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HRM 923 HR Planning CH.

1 Strategic Management
Strategy formulation of organizational objectives, scopes, and action plans for
gaining advantage. A declaration of intent.
Strategic intent: a tangible corporate goal; a point of view about the
competitive positions a company hopes to build over a decade
Strategic planning: the systematic determination of goals and the plans to
achieve them.
Strategy formulation: the entire process of conceptualizing the mission of an
organization, identifying the strategy, and developing long-range performance
Strategy implementation: those activities that employees and managers of
an organization undertake to enact the strategic plan and achieve the performance
Objectives: the end, the goals
Plans: the product of strategy, the means to the end
Strategic plan: a written statement that outlines the future goals of an
organization, including long-term performance goals.
Policies: broad guidelines to action, which establish the parameters or rules

Top management team determines strategy through a process of environmental

analysis and discussions. The strategy and objectives developed b senior
management are then approved by the board, and negotiated and revised as
they filter throughout the organization.
Strategic planning must be viewed as a dynamic process, moving, shifting, and
evolving as conditions warrant changes. The process of subtly redirecting
strategy to accommodate these changes is called logical incrementalism.

Emergent strategy: the plan that changes incrementally due to environmental

Intended strategy: the forumated plan
Realized strategy: the implemented plan. (what actually happened)

Strategiy Types
Basic strategies can be classied into 1) Corporate strategies, and 2) business
Corporate strategy: organizational-level decisions that focus on long-term
survival. Ex. Decisions to compete internationally, or to merge with other

companies. Focused on long-term growth and survival goals. Under corporate

strategies: restructuring, growth, and stability.
Corporate subset: Restructuring strategies

When an organization is not achieving its goals, corporate strategy becomes one
of trying to deal with the problem. Restructuring options include turnaround,
divestiture, liquidation, and bankruptcy.

Turnaround strategy: an attempt to increase the viability of an organization. AKA

retrenchment strategy.

Turnaround methods include getting rid of unprofitable products, imposing

layoffs, making the organization more efficient, or attempting to reposition it
with new products.

Divestiture: the sale of a division or part of an organization.


Spinning off a business as a financially and managerially independent

company or selling it outright.

Liquidation: the termination of a business and the sale of its assets. There is little
return to shareholders under this option.
Bankruptcy: a formal procedure in which an appointed trustee in bankruptcy takes
possession of a businesss assets and disposes of them in an orderly fashion. Occurs
when a company can no longer pay its creditors, and usually, one of them calls a
loan. The company ceases to exist, and its assets are divided among its creditors.
Corporate strategy subset: Growth strategies

A firm in a growth stage is engaged in job creation, aggressive recruitment and

selection, rapidly rising wages, and expanded orientation and training budgets,
depending on how the organization choose to grow.
Growth can be achieved in several ways: incrementally, internationally, oy
by mergers and acquisitions.

Incremental growth: can be attained by expanding the client base, increasing

products or services, changing the distribution networks, or using technology.
International growth: seeking new customers/markets by expanding
Mergers and Acquisitions: obvious impact on HR eliminate the duplication of
functions, meld benefits and labour relations practices, and create a common
Acquisition: the purchase of one company by another
Merger: two organizations combine resources and become one
Corporate strategy subset: Stability strategies

Some organizations, particularly small business owners in relatively stable

markets, wish to maintain the status quo. HRM practices remain constant, as
they are presumed to be effective for current strategy.
May be a temporary strategy until environmental conditions are more favourable
for growth, or perhaps the organization grew very rapidly and needs time to
manage all the changes.

Business strategies: plans to build a competitive focus in one line of business

Focuses on one line of business (in a diversified company or public organization)

Concerns itself with how to build a strong competitive position.

Differentiating corporate and business strategies: corporate strategies are

concerned with questions like: should we be in business? What business should we
be in? Business strategies are concerned with questions like: how should we
compete? Should we compete by offering products at prices lower than those of the
competition or by offering the best service?
The strategic planning process

Establish the mission, vision, and values

Develop objectives
Analyze the external environment
Identify the competitive advantage
Determine the competitive position
Implement the strategy
Evaluate the performance

1. Establish the mission, vision, and values

Mission statement: an articulation of the purpose of the organization and the
value it creates for customers.

Stipulates the value the organization offers for its customers and clients

Vision statement: the basic beliefs that govern individual and group behaviour in
an organization
Defines the organizations long-term goals.
The distinction between a mission statement and a vision statement is that
whereas the mission statement answers the questions: who are we? What do
we do? Why are we here?, the vision statement answers the question where
are we going?
Values: the basic beliefs that govern individual and group behaviour in an
While vision and mission statements answer the questions about what must be
accomplished, values answer the question how must we behave?
2. Develop objectives

Management team develops short-term objectives to realize its high-level

mission, vision, and value
Objectives are an expression, in measurable terms, of what an organization
intends to achieve.
Goals can be classified as hard or soft. Hard goals always include numbers,
usually relative to performance last year, or to competition. Examples of hard
objectives: profitability, growth, shareholder wealth, market leadership,
utilization of resources, efficiency (cost per unit produced), quality (percentage
of waste/defective)
Soft goals define the targets for the social conduct of the business, may not be
quantifiable. Soft goals may include being ethical and environmentally
responsible, providing a working environment free of discrimination with
opportunities for professional development.
3. Analyze the external environment
To achieve company objectives, managers must be aware of threats and
opportunities in the external environment.
4. Identify the competitive advantage
Besides the external environment, managers also need to consider what
competitive advantage the organization possesses
Competitive advantage: the characteristics of a firm that enable it to earn higher
rates of profit than its competitors

These normally derive from those resources that allow the organization to
perform more effectively or efficiently than competitors: 3 categories Tangible
assets, Intangible assets, and Capabilities

Tangible assets: these are future economic resources that have substance and
from which an organization will benefit. Ex. Land, inventory, building, location, cash,
and technology
Intangible assets: future economic resources that have been generated from past
organizational events. These assets lack substance and form. Ex. Human capital,
reputation, goodwill, trust, and copyright.
Capabilities: complex combination of people and processes that represent the
firms capacity to exploit resources that have been specially integrated to achieve a
desired result.
For resources and capabilities to provide a sustained competitive advantage, they
must meet four criteria: VRIO
1. They
2. They
3. They
4. They

are valuable to the firms strategy (they help generate value/reduce

are rare (competitors dont have them)
are inimitable (they cannot easily be copied by competitors)
can be organized by the firm (the firm can exploit the resources)

Core competencies: resources and capabilities that serve as a firms competitive


Core competencies distinguish a company competitively and reflect its

personality. It is a competitively important activity that directly contributes to a
companys strategy.

Dynamic capabilities: the ability to adapt and renew competencies in accordance

with changing business environment.
With the information from external environment and internal competence
analysis, managers can summarize the conclusions using SWOT analysis for
analyzing a companys resources capabilities and deficiencies, its market
opportunities, and the external threats to its future.
SWOT: Strengths, Weaknesses, Opportunities, and Threats
Strength: something that a company does well or an attribute that makes it more
Weakness: something that an organization does poorly, or a condition (ex. Location)
that puts it at a disadvantage relative to competitors
Opportunities and threats: environmental conditions external to the firm that may
be beneficial or harmful.