CHAPTER 3:

STRATEGIC PLANNING
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Strategic Management
Strategic Human Resource Management
Involves aligning initiatives involving how people are managed with organizational mission & objectives

Strategic Management Process

Determining what needs to be done to achieve corporate objectives over 3 - 5 years Examining organization & competitive environment Establishing optimal fit between organization & its environment Reviewing & revising strategic plan

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Models of Strategy
Industrial Organization (O/I) Model
External environment is primary determinant of organizational strategy rather than internal decisions of managers Environment presents threats & opportunities All competing organizations control or have equal access to resources Resources are highly mobile between firms Organizational success is achieved by
Offering goods & services at lower costs than competitors Differentiating products to bring premium prices
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Models of Strategy
Resource-Based View (RBV)
An organizations resources & capabilities, not external environmental conditions, should be basis for strategic decisions Competitive advantage is gained through acquisition & value of organizational resources Organizations can identify, locate & acquire key valuable resources Resources are not highly mobile across organizations & once acquired are retained Valuable resources are costly to imitate & non-substitutable
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Contrasting the Two Approaches

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

Mission statement Environmental analysis Organizational self-assessment Establishing goals & objectives

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Process of Strategic Management

Exhibit 3-1

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Mission Statement
Explains purpose & 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

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
Critical components of external environment
Competition Industry structure Government regulations Technology Market trends Economic tends

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Organization Self-Assessment
Identify primary strengths & 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

Examine internal management systems

Culture Organization structure Power dynamics & policy Decision-making processes Past strategy & performance Work systems
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Establishing Goals & Objectives

Goals should be:

Specific Measurable Flexible

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Corporate Strategies: Growth

Benefits
Gaining economies of scale in operations & functions Enhancing competitive position vis--vis industry competitors Providing opportunities for employee professional development & advancement

Internal Methods
Penetration of existing markets Developing new markets Developing new products or services for existing or new markets

External Methods
Acquiring other organizations Vertical integration

HR Issues
Planning for new hiring Alerting current employees Ensuring quality & performance standards are maintained
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HR Issues
Merging organizations Dismissing redundant employees

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Corporate Strategies: Stability

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 & develop specific HR retention strategies to keep them
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Corporate Strategies: Turnaround or Retrenchment

Downsizing or streamlining organization in cost-cutting attempt to adjust to competitive environment Few opportunities & many environmental threats Important to develop HR practices to manage survivors

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Business Unit Strategies: Cost Leadership

Increases in efficiency & 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 & promoting efficiency through job specialization & cross-training

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Business Unit Strategies: Differentiation

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 & compensation for creativity HR strategy focuses on external hiring of unique individuals & on retaining creative employees

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Business Unit Strategies: Focus

Business attempts to satisfy needs of only a particular group or narrow market segment 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 & focus on customer satisfaction are critical factors Hiring members of target segment who are empathetic to customer in target segment
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Dyer & Holders Typology of Strategies

Exhibit 3-3 (page 1)

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Dyer & Holders Typology of Strategies

Exhibit 3-3 (page 2)

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Benefits of a Strategic Approach to HR

Facilitates development of high-quality workforce through focus on types of people & skills needed Facilitates cost-effective utilization of labor, particularly in service industries where labor is generally greatest cost Facilitates planning & assessment of environmental uncertainty & adaptation of organization to external forces
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Reading 3.1

Human Resources & Resource Based View

People management systems construct

Not all competitive advantage begins with people management systems These systems create value to extent that they impact stock, flow, & change of intellectual capital/knowledge Basis of core competencies

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Reading 3.1

Human Resources & Resource Based View

Skill concept expanded to consider stock of intellectual capital in firm Behavior concept reconceptualized as flow of knowledge within firm through its creation, transfer, & integration Core competence arises from combination of firms stock of knowledge & flow of knowledge through creation, transfer, & integration in a way that is valuable, rare, inimitable, & organized

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Reading 3.1

Human Resources & Resource Based View Dynamic capability construct illustrates interdependent interplay between workforce & core competence as it changes over time

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Reading 3.2

Distinctive Human Resources

Flexibility dimension associated with prospectors Established markets category linked to classifications like defenders Employment practices are difficult to change & transfer Core competencies should drive business strategy & not vice versa
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Reading 3.2

Distinctive Human Resources If competencies are available to everyone on open market, how can they generate a unique competency & competitive advantage for any one firm?

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Reading 3.3

The Five Ps Model of SHRM

Philosophy
Statements of how organization values & treats employees; essentially culture of the organization

Policies
Expressions of shared values & guidelines for action on employee-related business issues

Programs
Coordinated & strategized approaches to initiate, disseminate, & sustain strategic organizational change efforts necessitated by strategic business needs

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Reading 3.3

The Five Ps Model of SHRM

Practices
HR practices motivate behaviors that allow individuals to assume roles consistent with organizations strategic objectives Three categories of roles:
Leadership Managerial Operational
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Reading 3.3

The Five Ps Model of SHRM

Processes
Continuum of participation by all employees in specific activities to facilitate formulation & implementation of other activities

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Reading 3.3

The Five Ps Model of SHRM

Successful SHRM efforts begin with identification of strategic needs Employee participation is critical to linking strategy & HR practices Strategic HR depends on systematic & analytical mindset Corporate HR departments can have impact on organizations efforts to launch strategic initiatives

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