8/13/2019 Chapter 2 HR 2

1/27

2. THE STRATEGIC

MANAGEMENT PROCESS

8/13/2019 Chapter 2 HR 2

2/27

STRATEGIC PLAN

A companys plan for how it will match its

internal strengths and weaknesses with

external opportunities and threats in order

to maintain a competitive advantage.

8/13/2019 Chapter 2 HR 2

3/27

Strategy & Strategic Management

Strategy :-The companys long-term plan for how

it will balance its internal strengths and

weaknesses with its external opportunities and

threats to maintain a Competitive advantage.

Strategic Management :-The process of

identifying and executing the organizations

mission by matching its capabilities with the

demands of its environment.

8/13/2019 Chapter 2 HR 2

4/27

Steps in Strategic Management

Process

1. Define the current business and mission.

2. Perform external and internal audits.

3. Formulate new business and mission

statements.

4. Translate the mission into goals.

5. Formulate strategies to achieve the strategic

goals.6. Implement the strategy.

7. Evaluate performance

8/13/2019 Chapter 2 HR 2

5/27

Vision:- A general statement of its intended

direction that evokes emotional feelings in

organisational members

Mission:- Spells out who the company is,

What it does , and where its headed.

SWOT Analysis:- The use of a swot chart

to compile and organize the process ofidentifying company Strengths, Weakness,

Opportunities and Threats.

8/13/2019 Chapter 2 HR 2

6/27

A SWOT CHART

STRENGTHS

Example:-strong

research group

WEAKNESS

Example:- Aging

machinery

OPPORTUNITIES

Example:- Expanding

china markets

THREATS

Example:- Merger of

two competitors to form

single strong one.

8/13/2019 Chapter 2 HR 2

7/27

Types of Strategies

Diversification

Strategy

Geographic

Expansion

Strategy

Vertical

Integration

Strategy

Corporate-Level

Strategies

Consolidation

Strategy

8/13/2019 Chapter 2 HR 2

8/27

Strategic Control:- The process of assessing

progress towards strategic goals and taking

corrective action as needed

Types of strategies:-1. Corporate strategy:-

Example:- Pepsico runs Pepsi, Frito-lay, and Pizza Hut

Diversification corporate strategy- By expandingAnd adding new product line.

A vertical integration strategy means the firmexpands by ,perhaps producing its own rawmaterials, or selling its products direct.

Consolidationreducing the companys size - and Geographic expansionfor instance, taking the

business abroadare other corporate strategypossibilities.

8/13/2019 Chapter 2 HR 2

9/27

Types of Strategies (contd)

Cost Leadership Focus/Niche

Business-Level/

Competitive

Strategies

Differentiation

8/13/2019 Chapter 2 HR 2

10/27

2. Competitive strategy:- any factor that allowsan organisation to differentiate its products or service from

those of its competitors to increase market share.

Cost leadership means the enterprise aims to become the low-

cost leader in an industry.

Example:- Dell- by selling directly.

Differentiationis a second example of a competitive strategy.

Example:- VOLVO Stresses the safety of its cars, MERCEDES-BENZ Emphasis reliability and quality.

Focusers carve out a market niche( like ferrari), and compete byproviding a product or service customers can get in no other way.

8/13/2019 Chapter 2 HR 2

11/27

Focusers carves out a market niche( like fierrari ) , and

compete by providing a product or service customers

can get in no other way.

3. Functional strategy:- Identify the basiccourses of action that each department will

pursue in order to help the business attain its

competitive goals.

Example:- Dells HR strategies include

putting its HR activities on the web to

support Dells low-cost competitive strategy.

8/13/2019 Chapter 2 HR 2

12/27

Human Resource Management

StrategyThe Meaning of Strategy A critical factor that affects Firm Performance

A factor that contributes to Competitive Advantage in

markets Having a long-term focus

Plans that involve the top executives and/or board ofdirectors of the firm

A general framework that provides a perspective forselecting specific policies and procedures

8/13/2019 Chapter 2 HR 2

13/27

Human Resource Management

StrategyWhy is HR critical to firm performance? 85% of all firms in the US are service firms.

Service is delivered by people.

Low quality HR leads to low quality customerservice.

In the 21st century effective knowledge managementtranslates into competitive advantage and profits.

Knowledge comes from a firms people.

8/13/2019 Chapter 2 HR 2

14/27

Human Resource Management

StrategyWhat is unique about Human Resource Management?

HR is multidisciplinary: It applies the disciplines ofEconomics (wages, markets, resources), Psychology(motivation, satisfaction), Sociology (organizationstructure, culture) and Law (min. wage, laborcontracts, EEOC)

HR is embedded within the work of all managers, andmost individual contributors due to the need ofmanaging people (subordinates, peers and superiors)as well as teams to get things done.

8/13/2019 Chapter 2 HR 2

15/27

HR Strategy: Strategic Fit

Training Rewards

Corporate Strategy

Business Strategy

HR Strategy

HR System

(Performance Mgmt.)

8/13/2019 Chapter 2 HR 2

16/27

HR Strategy: HR System

Internal Fit

Performance Management System

HR StrategyGoal Setting

Performance

Measurement

Coaching

Rewards

Appeal

Performance Evaluation

8/13/2019 Chapter 2 HR 2

17/27

HRM and its Environment

HRM

Cultural

Professional

Bodies

Economic

Strategy,Task

&LeadershipE

xternal I

nternal

8/13/2019 Chapter 2 HR 2

18/27

HR Strategy: Context of HR

System1. The Five Factors Influencing the HR

System

External Environment

Social: social values, roles, trends, etc.

Political: political forces, changes. Ex. Bush

presidency and its agenda for Social

Security. Legal: laws, court decisions, regulatory rules.

Economic: product, labor, capital, factor

markets.

8/13/2019 Chapter 2 HR 2

19/27

HR Strategy: Context of HR

System2. The Workforce

Demographics

8/13/2019 Chapter 2 HR 2

20/27

HR Strategy: Context of HR

System3. Organization Culture

Weak vs. Strong culture

Type of culture

8/13/2019 Chapter 2 HR 2

21/27

8/13/2019 Chapter 2 HR 2

22/27

HR Strategy: Context of HR

System5. Technology of Production & Organization

of Work

Physical layout/employee proximity

Required employee skills

Ease of monitoring employees input

8/13/2019 Chapter 2 HR 2

23/27

HR Scorecard:- Measures the HR functions effectivenessand efficiency in producing employee behaviors needed to achieve the

companys strategic goals

The Ten steps HR Scorecard Process:-

Define the business Strategy

Outline the companys value chain activities.

Outline a strategy map. Identify the strategically required organisational outcomes.

Identify the required workforce behaviors.

Identify the strategically relevant HR systems policies & activities.

Creat HR scorecard. Design the HR Scorecard measurement system.

Summarize scorecard measures in digital dashboard

Periodically re-evaluate the measurement system.

8/13/2019 Chapter 2 HR 2

24/27

Achieving Strategic Fit

The Fit Point of View (Porter)

All of the firms activities must be tailored to or fit the

chosen strategy such that the firms functional

strategies support its corporate and competitive

strategies.

Leveraging (Hamel and Prahalad)

Stretch in leveraging resourcessupplementing

what you have and doing more with what you havecan be more important than just fitting the strategic

plan to current resources.

8/13/2019 Chapter 2 HR 2

25/27

Strategy Formulation Role

This expanded strategy formulation role reflects

the reality employer face today. Globalization

means more competition, more competition

means more performance, and most employersare pursuing improved performance by boosting

the competence and commitment level of

employees. That makes HR managements

knowledge and expertise crucial to the strategyformulation process.

8/13/2019 Chapter 2 HR 2

26/27

Creating the Strategic Human

ResourceManagement System

Human Resource

Professionals

Employee

Behaviors and

Competencies

Components of a

Strategic HRM System

Human Resource

Policies and

Practices

Components of a Strategic HRM

8/13/2019 Chapter 2 HR 2

27/27

Components of a Strategic HRMSystem

The HR Function:- HR professionals withstrategic management competencies.

The HR system:- High performance Work

System(HPWS) consisting of strategicallyaligned Hr policies, practices, and activities.

Employee behavior:- Employee competencies,

values, motivation, and behaviors required by

the companys strategic plan.