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