li>Benefits </li></ul><ul><ul><li>Gaining economies of scale in operations & functions </li></ul></ul><ul><ul><li>Enhancing competitive position vis-à-vis industry competitors </li></ul></ul><ul><ul><li>Providing opportunities for employee professional development & advancement </li></ul></ul><ul><li>HR Issues </li></ul><ul><ul><li>Planning for new hiring </li></ul></ul><ul><ul><li>Alerting current employees </li></ul></ul><ul><ul><li>Ensuring quality & performance standards are maintained </li></ul></ul><ul><li>Internal Methods </li></ul><ul><ul><li>Penetration of existing markets </li></ul></ul><ul><ul><li>Developing new markets </li></ul></ul><ul><ul><li>Developing new products or services for existing or new markets </li></ul></ul><ul><li>External Methods </li></ul><ul><ul><li>Acquiring other organizations </li></ul></ul><ul><ul><li>Vertical integration </li></ul></ul><ul><li>HR Issues </li></ul><ul><ul><li>Merging organizations </li></ul></ul><ul><ul><li>Dismissing redundant employees </li></ul></ul>1 –
  15. 15. Corporate Strategies: Stability <ul><li>Maintaining status quo due to limited environmental opportunities for gaining competitive advantage </li></ul><ul><li>Few employees will have opportunities for advancement </li></ul><ul><li>Critical that management identify key employees & develop specific HR retention strategies to keep them </li></ul>1 –
  16. 16. Corporate Strategies: Turnaround or Retrenchment <ul><li>Downsizing or streamlining organization in cost-cutting attempt to adjust to competitive environment </li></ul><ul><li>Few opportunities & many environmental threats </li></ul><ul><li>Important to develop HR practices to manage “survivors” </li></ul>1 –
  17. 17. Business Unit Strategies: Cost Leadership <ul><li>Increases in efficiency & cutting of costs, then passing savings to consumer </li></ul><ul><li>Assumes price elasticity in demand for products or services is high </li></ul><ul><li>Assumes that customers are more price sensitive than brand loyal </li></ul><ul><li>HR strategy focuses on short-term performance measures of results & promoting efficiency through job specialization & cross-training </li></ul>1 –
  18. 18. Business Unit Strategies: Differentiation <ul><li>In order to demand a premium price from consumers </li></ul><ul><ul><li>Attempting to distinguish organizational products or services from other competitors or </li></ul></ul><ul><ul><li>Creating perception of difference </li></ul></ul><ul><li>Organization offers employees incentives & compensation for creativity </li></ul><ul><li>HR strategy focuses on external hiring of unique individuals & on retaining creative employees </li></ul>1 –
  19. 19. Business Unit Strategies: Focus <ul><li>Business attempts to satisfy needs of only a particular group or narrow market segment </li></ul><ul><li>Strategic intent is to gain consumer loyalty of neglected groups of consumers </li></ul><ul><li>Strategic HR issue is ensuring employee awareness of uniqueness of market segment </li></ul><ul><ul><li>Thorough employee training & focus on customer satisfaction are critical factors </li></ul></ul><ul><ul><li>Hiring members of target segment who are empathetic to customer in target segment </li></ul></ul>1 –
  20. 20. Exhibit 3-3 (page 1) Dyer & Holder’s Typology of Strategies 1 –
  21. 21. Exhibit 3-3 (page 2) Dyer & Holder’s Typology of Strategies 1 –
  22. 22. Benefits of a Strategic Approach to HR <ul><li>Facilitates development of high-quality workforce through focus on types of people & skills needed </li></ul><ul><li>Facilitates cost-effective utilization of labor, particularly in service industries where labor is generally greatest cost </li></ul><ul><li>Facilitates planning & assessment of environmental uncertainty & adaptation of organization to external forces </li></ul>1 –
  23. 23. Reading 3.1 Human Resources & Resource Based View <ul><li>People management systems construct </li></ul><ul><ul><li>Not all competitive advantage begins with people management systems </li></ul></ul><ul><ul><li>These systems create value to extent that they impact stock, flow, & change of intellectual capital/knowledge </li></ul></ul><ul><ul><li>Basis of core competencies </li></ul></ul>1 –
  24. 24. Reading 3.1 Human Resources & Resource Based View <ul><li>“ Skill” concept expanded to consider stock of intellectual capital in firm </li></ul><ul><li>“ Behavior” concept reconceptualized as flow of knowledge within firm through its creation, transfer, & integration </li></ul><ul><li>Core competence arises from combination of firm’s stock of knowledge & flow of knowledge through creation, transfer, & integration in a way that is valuable, rare, inimitable, & organized </li></ul>1 –
  25. 25. Reading 3.1 Human Resources & Resource Based View <ul><li>Dynamic capability construct illustrates interdependent interplay between workforce & core competence as it changes over time </li></ul>1 –
  26. 26. Reading 3.2 Distinctive Human Resources <ul><li>“ Flexibility” dimension associated with “prospectors” </li></ul><ul><li>“ Established markets” category linked to classifications like “defenders” </li></ul><ul><li>Employment practices are difficult to change & transfer </li></ul><ul><li>Core competencies should drive business strategy & not vice versa </li></ul>1 –
  27. 27. Reading 3.2 Distinctive Human Resources <ul><li>If competencies are available to everyone on open market, how can they generate a unique competency & competitive advantage for any one firm? </li></ul>1 –
  28. 28. Reading 3.3 The Five P’s Model of SHRM <ul><li>Philosophy </li></ul><ul><ul><li>Statements of how organization values & treats employees; essentially culture of the organization </li></ul></ul><ul><li>Policies </li></ul><ul><ul><li>Expressions of shared values & guidelines for action on employee-related business issues </li></ul></ul><ul><li>Programs </li></ul><ul><ul><li>Coordinated & strategized approaches to initiate, disseminate, & sustain strategic organizational change efforts necessitated by strategic business needs </li></ul></ul>1 –
  29. 29. Reading 3.3 The Five P’s Model of SHRM <ul><li>Practices </li></ul><ul><ul><li>HR practices motivate behaviors that allow individuals to assume roles consistent with organization’s strategic objectives </li></ul></ul><ul><ul><li>Three categories of roles: </li></ul></ul><ul><ul><ul><li>Leadership </li></ul></ul></ul><ul><ul><ul><li>Managerial </li></ul></ul></ul><ul><ul><ul><li>Operational </li></ul></ul></ul>1 –
  30. 30. Reading 3.3 The Five P’s Model of SHRM <ul><li>Processes </li></ul><ul><ul><li>Continuum of participation by all employees in specific activities to facilitate formulation & implementation of other activities </li></ul></ul>1 –
  31. 31. Reading 3.3 The Five P’s Model of SHRM <ul><li>Successful SHRM efforts begin with identification of strategic needs </li></ul><ul><li>Employee participation is critical to linking strategy & HR practices </li></ul><ul><li>Strategic HR depends on systematic & analytical mindset </li></ul><ul><li>Corporate HR departments can have impact on organization’s efforts to launch strategic initiatives </li></ul>1 –