Reviewer Strat

Republic of the Philippines
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

OFFICE OF THE VICE PRESIDENT FOR BRANCHES AND CAMPUSES
MARAGONDON BRANCH
INSTRUCTIONAL MATERIALS
FOR
MANA 3143
STRATEGIC HUMAN RESOURCE MANAGEMENT
Compiled by:
Mary Emilee M. Quezon

Faculty
Date: _________________
Checked and Approved by:
Dr. Agnes Y. Gonzaga Assoc. Prof. Denise A. Abril

Head, Academic Programs Director
Date: _________________ Date: __________________

INTRODUCTION
Welcome to the Polytechnic University of the Philippines. This module will help you become an
effective learner and successfully meet the requirements of the course. You will discover that
you can learn in a very challenging way at your own pace.
THE POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
VISION
PUP: The National Polytechnic University of the Philippines
MISSION
Ensuring inclusive and equitable quality education and promoting lifelong learning opportunities
through a re-engineered polytechnic university by committing to:
• provide democratized access to educational opportunities for the holistic development

of individuals with global perspective
• offer industry-oriented curricula that produce highly-skilled professionals with
managerial and technical capabilities and a strong sense of public service for nation
building
• embed a culture of research and innovation
• continuously develop faculty and employees with the highest level of professionalism
• engage public and private institutions and other stakeholders for the attainment of social
development goal
• establish a strong presence and impact in the international academic community
PHILOSOP HY
As a state university, the Polytechnic University of the Philippines believes that:
• Education is an instrument for the development of the citizenry and for the
enhancement of nation building; and
• That meaningful growth and transmission of the country are best achieved in an
atmosphere of brotherhood, peace, freedom, justice and nationalist-oriented education
imbued with the spirit of humanist internationalism.
TEN PILLARS
Pillar 1: Dynamic, Transformational, and Responsible Leadership
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SUBJECT: HRMA 20063 STRATEGIC HUMAN RESOURCE MANAGEMENT COMPILED
BY: MARY EMILEE M. QUEZON
Pillar 2: Responsive and Innovative Curricula and Instruction
Pillar 3: Enabling and Productive Learning Environment
Pillar 4: Holistic Student Development and Engagement
Pillar 5: Empowered Faculty Members and Employees
Pillar 6: Vigorous Research Production and Utilization
Pillar 7: Global Academic Standards and Excellence
Pillar 8: Synergistic, Productive, Strategic Networks and Partnerships
Pillar 9: Active and Sustained Stakeholders’ Engagement
Pillar 10: Sustainable Social Development Programs and Projects
SHARED VALUES AND PRINCIPLES
• Integrity and Accountability

• Nationalism
• Spirituality
• Passion for Learning and Innovation
• Inclusivity
• Respect for Human Rights and The Environment
• Excellence
• Democracy
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES MARAGONDON

BRANCH
GOALS
• Quality and excellent graduates

• Empowered faculty members
• Relevant curricula
• Efficient administration
• Development – oriented researches
• State-of-the-art physical facilities and laboratories
• Profitable income – generating programs
• Innovative instruction
• ICT – driven library
• Strong local and international linkage
PROGRAM OBJECTIVES
The Bachelor of Science in Business Administration aims to provide training and practice that
will enable students to:
1. Acquire basic and advance level of literacy, communication, critical thinking and other
skills relevant to higher learning.
2. Develop a comprehensive and meaningful knowledge and understanding of the different
subject disciplines.
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3. Apply a wide range of teaching process skills that include curriculum development,
lesson planning, materials development, educational assessment and teaching
approaches.
4. Gain direct experience from the field through classroom observations, teaching
assistance and practice teaching.
5. Develop researchers with quality outputs.
6. Strengthen Community Engagement.
HRMA 20063 STRATEGIC HUMAN RESOURCE MANAGEMENT
COURSE DESCRIPTION
COURSE TITLE : STRATEGIC HUMAN RESOURCE MANAGEMENT

COURSE CODE : MANA 3143
CORSE CREDIT : 3 units
PRE-REQUISITE : NONE
This course introduces the key concepts, tools, and principles of strategy formulation and
competitive analysis. It is concerned with managerial decisions and actions that affect the
performance and survival of business enterprises. The course is focused on the information,
analyses, organizational processes, and skills and business judgment managers must use to
devise strategies, position their businesses, define firm boundaries and maximize long-term
profits in the face of uncertainty and competition.
COURSE OBJECTIVES
After completing this course, you must be able to:

1. Provide the students with an overview of law and the Philippine legal system.
2. Guide students in the study of legal principles relating to obligations and contracts by
exposing them to relevant primary and secondary materials and facilitating discussions
on the application of these principles to actual or hypothetical cases.
COURSE REQUIREMENTS
The course requirements are as follows:

1. Demonstrate knowledge and understanding of the key concepts and principles of strategy
formulation and competitive analysis,
2. Facilitate and communicate the strategic management component of the case situations
presented.
3. Develop future managers with the sense of responsibility and commitment in the exercise of
their profession.
4. Analyze and evaluate critically real life company situations and develop creative solutions,
using a strategic management perspective.
5. Manage own professional development and provide leadership to others in the achievement
of ongoing competence in strategic management.
6. Share expertise of the acquired knowledge in the professional field
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7. Manage own professional development and provide leadership to others in the achievement
of ongoing competence strategic management.
8. Practice the professional and ethical requirements needed of becoming a manager.
Manage own professional development and provide leadership to others in the achievement
of ongoing competence in strategic management.
GRADING SYSTEM
The grading system will determine if the student passed or failed the course. There will be two
grading periods: Midterm and Final Period. Each period has components of 70% Class Standing
+ 30% Major Examination. Final Grade will be the average of the two periodical grades.
Midterm Grading Final Grading
Class Standing 70% Class Standing 70%
• Quizzes • Quizzes
• Activities • Activities
Midterm Examination 30% Final Examination 30%
100% 100%
FINAL GRADE = Midterm Grade + Final Grade
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COURSE GUIDE
Regular class (18 weeks, 3hrs/week, 54hrs)

Wk Topic Learning Outcomes Methodology Resources Assessment
1 Course Orientation To determine students Class See the list Class
Grading System expectation of the course introduction of references recitation
Requirements
Relevance of the Class
Course discussion
And lecture
2-3 Analysis of the Understand the basic

Environment concepts and terminology
•The general used in Strategic
environment •The Management and Identify Socialized See the list Assignment
economic environment opportunities and threats as Discussion of references Readings
•The technological well as strengths and
environment weakness in the operating
•The legal environment environment of hypothetical
•The socio-political
and real-world organization
environment
➢ •The internal
v
environment:
structure, culture and
resources
4-5 The Functional Distinguish between Discussion See the list Assignment
Approach to Strategy different types and levels of of references Readings
Formulation strategy and strategy
•Production/Operations implementation.
•Marketing Gain insights into the
•Purchasing and strategymaking processes
supply of different types of
•Human resources organizations
•Research and
development
•Information
technology •The co-
ordination of strategy
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6-7 3. Classification of Determine the contribution of
Obligations 3.1 Pure the Human Resource Discussion
and Department on Illustration See the list Quiz
Conditional the area of profitability
of
a. Pure through the strategies that it
references
obligations takes.
b. Conditional
obligations (i)
Suspensive v.
resolutory conditions
(ii) Potestative,
casual and mixed
conditions
(iii) Impossible
conditions
c. Effects of
conditions
d. Constructive
fulfilment of
suspensive condition
e. Retroactive effects
of fulfillment of
f. Rights of
creditor pending
fulfillment of
g. Loss,
improvement,
deterioration of thing
to be delivered
pending the fulfillment
of suspensive
condition/resolutory
condition
h. Unilateral/
reciprocal obligations
i. Effect of
mutual breach
3.2 Obligations with a
Period
a. Suspensive
period v. resolutory
period
b. Effects of a
period
c. When courts
may fix a period d.
Benefit or use of the
period ➢ 3.3
Alternative
Obligations and
Facultative
vii
Obligations
8-9 The Implementation of Gain knowledge on the
Strategy applicability of the concepts Discussion See the list Quiz
•Budgets and to the day to day Illustration of
budgeting control activities in order to avoid references
•Supporting chosen unnecessary liability.
strategies through
appropriate policies
and procedures
•Motivational aspects
of strategy
• The identification of
strategically relevant
performance
outcomes •The
matching of
organizational
structures with
strategy
10 MIDTERM EXAM
11- Competitive Understand the concepts of Assignment
12 Advantage •The change and gain advantage Lecture See the list Readings
identification of against competitors. of
competitive forces references
• Drivers of change
•Strategic cost and
profit analysis
•Technology-based
competitive
advantage •Value
chains and
benchmarking the
costs of key activities
•Balanced score-cards
•Generic competitive
strategies
• Vertical and co-
operative competitive
strategies ➢
•Defensive strategies
13- Strategy and Gain knowledge on Discussion See the list Quiz
14 Diversification diversification and the related of
•Definition and scope strategies and core activities. references
of diversification
•Related and
unrelated
diversification
strategies
•Assessment of a
diversification
strategy
•Relationship between
diversification
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strategies and core
activities and
competencies
•Strategic fit analysis
➢ •Resource fit
analysis
15- Management of Gain knowledge on Lecture Assignment
16 change management of change as
Definition and part of strategic move. See the list
identification of issues of
•Response to change references
as a strategic issue
•Power and culture as
catalysts for change
•Types of change and
intervention strategies
•Framework and its
impact on change
management
•Strategists,
implementers and
recipients in the
change
process
17 International Human Understand SHRM on a wider
Resource perspective, using
Management International Standards and
Principles
18 FINAL EXAM
TABLE OF CONTENTS
Topic Page
Introduction ii
Lesson 1 Analysis of the Environment

Unit 1: Basic Principles 1
Unit 2: Environment in Human Resource Management: 2
Internal and External Environment
ix
Lesson 2 The Functional Approach to Strategy
Unit 1: Functional Strategy – Introduction to Functional Strategy 8
Unit 2: Functional Strategy – Application and Importance 10
Unit 3: Functional Strategy – Classifications 15
Unit 4: Functional Strategy – Basic Features of HRM 20
Unit 5: Functional Strategy – Development of Functional Strategies 21
Unit 6: Functional Strategy – Considerations for Integration 24
of Functional Strategy
Unit 7: Functional Strategy – Functional Implementation of 25
Strategies (Policies)
Unit 8: Functional Strategy – In Different Functional Areas: 34
Marketing, Finance, Operations and Human Resource
Lesson 3 The Formulation of Strategy

Unit 1: Strategy formulation – General Principles 37
Unit 2: Strategy formulation – Steps and Factors to Consider 38
Lesson 4 The Implementation of Strategy
Unit 1: Strategy Implementation – General Principles 43
Unit 2: Strategy Implementation – Main Steps 43
Lesson 5 Competitive Advantage 45
Lesson 6 Strategy and Diversification 47
Lesson 7 Management of Changes 49
Lesson 8 International Human Resource Management

Unit 1: International Human Resource Management (IHRM) – 57
General Principles
Unit 2: International Human Resource Management (IHRM) – 58
x
Factors and Functions involving IHRM
References 61
xi
MANA 3143 – STRATEGIC HUMAN RESOURCE MANAGEMENT
LESSON 1 Analysis of the Environment

This is a study of the environment that influences the strategy taken by the human resource
management.
Overview:
Human resources can be defined as the total knowledge, abilities, skills, talents and aptitudes of
an organization’s workforce. In simple words, human resources management means employing
people, developing their resources, utilizing, maintaining and compensating their services in
tune with the job, and organizational requirements. In the present complex environment, no
organization or business can exist and grow without proper human resources. This is, perhaps,
the reason why human resources have become focus of attention of all progressive
organizations of today.
Learning Objectives:
1. After successful completion of this lesson, you should be able to:

2. Explain the concept of Environment in Strategic Human Resource Management.
3. Know the difference between internal and external environment and its composition.
4. Critically assess the effects of these environment in the implementation of strategic human
resource management.
Course Materials:
Unit 1: Basic Principles
Human Resource Management
The best way to understand strategic human resources management is by comparing it to

human resource management. Human resource management (HRM) focuses on recruiting and
hiring the best employees and providing them with the compensation, benefits, training, and
development they need to be successful within an organization. However, strategic human
resource management takes these responsibilities one step further by aligning them with the
goals of other departments and overall organizational goals. HR departments that practice
strategic management also ensure that all of their objectives are aligned with the mission,
vision, values, and goals of the organization of which they are a part.
Strategic Human Resource Management
Strategic human resource management is the practice of attracting, developing, rewarding, and
retaining employees for the benefit of both the employees as individuals and the organization as
a whole. HR departments that practice strategic human resource management do not work
independently within a silo; they interact with other departments within an organization in order
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to understand their goals and then create strategies that align with those objectives, as well as
those of the organization. As a result, the goals of a human resource department reflect and
support the goals of the rest of the organization. Strategic HRM is seen as a partner in
organizational success, as opposed to a necessity for legal compliance or compensation.
Strategic HRM utilizes the talent and opportunity within the human resources department to
make other departments stronger and more effective.
Importance of Strategic HRM
When a human resource department strategically develops its plans for recruitment, training,
and compensation based on the goals of the organization, it is ensuring a greater chance of
organizational success. Let's think about this approach in relation to a basketball team, where
Player A is the strategic HR department, and Players B through E are the other departments
within the organization. The whole team wants to win the ball game, and they all may be
phenomenal players on their own, but one great player doesn't always win the game. If you've
watched a lot of sports, you understand that five great players won't win the game if each one of
those five great players is focused on being the MVP.
That's not how a basketball team wins, and it's not how an organization wins either. A team wins
when its members support each other and work together for a common goal. Player A, our
strategic HR department, must work with players B, C, D and E, our different organizational
departments. They must run plays that they have planned out beforehand, assist when
necessary to help another player get the basket, and compensate for the weaknesses of one in
order to create a stronger team as a whole. When a team works together to reach that common
goal, only then can they be truly successful.
You could also look at strategic HRM as the team captain or coach, as his or her responsibilities
are a little bit different from those of the other players. Human resources departments are
charged with analyzing the changes that need to occur with each 'player' or department and
assisting them in strengthening any weaknesses. Strategic human resource management then
is the process of using HR techniques, like training, recruitment, compensation, and employee
relations to create a stronger organization, one employee at a time.
Example of Strategic HRM

Suppose a customer service department is really struggling with turnover and retention. As a
result, its customers are complaining about a lack of knowledge or assistance when they contact
the department. This in turn is affecting repeat orders and having a dramatically negative affect
on sales, causing the company to lose money.
Unit 2: Environment in Human Resource Management:

Internal and External Environment
What is environment? In simple words, environment comprises all those forces which have their
bearing on the functioning of various activities including human resource activities. Environment
scanning helps HR manger become proactive to the environment which is characterised by
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change and intense competition. Human resource management is performed in two types of
environments- internal and external.
Internal Environment:
These are the forces internal to an organization. Internal forces have a profound influence on
HR functions. The internal environment of HRM consists of unions, organizational culture, and
conflict, professional bodies, organizational objectives, policies, etc. A brief mention of these
follows.
(1) Unions: Trade unions are formed to safeguard the interest of its members/workers. HR
activities like recruitment, selection, training, compensation, industrial relations, and separations
are carried out in consultation with trade union leaders.
(2) Organizational Culture and Conflict: As individuals have personality, organizations

have cultures. Each organization has its own culture that distinguishes one organization from
another. Culture may be understood as sharing of some core values or beliefs by the members
of the organization “Value for time” are the culture of Reliance Industries Limited. The culture of
Tata conglomerate is “get the best people and set them free”.
(3) Professional Bodies: Like other professional bodies, the NIPM as the HR professional
body regulates the functions of HR practitioners in India. For this the NIPM in of ethics which the
HR practitioners are expected to declare their allegiance to the code. Thus, professional bodies
also influence HR functions of an organization.
(4) Compensation
The amount of compensation a business offers draws employees to an organization or keeps
them away. In an economy characterized by high unemployment rate and many qualified
individuals, compensation should be low. When there is a small number of a candidate, HRM
should attract them by increasing compensation in order for the company not to lose them to
competitors. A survey of compensation structure of an industry will help a company have
competitive offers in order to gain a competitive advantage over others in terms of attracting and
retaining employees. However, the offer should not be too high in such a way that they bring
losses to the company. Experienced staff should be given more compensation than recently
recruited graduates in the same job category.
(5) Employees Relations

Human resource activities must consider several factors like training their staff before promoting
them when their recruitment policies are based on internal promotion. They should monitor
retiring employees so that replacement arrangements are made in time. According to Purcell
and Boxall human resource department should be able to manage employee relations within the
firm.
(6) Customers’ satisfaction

Change in customer preferences need to be taken into account since this affects service
delivery. HRM should hire employees who have the consumers’ interest at heart. Continuous
training and retraining is important in order to increase performance hence satisfaction.
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(7) New entrants
These are businesses entering into an industry. New entrants offer competitive salaries that
attract employees. HRM should analyze their industry in order to know new entrants. This will
help them have strategies aimed at retaining in order prevent them from being poached by the
new entrants.
(8) Competition
The degree of competition affects HRM’s power to recruit workers who can meet a company’s
standards. Experienced workers always want to work in reputable organizations. Small
organizations with a lower brand image have to invest their resources in getting qualified people
to work for the organization. In this case, HRM will have to advance its recruitment procedures
and attend trade union fairs in order to advertise the company and draw applicants closer. It is
also important to have structures put in place to retain employees in a business environment
characterized with cut throat competition
External Environment:
The external environment that can affect any business operation can be summarized as
PESTEL (political, economic, social, technological, environmental and legislative factors).
PESTEL changes are continuously impacting on human resource policies These factors affect
the internal operations regardless of the fact that they are outside the organization. The reasons
why these factors should be understood by the HR practitioners are:
The intensity of intervention by the government will alter how a company operates. Political
factors include government funding, initiatives and grants. Political instability, taxation and
relationship with other governments, impact directly on human resource practices. Therefore, it
is important to check this factor prior to establishing an operation.
External environment includes forces like economic, political, technological, demographic etc.
These exert considerable influence on HRM. Each of these external forces is examined here.
Economic:
Economic factor are such as inflation, unemployment, exchange rates, interest rates, rate of
economic development, government and consumer spending. Higher interest rates hinder
investment as this raises the cost of borrowing. Inflation in commodity prices may make
employees demand more money as salaries and this will in turn raise operational cost of the
company. An increase in disposable income will as well create a broad market for the products
manufactured by the company.
Economic forces include growth rate and strategy, industrial production, national and per capita
incomes, money and capital markets, competitions, industrial labour and globalisation. All these
forces have significant influence on wage and salary levels. Growing unemployment and
reservation in employment also affect the choice for recruitment and selection of employees in
organisations.
Political:
Political environment covers the impact of political institutions on HRM practices. For example,
democratic political system increases the expectations of workers for their well being.
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The total political environment is composed of three institutions:
1. Legislature:
This is called Parliament at the central level and Assembly at the state level A plethora of labour
laws are enacted by the legislature to regulate working conditions and employment relations.
(Take note however, that in the Philippines, our legislative department is bicameral: Upper
House known as the Senate House and the Lower House also known as the House of
Representatives_MEMQ) 2. Executive:
It is the Government that implements the law. In other words, the legislature decides and the
executive acts.
3. Judiciary:
This is like a watchdog above the two. It ensures that both the legislature and the executive
work within the confines of the constitution and also in the overall interest of the people. These
affect, in one way or the other, all HR activities from planning to placement to training to
retention and maintenance.
Legal factors like health, trading, competition and regulations from legal firms directly affect a
business. In the recent past, United Kingdom has witnessed noticeable legal changes in relation
to age and disability discrimination. HRM must operate within the law and stay updated on legal
changes. Legislative factors determine the grievances HRM has to address.
Technological:
Technology is a systematic application of organised knowledge to practical tasks. Technological

advances affect the HR functions in more than one way:
First; technology makes the job more intellectual or upgraded.
Second, it renders workers dislocated if they do not equip themselves to the job.
Third, job becomes challenging for the employees who cope with the requirements of
technology Fourth, technology reduces human interaction at the work place. Finally job-holders
become highly professionalized and knowledgeable in the job they perform.
Technologically, research, purchasing power, technological innovation and intellectual capacity
affect HR operations. Any change in technology creates a need to restructure human resource
structure and policies. Technology has found its way into business operations such as
marketing and selling through online shopping and computer designs to alter how business
functions are carried out. Today, recruitment and selection processes can easily be done on an
online platform. Human resource management creates online portal to increase efficiency in
these processes. This has eliminated the cost of advertising vacancies as candidates visit
websites to find vacancies.
Demographic:
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Demographic variables include sex, age, literacy, mobility, etc. Modem work force is
characterized by literate, women and scheduled caste and scheduled tides workers. Now,
workers are called knowledge workers’ and the organisations wherein they work are called
‘knowledge organisations’.
As such, the traditional line of distinction between manual and non-manual workers is getting
blurred. Employees are demanding parity in remuneration and responsibility among various
categories and levels of employees.
Religion, lifestyle, ethics, demographics, education and culture are some of the social factors
that affect the business operations. Any change in these factors will have a greater influence in
demand for products and the availability of workforce willing to labor for the company.
Understanding the surrounding culture helps HRM put in place a culture that blends with its
environment. An aging population will demand pension benefits from related firms. An example
is in the UK, where staffs live longer due to their longer lifespan. Societal changes have made
more women be involved in the workforce as there is less physical power involvement. Social
changes affect organizational culture and have enabled organizations embrace cultural
differences. HR practitioners need to keep abreast of social changes in order to fully understand
their employees.
Environmental factors include climate change, pollution and recycling. Global warming
experienced in today’s world has greatly affected companies. Climatic factors should be
considered before making international business expansion.
A successful strategy in the human resource department should conform to the goals and
missions of the organizations in which they operate. Different human resource strategies work
efficiently for differently sized organizations. Whatever is applicable in large organizations may
not necessarily achieve the same success in smaller organizations. Factors that affect human
resource operations are ever dynamic. In order to enhance employee retention and maximize
employee recruitment, employee concerns must be addressed through continuously tracking
and overseeing both factors within and outside the organizational environment.
Actual Case: COMPETING THROUGH GLOBALIZATION

Blind Feeding the Blind
At the Blind Cow restaurant in Zurich, Switzerland, nothing looks good to eat. The reason is not
that the food is bad, but because patrons dine in total darkness. Rev. Jorge Spielman, a 37 year
old blind pastor, came up with the idea while tending bar at a public exhibiy in Zurich. The
exhibit required sighted people to grope their way through various dark rooms to experience
what it is like to be blind.He and four blind colleagues decided to create a restaurant that would
help sighted people appreaciate the situatio of the blind while providing jobs for the blind and
visually impaired.
A blind waitress leads diners to their tables, asking one guest to place both hands on her
shoulders, and other guests to do likewise to the guest in front of them. She explains the rules,
no flashlights, no iridescent watches, and no wandering. Waitresses and waiters should be
called by shouting, and guests who need to use the restrooms must be led by a waitrrress. The
saff all war bells to allow them to avoid colliding with one another while carrying hot plates of
food.
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The restaurant has been an unarguable success. Although Rev. Spielman worried that the
novelty would wear off after a few months, a year after its opening the restaurant was still
booked solid for the following three months. In addition, the breakage of dishes and glasses is
no different from other restaurants because guests are extremelh careful. In fact, the business
has been such a success that the owners are now considering expanding into big U.S. cities like
New York and Los Angeles.
Such expansion could succeed because the atmosphere provides for a variety of novel
experiences. For instance, a group of three couples dined there, and when the ladies went to
the restroom, the men changed places. When they returned, the men planted kisses on their
“new” dates, not all the women noteced that the lips kissing them were unfamiliar ones. In
addition, the restaurant was the site for a “blind date.” The lady arrived early and sipped a drink
until the man was led to her table. Unfortunately, according to the staff, they departed
separately.Finally, Rev. Spielman has some ideas to keep the restaurant fresh. He plans to
make Monday night “date night” bringing in guest speakers to discuss sex and relationships. He
explains, “People can ask all kindsof questions in the dark.” (source: J. Costello, “Swiss Eatery
Operated by the Blind Keeps Diners Completely in the Dark,” The Wall Street Journal, Nov. 28,
2001,p.1/Human Resource Management Mc Graw Hill 6th edition)
Activities/Assessments:
I. Introduction of students involving their personal information and their expectations on the
subject, as well as their idea on what is expected of them in return.
II. Introduction – lecture and discussion
III. Read the Actual Case above and write a Reaction Paper. (Blind feeding the blind) IV. Read
the topics on: 3 Branches of the State and Unions under the Labor Law.
References:
• https://www.yourarticlelibrary.com/hrm/environment-in-human-resource-managementinternal-
and-external-environment/35235
• https://study.com/academy/lesson/strategic-human-resource-management-
definitionimportance.html
• https://bohatala.com/impact-of-internal-and-external-environment-on-human-
resourcemanagement/
• Human Resource Management
Noe.Hollenbeck.Gerhart.Wright
6th Edition
Mc Graw Hill
7
LESSON 2 The Functional Approach to Strategy
Overview:
‘A functional strategy is the short-term game plan for a key functional area within a company’.
The main purpose of functional strategy is to achieve the corporate and business level objective
in specific functional area by the optimum allocation of the resources available to maximize the
profitability.
After successful completion of this lesson, you should be able to:

1. Understand the concept of functional approach to strategy.
2. Know the different steps to maximize profitability of a Corporation
3. Analyze the contribution of the Human Resource Department on the area of profitability
through the strategies that it takes.
Course Materials:
Unit 1: Functional Strategy – Introduction to Functional Strategy
It is the approach a functional area takes to achieve corporate and business unit objectives and
strategies by maximizing resource productivity.
It deals with a relatively restricted plan that provides the objectives for a specific function, for the
allocation of resources among different operations within that functional area and for facilitating
coordination between them for an optimal contribution to the achievement of the business and
corporate-level objectives.
According to Gareth R. Jones, “Functional strategy is a plan of action to strengthen an

organization’s Functional and organizational resources, as well as its coordination abilities, in
order to create core competencies.”
Corporate and Business strategies give birth to functional strategies, which are implemented in
the organization through functional and operational implementation.
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This strategy refers to single function operation and the activities involved in it. This is an
operating level of strategies. The decisions taken at this level are referred as tactical decisions.
According to Gareth R. Jones, “Functional strategy is a plan of action to strengthen an

organization’s Functional and organizational resources, as well as its coordination abilities, in
order to create core competencies.” Corporate and Business strategies give birth to functional
strategies, which are implemented in the organization through functional and operational
implementation.
This strategy refers to single function operation and the activities involved in it. This is an
operating level of strategies. The decisions taken at this level are referred as tactical decisions.
The main purpose of functional strategy is to achieve the corporate and business level objective
in specific functional area by the optimum allocation of the resources available to maximize the
profitability.
When all the functional departments of any organization either it is marketing, finance, human
resource, operations, legal, supply chain or information technology, work together in same
direction to cover the business level objectives, and hence by doing so achieve the corporate
level goals, then only the basic purpose behind functional level strategies can be fulfilled.
Each functional department carries out its own functional responsibility by executing short and
medium term plans to play its role in meeting overall corporate objectives. For example, in
marketing strategy; the process may focus on selecting the target market, developing a market
plan that may satisfy the overall needs of the target customers.
In human resource strategy, the functions may deal with recruitment and selection of the
employees, their retention, training and development, evaluation, and remuneration part.
Financial strategy may go with issues of funding, shares, debt financing, depreciation etc.:
The functional strategies relate to the operating divisions and thus connect to business
processes and value chain. Higher-level strategies depend upon these strategies as they
provide input to the business level and corporate level strategies. Once the higher-level
strategies are formulated, the functional units translate them into the course of action plan,
which each department is supposed to complete within a due course of time for the success of
the strategy.
An organization with multi-units dealing in several businesses at a same time, create a business
strategy for each business and each business with separate sets of departments constitute their
own functional strategies for each department. For example, if an organization decides to go for
differentiation strategy, all the activities of each department, must be focused on fulfilling that
purpose only.
The strategy may be focused on providing customized products, focus on value creation of the
product, charging high prices and providing innovative and improved products by going through
research and development. The whole idea behind the formulation of these strategies is to gain
competitive advantage and maximizing resource productivity in terms of increased
costeffectiveness.
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It is very important to understand the significance of alignment among the corporate, business
and functional level strategies. The corporate level strategy will not be effective if the business
and functional level strategies do not go in consistency with it. Thus, confirming the reliability of
business and functional level strategies, which support the grand strategies for the organization,
is as important as picking up the right strategy for the corporate level. Functional level strategies
label the support function of the business.
Functional strategy deals with developing and nurturing a distinctive competence in a functional
area in order to maximize resource productivity. Functional strategy contributes to business
level strategy and corporate strategy as well. It also helps to develop competitive advantage.
A corporation consists of several business units and each business unit consists of several
departments and functions. Each business unit adopts its own business level strategy and its
own functional strategies. The orientation of functional strategy mainly depends on its business
level strategy. If the unit follows a business level strategy of cost leadership, a set of functional
strategies would be needed to support cost leadership strategy.
Functional Strategy – Meaning of Functional Strategies
Functional strategies are at the heart of competitive advantage of any firm. These strategies are
a great help to the implementation of integrated business strategy of the firm. They are as basis
for attaining the strategic intent of the firm. Functional strategies are formed in correlation with
the changing competitive environment.
Every business firm is built around certain basic functions such as production, marketing,
finance, human resources, information system, operational research and development, etc.
Many other functions are supporting activities which are significant for the business. Melvin J.
Stanford says that for a firm to fulfill its purposes and progress towards it objectives, strategic
alternatives within each of these functional areas must be developed, selected and implemented
by management.
Functional strategies are the collective activities of day-to-day decisions made by respective
functional department heads who are responsible in creating and adding value to the product or
service. They are involved in designing product, raising finance, manufacturing the required
product, delivering product to customers, and support product or service of each business within
the corporate portfolio.
These activities are carried out by efficient utilization of available resources and capabilities; and
integrating the activities within the functional area as, for example, coordinating among research
in marketing, purchasing, inventory control, promotion, advertising and shipping in production.
Functional strategies are derived from business level strategy. Remember the three generic
strategies-low cost leadership; differentiation and focus strategy. For example, take a firm
pursuing low cost leadership strategy. When the strategy is implemented, all the functional
areas have to be focused on low cost structure.
Unit 2: Functional Strategy – Application and Importance
According to Thompson and Strickland, strategy making is not just a task for senior executives.
In large enterprises, decisions about what business approaches to take and what new moves to
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initiate involve senior executives in the corporate office, heads of business units and product
divisions, the heads of major functional areas within a business or division (manufacturing,
marketing and sales, finance, human resources, and the like), plant managers, product
managers, district and regional sales managers, and lower-level supervisors. In diversified
enterprises, strategies are initiated at four distinct organization levels-
These are as follows:
1. Corporate Strategy – It is a strategy for the company and all of its businesses as a whole.
2. Business Strategy – It is a strategy for each separate business the company has diversified
into.
3. Functional Strategy – Then there is a strategy for each specific functional unit within a
business. Each business usually has a production strategy, a marketing strategy, a finance
strategy, and so on.
4. Operating Strategy – And finally, this is a still narrower strategy for basic operating units —
plants, sales districts and regions, and departments within functional areas. Functional
Strategy – Definitions
The activities and processes—such as human resource management, research and

development, finance, production, and marketing — constitute the strategic functions of an
organization. Strategies designed to enact these strategic functions are referred to as functional
level strategies. A functional strategy is the short-term game plan for a key functional area within
a company.
allocation of resources among different operations within the functional area. It facilitates
coordination between them. Functional strategies contribute to the achievement of business and
According to Thompson and Strickland, “The term functional strategy refers to the managerial
game plan for a particular functional activity, business process, or key department within a
business. A company’s marketing strategy, for example, represents the managerial game plan
for running the marketing part of the business. A company’s new product development strategy
represents the managerial game plan for keeping the company’s product lineup fresh and in
tune with what buyers are looking for.”
Pearce and Robinson define “a functional strategy is the short-term game plan for a key
functional area within a company. Such strategies clarify grand strategy by providing more
specific details about how key functional areas are to be managed in the near future.”
According to Thomas Wheelen and David Hunder, “Functional strategy is the approach a
functional area takes to achieve corporate and business unit objectives and strategies by
maximizing resource productivity. It is concerned with developing and nurturing a distinctive
competence to provide a company or business unit with a competitive advantage. Just as a
multidivisional corporation has several business units, each with its own business strategy, each
business unit has its own set of departments, each with its own functional strategy.”
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Thus, a functional strategy is a set of decisions and actions managers make and take to attain
superior competency in business functions in accordance with the corporate and business-level
strategies. Once corporate and business-level strategies are developed, management must turn
its attention to formulating strategies for each business unit’s functional areas.
Functional Strategy – Concept
‘A functional strategy is the short-term game plan for a key functional area within a company’. It
is the approach a functional area takes to achieve corporate and business unit objectives and
strategies by maximizing resource productivity.
allocation of resources among different operations within that functional area and for facilitating
coordination between them for an optimal contribution to the achievement of the business and
Functional strategies clarify corporate and business strategies by providing more specific details
about how key functional areas to be managed in the near future.
Functional strategy is concerned with developing and nurturing a distinctive competence to

provide a company or business unit with a competitive advantage.
Functional strategy, as is suggested by the title, relates to a single functional operation and the
activities involved therein. Decisions at this level within the organization are often described as
tactical. Such decisions are guided and constrained by some overall strategic considerations.
In terms of the levels of strategy formulation, functional strategies operate below the SBU or
business-level strategies. Within functional strategies there might be several sub-functional
areas. Functional strategies are made within the higher level strategies and guidelines therein
that are set at higher levels of an organization.
Example – Marketing strategy, a functional strategy, can be subdivided into promotion, sales,
distribution, pricing strategies with each sub-functional strategy contributing to a functional
strategy.
Parent business unit’s strategy dictates the orientation of the functional strategy. For example, a
business unit pursuing a competitive strategy of differentiation by offering high quality product or
service requires an operation functional strategy that emphasizes quality assurance processes
than a cheaper, high-volume production.
Simultaneously, a human resource functional strategy emphasizes the hiring and training of a
highly skilled, but costly workforce. A marketing functional strategy that emphasizes distribution
channel “pull” using advertising to increase consumer demand over “push” using promotional
allowances to retailers.
If a business unit were to follow a low-cost competitive strategy, however, a different set of
functional strategies would be needed to support the business strategy. Functional strategies
must be developed in the key areas of marketing, finance, production/operations, R&D, and
human resources. They must be consistent with long-term objectives and grand strategy.
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Functional strategies help in implementation of grand strategy by organizing and activating
specific subunits of the company to pursue the business strategy in daily activities. In a sense,
functional strategies translate grand strategy into action designed to accomplish specific annual
objectives.
For every major subunit of a company, functional strategies identify and coordinate actions that
support the grand strategy and improve the likelihood of accomplishing annual objectives.
Functional strategies play an important role in implementing corporate and business strategy.
But to increase the probability that these strategies will be successful, more specific guidelines
are needed for the business’s operating components. Thus, functional strategies clarify the
business strategy, giving specific short-term guidance to operating managers.
A major task of strategy implementation is to align or fit the activities and capabilities of an
organization with its strategies. Strategies operate at different levels and there has to be
congruence and coordination among these strategies. Such congruence is the vertical fit. Then
there has to be congruence and coordination among the different activities taking place at the
same level. This is the horizontal fit.
Functional Strategy – Reasons why Functional Strategies are Needed
Functional strategies tell the functional managers what to do in their areas to achieve business
objectives. Glueck and Jauch have described the following reasons to point out why functional
strategies are needed.
The reasons why functional strategies are needed can be enumerated as follows:
i. Aimed at making the strategies formulated at the top management level practically feasible at
the functional level.
ii. Provide flow of strategic decisions to the different parts of an organization.
iii. The basis for controlling activities in the different functional areas.
iv. The time spent by functional managers in decision-making is reduced as –
a. Plans lay down clearly what is to be done, and
b. Policies provide the discretionary framework within which decisions need to be taken.
v. Help in bringing harmony and coordination as they remain an important part integral part of
major strategies.
vi. Similar situations occurring in different functional areas are handled in a consistent manner
by the functional managers.
Functional strategies play two important roles:
i. They provide support to the overall business strategy.

ii. They spell out how functional managers will work so as to ensure better performance in their
respective functional areas.
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Functional Strategy – 20 Important Features
Some important features of functional strategy are as follows:

1. The time span of a functional strategy, as compared to a business-level strategy, is short.
2. It focuses attention on what needs to be done now to make the grand strategy work.
3. It is more specific and action-oriented because it clearly outlines what should be done in
each functional area so as to achieve the corporate objectives.
4. Functional strategy pertains to the function, department, division of the enterprise.
5. It has to be in pursuance of the overall corporate strategy.
6. It acts to achieve corporate and business unit objectives by maximizing resource
productivity.
7. It is the game plan to manage a principal subordinate activity within a business.
8. Functional strategy is concerned with developing and nurturing a distinctive competence to
provide a company or business unit with a competitive advantage.
9. The orientation of the functional strategy is dictated by its parent business unit’s strategy.
10. Functional strategy is narrower in scope than business strategy. It contains relevant details
of the overall business game plan by setting out the actions, approaches and practices
which are to be employed in managing a particular function.
11. It may differ from region to region.
12. Functional strategies should be in sync rather than serving their own narrower purposes.
They should be in coordination and consistency with long-term objectives and grand
strategy.
13. These functional strategies have to be related to each other and to the overall corporate
strategy.
14. Implementation of these strategies involves a wide range of policy decisions to be made
relating to the functional areas.
15. The focus of these functional strategies is often towards external environment.
16. Functional strategies help in implementation of grand strategy. These translate grand
strategy into action.
17. There might be several sub-functional areas within functional strategies.
18. Functional strategies are made within the guidelines that have been set at higher levels.
19. These are detailed statements of the “means” or activities that will be used to achieve
shortterm objectives and establish competitive advantage.
20. A functional strategy supports business-level strategy, which in turn supports corporate-level
strategy.
Functional Strategy – Importance
Today, every firm faces challenges in optimizing resources such as finance, production facilities,
technology, and marketing opportunities in functional areas. Functional managers need
strategies to make the best of opportunities and to identify avenues for growth. They need
strategic focus on their decisions in their fields.
The importance of functional strategies is pointed out under the following headings:
1. Help in Operation of Business Functions:

Functional strategies provide operational help in the conduct of various functional activities. For
example, a finance manager has to necessarily take decisions on funding opportunities,
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deploying projects, reducing capital costs, or acquiring another firm. In addition, he has to
decide on strategic options to manage working capital, which may be used to decide the various
aspects of receivables management, factoring, payables management, inventory strategy, and
treasury management.
Similarly, to manage human resource function, a number of strategic initiatives can be deployed
by a firm. Managers need strategic focus on various functions. The production and operations
management function also involves a number of strategic issues.
2. Managerial Road Map:
Thompson and Strickland write, “A company needs a functional strategy for every major
business activity and organisational unit. Functional strategy, while narrower in scope than
business strategy, adds relevant detail to the overall business game plan. It aims at establishing
or strengthening specific competencies calculated to enhance the company’s market position.
Like business strategy, functional strategy must support the company’s overall business
strategy and competitive approach. A related role is to create a managerial road map for
achieving the functional area’s objectives and mission.”
3. Help in Implementation of Grand Strategy:
Pearce and Robinson state that “functional strategies must be developed in the key areas of
marketing, finance, production, R&D, and personnel. Functional strategies help in
implementation of grand strategy by organising and activating specific subunits of the company
to pursue the business strategy in daily activities.”
4. Decisional Guides to Action:
Functional strategies guide and translate thought into action designed to accomplish specific
annual objectives. Thus, functional strategies may be regarded as decisional guides to action
that make the strategies work. They clarify many conflicting issues and problems, giving specific
short-term guidance to operating managers and employees.
5. Improves Effectiveness and Efficiency and Creates Super Profitability:
It should be noted that functional strategies aim at improving the effectiveness of a company’s
operations and thus its ability to attain superior efficiency, quality, innovation, and customer
responsiveness. It is important to keep in mind the relationships of functional strategies,
distinctive competencies, differentiation, low cost, value creation, and profitability.
We can note that functional-level strategies can build resources and capabilities of a firm that
enhance superior efficiency, quality, innovation. These in turn, create low cost, value and
superior profitability.
6. Builds Competitive Advantage:
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Functional strategies can improve the efficiency, reliability (quality), and consumer
responsiveness of its service. Thus, they can be used to build a sustainable competitive
advantage. Functional strategies can increase efficiency of activities and thereby lower their
cost structure. In fact, functional strategy is concerned with developing and nurturing a
distinctive competence to provide a company or business unit with a competitive advantage.
Other Benefits of Functional Strategies:
i. They give operating personnel a better understanding of their role in the firm’s mission. ii. The
process of developing them becomes a forum for raising and resolving conflicts between
strategic intent and operational reality. iii. They provide a basis for developing budgets,
schedules, trigger points, and other sources of strategic control. iv. They can be powerful
motivators, especially when connected to the reward system.
Unit 3: Functional Strategy – Classifications
Classifications: Marketing Strategy, Financial Strategy, Operations Strategy and Human

Resource Management Strategy
Let us now discuss these functional strategies in detail:
Type # 1. Marketing Strategy:
The definition of marketing strategy can be given, as – “A marketing strategy is a practice that
allows an organization to focus on the available resources and turn the opportunities into
productivity to increase sales and achieve justifiable competitive lead.” Marketing strategies
provide detailed information to the necessary plans to be taken, to carry out the marketing
program.
By using an effective marketing plan an organization may go for capturing a large share of
existing market, develop a new market for its current products, or develop new products for its
existing market or even go for total diversification strategy that mean developing a new product
for an entirely new market.
The marketing strategy based on building an organization that revolves around customer
satisfaction helps the organization in achieving fast growth rate. It describes how the
organization is going to engage customers, identify the prospects, and the competition in the
market.
It derives from the broader corporate strategies and corporate goals. A strategy consists of
range of refined thoughts and organized series of tactics. It is not possible to implement a
marketing plan, if it is not based upon sound strategy formulation.
Marketing strategy includes the successful understanding of internal and external environment.
Internal environment factors include the analysis of marketing mix, whereas external factors
include the analysis of political, legal, economic, social, technological, cultural, environment, and
evaluation of customer, competitors, and target market. Various analyses can be performed to
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understand the strategic constraints and focus such as – SWOT analysis, GE/McKinney matrix
or COPE analysis.
As every unique business has unique features, the marketing strategies of different businesses,
also differ in accordance with those.
However, one can categorize the strategies in four major schemes given below:
i. Market dominance based strategies – It depends upon the basis of the market share, the
firm holds in the market or the dominance of an industry is required to make the basis for this
categorization. There may be three types of market dominance strategies such as – Leader,
Challenger, and follower.
ii. Porter generic strategies – It focuses to the scope of market penetration and firm’s
sustainable competitive advantage. It can be further divided into three broad categories such as
– cost leadership, product differentiation, and market segmentation.
iii. Innovation strategies – It focuses on the rate a firm develops new products and
innovative business models. There are three types such as – pioneers, close followers, and late
followers. iv. Growth strategies – It deals with the questions what should be the measures,
which may help the organization in proper growth. The most common ways may be horizontal
integration, vertical integration, diversification, and intensification.
A good marketing strategy consist the following points:
a. Flexible – Having an overall control is needed while implementing any plan but there
must be some space for changes also, as the needs and situations may keep altering and if
there is no possibility for flexibility in the plan, adaption and implementation of change may
become difficult.
b. Comprehensive – Having a complete overview is very important before going for

implementation of the plan, as the plan may lead to failure if any necessary details have been
missed.
c. Consistence – Having consistency, is very much needed in any good marketing strategy
as there is no use of the plan if it couldn’t correlate with the other functional strategies and fail in
achieving the overall corporate and business level objectives. Maintaining consistency also
ensures that employees are in accordance with what has been mentioned in the functional
strategy.
d. Rational – Maintaining rationality is very necessary; as the plan must flow in the logical
manner, otherwise it would not come up with corporate level objective.
Marketing strategy relates to the formulation and implementation of marketing mix that is
product, price, place, and promotion.
Type # 2. Financial Strategy:
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The financial strategy deals with the availability or sources, usages, and management of funds.
It focuses on the alignment of financial management with the corporate and business objectives
of an organization to gain strategic advantage. It emphasizes on the aspects such as – how
much fund is required. When the fund is required? How the funds should be raised? In addition,
by what are the means to use and manage the funds?
The financial plans and policies should focus on some major points:
i. Determining the financial resources, which are necessary to meet the operating program of
the organization?
ii. Developing plans for obtaining the obligatory external funds.
iv. Governing the allocation and use of funds by founding and upholding the financial
control system.
v. Formulating programs, which max help in providing the most effective profit-volume-cost
relationship.
vi. Analyzing the operation’s financial results.
vii. Reporting the data to the top management and planning the future operations of the
firm.
A sound financial plan, apart from cost, solvency, and liquidity and profitability, has few more
prominent characteristics such as – it is based on clear cut objectives, it’s simple in nature,
shows less dependency on outside sources, and is flexible in nature.
The financial plans and policies deal with three major issues such as:
a. Sources,
b. Usages, and
c. Management of funds.
The details are as follows:
a. The Sources of Funds:
It refers to the owner’s capital, borrowing from public through shares and debentures, and loans
from financial institutions. Financial plans and polices are related with the requirements of
capital, desired capital structure, reserves and surplus, and relationship with lenders. It is often
the hardest part as raising the funds is the first and the most important requirement for setting
up any business.
Raising funds need careful planning and ask the answers of few questions such as how much
finance is required? When is the finance needed? For how long is it needed? What security can
be provided for availing the finance? Can some ownership be given at the startup of the
business, in return for investment?
There may be some external sources and some internal sources, which may facilitate the
startup finance. The internal sources that are from within the organization may be personal
sources such as – the savings and inheritance of the entrepreneur, borrowings from friend and
family and credit cards, retained profits, and share capital that is invested by the founder. The
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external sources are the outside providers of fund. It includes, loan capital, share capital, and
venture capital.
For instance, the financial plan of an organization is to raise 50% funds by borrowing from public
and rest 50% by owned funds. An organization generally does not use the reserves as funds
because they are used for investment and contingency purposes.
b. Usage of Funds:
It implies that the funds can be used for making investments, giving loans and advances, and
offering dividends to shareholders. In short, it asks the answer of ‘how the entrepreneur is
planning to spend the fund or money?’ The funds should be utilized in an efficient and effective
manner.
Financial plans and policies allocate funds to carry out various strategies related to expansion of
business and giving dividends to shareholders. A plan can be an expansion plan, such as –
merger and acquisition with another organization; whereas a policy can be giving minimum 20%
of dividend to shareholders.
c. The Management of Funds:
Help in the optimum utilization of funds. The plans and policies at this level relate to areas, such
as cash and credit management, tax planning and accounting, and budgeting.
Thus, the plans and policies at the financial level are very important since they determine the
sources, usage, and management of funds that help in the implementation of projects.
Type # 3. Operations Strategy:
According to Slack and Lewis, operations strategy can be defined as – “the total pattern of
decisions which shape the long term capabilities of any type of operations and their contribution
to the overall strategy, through the reconciliation of market requirements with operations
resources.” One must not be confused between two terms that are “operations” and
“operational”.
However, the words are similar but have different meaning. ‘Operations’ refers to those parts of
business which deals with producing goods and services. ‘Operational’ means short term and
limited plans. For example, a marketing strategy defines the procedures and approaches to be
used by an organization to position its business in the market.
While on the other hand, operational side of marketing refers to the day-to-day activities or
tactics to manage things such as – pricing, promotion of product or service, and its distribution.
The procedure, which is used to formulate the operations strategy, is known as the process of
operations strategy, which defines the way ‘how to go for operations strategy’?
We can broadly describe two approaches for devising an operations strategy:
i. Top-Down Approach:
It determines the flow of directions or decisions from the top level to the lower level in the
organizational hierarchy. The top-level management takes the decisions and set the
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organizational objectives and policies, and then those decisions and policies are implemented
by the different functional areas of the organization such as marketing, finance, HR. etc.
ii. Bottom up Approach:
It originates from the practical experiences of the past. It is not always feasible to formulate the
strategy without knowing the actual condition of the internal and external environment. Bottom
up approach suggests forming the ideas from their earlier experience of dealing with customers,
suppliers, distributers, and their own processes and then invent the strategies based upon these
experiences.
In any organization corporate and business level strategies set the base for standing in market
with competitors that in turn affect the business, the target market, and the manner, which
defines how to serve the market.
Thus, operations strategy formulates a long-range game plan for the production of goods and
services of any organization and provides a road map for the production function to achieve the
business level and corporate level strategies simultaneously.
Type # 4. Human Resource Management Strategy:
Human resource management (HRM) strategy assists in implementing the specific function of
human resource management to any organization. Human resource management strategy
provides a practical framework of managing human resource in line with the organization’s
corporate objectives.
It involves a four-way approach:

i. Developing a strategic framework
ii. Generating HR mission
statement
iii. Applying SWOT analysis
iv. Making HR planning decisions.
Human resource management strategy focuses on organization, culture, people, and systems. It
focuses on the implementation of the specific functions of HR, which includes policies on
recruitment and selection, disciplinary policies, reward policies, training and development
policies and payroll processes etc.
Thus, HRM strategy is an overall plan, which concentrates on implementation of specific HR

functions, which are generally administrative in nature and help in correlating with the whole
business strategy.
Human resource management comprises of various practices:
i. Human resource planning

ii. Recruitment and selection
iii. Induction
iv. Training and development
v. Skill management Remuneration
vi. Performance appraisal
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vii. Personal administration
viii. Time management
ix. Payroll
x. Employee benefit and ethical issues
xii. Personal cost planning
xii. Labor relations.
The Human resource management typically talks about ‘best practices’ which means nothing
but the correlation between the HRM strategy and the overall corporate strategy by coordinating
the firm’s personal needs with organization’s objectives. In any organization, personnel’s proper
management is very necessary, as it is the employees who implement the policies and turn the
objectives into reality.
Unit 4: Functional Strategy – Basic Features of HRM
Employee feedback, continuous monitoring, surveys are all done through human resource
management policies. Thus, as a functional department HR plays a significant role. Human
resource management strategies include some basic features, which are as follows:
a. Organizational Management:
It refers to the management of an organization’s employees. Contribution to organizational

practices include improving employee commitment, maintaining higher level of productivity
through higher level of skills, enhancing quality and efficiency, lowering the absenteeism and
turnover.
The idea behind organizational management refers that better organizational performance can
be gained through the adoption of some definite best practices in Human resource
management. The practices include selective hiring, training and development of the
employees, facilitating employment security, free flow of information sharing, minimizing
difference, increasing overall performance of the organization, and motivating self-managed
teams.
The organizational management tries to maintain a balance in between the personal and
organizational goals of an employee and ensures a close coherence between the HR policies of
the organization and the external environment or business. The overall idea is to-support the
organization by attracting, retaining and managing employees effectively to meet the corporate
strategic goal.
b. Personnel Management:
It refers to the management of individuals or employees who make up the workforce of an

organization. The personal management ensures the supply of the skilled and qualified
individuals and develops the capability of current workforce. The basic idea is to minimize the
financial risk and to gain a maximized return on investment of human capital in the organization.
It helps in securing future survival and long-term success for the organization. The key functions
of personal management include resourcing capable workforce, their recruitment and selection,
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employee record retention, training and development of employees, keeping track of local, state
and central labor laws, design and development of the organization, implementation of change
management, performance and behavioral management, job and workforce analysis, industrial
and employee relations, compensation management, and employee motivation.
c. Industrial Management:
It refers to the study of employment relationship. It helps in designing policies related with the
betterment of worker and employment relationship. It avoids the idea of treating the worker as a
mere commodity. It favors to treat workers as human being entitled to every human right.
Traditionally the field discusses with the fields such as – trade unions, collective bargaining, and
worker’s participation in management, grievance management, industrial disputes, labor laws,
rules and code of conduct
According to Lester, “Industrial relations invoke attempts at arriving at solutions between the
conflicting objectives and values; between the profit motive and social gain; between discipline
and freedom; between authority and industrial democracy; between bargaining and cooperation
and between conflicting interests of the individual, the group and the community.”
Industrial relations include all the factors that put impact on the behavior of the people at work
such as:
i. Institutions that comprises of the government, employers, trade unions labor courts, union
associations and other organizations which influence the organization in direct or indirect ways.
ii. Characters that study the role of worker unions. It comprises of industrial relation officials or
employer’s federation officials, mediators, arbitrators, judges of labor court, tribunal, etc.
iii. Methods that focus on the participation of workers in industrial relation schemes,
collective bargaining, grievance handling machinery, dispute settlements machinery, union
reorganization, hearing of labor courts etc.
iv. Contents that include matters relating to employment circumstances such as – working
hours, pay issues, health and safety issue, leave with wages, lay-off, retirements, social security
etc.
Unit 5: Functional Strategy – Development of Functional Strategies
The development of functional strategies aims at formulating the strategies at the top
management level that is practically feasible at the functional level. Strategies need to be
segregated into viable and unviable functional strategies. Viable functional strategies are those
that are compatible with each other, thereby augmenting the horizontal fit.
In this way, the functional managers can implement the strategies. The process of development
of functional strategies may range from the formal to the informal. Larger and more complex
organizations may have several strategies related to every major function. Comparatively
smaller organization may operate with fewer policies, most of which could be informal and
understood.
Vertical Fit:
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The concept of vertical fit defines functional strategies in terms of their capability to contribute to
the creation of a strategic advantage for the organization.
Viewed in this way we can have the following types of functional strategies:
(1) Strategic marketing functional strategies focus on the alignment of marketing

management within an organization with its corporate and business strategies to gain a
strategic advantage.
(2) Strategic financial functional strategies focus on the alignment of financial management
within an organization with its corporate and business strategies to gain a strategic advantage.
(3) Strategic operations functional strategies focus on the alignment of operations
management within an organization with its corporate and business strategies to gain a
strategic advantage (4) Strategic human resource functional strategies focus on the alignment
of human resource management within an organization with its corporate and business
strategies to gain a strategic advantage.
(5) Strategic information management functional strategies focus on the alignment of information
management within an organization with its corporate and business strategies to gain a strategic
advantage.
Horizontal Fit:
The concept of horizontal fit means that there has to be an integration of the operational
activities undertaken to provide a product of service to a customer. These have to take place in
the course of operational implementation.
Operational implementation is the approach an organization adopts to achieve operational

effectiveness. When an organization performs value-creating activities optimally and in a way
that is better than its competitors, it results in operational effectiveness.
Functional Strategy – Managerial Aspects of Managing Functional Strategy

Each business enterprise has its own set of departments. Each department has its own
functional strategy. Within the general framework created by the corporate and business
strategies, each business function needs to identify and undertake activities unique to the
function. The functional strategies delineate the activities to be undertaken in each part of the
business and usually include them as a core part of their action plan.
A few managerial aspects of managing functional strategy can be noted:
1. Lead Responsibility:
The main responsibility for conceiving strategies for each of the various important business
functions and processes is normally delegated to the respective functional department heads
and process managers.
Thompson and Strickland think that “In crafting strategy, the manager of a particular business
function or process ideally works closely with key subordinates and touches base often with the
managers of other functions/processes and the business head. If functional or process
managers plot strategy independent of each other or the business head, they open the door for
uncoordinated or conflicting strategies.”
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2. Coordination and Consistency:
Thompson and Strickland further point out that compatible, collaborative, mutually reinforcing
functional strategies are essential for the overall business strategy to have maximum impact.
Plainly, a business’s marketing strategy, production strategy, finance strategy, customer service
strategy, new product development strategy, and human resources strategy should be in sync
rather than serving their own narrower purposes. Coordination and consistency among the
various functional and process strategies are best accomplished during the deliberation stage.
3. Strategic Choice:
After the pros and cons of the potential strategic alternatives have been identified and
evaluated, and must be selected for implementation. By now, it is likely that many feasible
alternatives will have emerged. How is the best strategy determined? Perhaps two most
important criteria are:
i. The capability of the proposed strategy to deal with the specific strategic factors
developed in the SWOT analysis.
ii. The ability of each alternative to satisfy agreed-on objectives with the least resources
and the fewest negative side-effects.
4. Developing Policies:
The selection of the best strategic alternative is not the end of strategy formulation. The
organisation must then engage in developing policies. Policies define the broad guidelines for
implementation. Flowing from the selected strategy, policies provide guidance for decision
making and actions throughout the organisation. Policies tend to be rather long lived and can
even outlast the particular strategy that created them. Policies can make the implementation of
specific functional strategies easier.
5. Strategies to Avoid:
Certain functional strategies may prove very dangerous. Hence, they should be avoided. For
example, imitating a leading competitor’s strategy might seem to be a good idea, but it ignores a
firm’s particular strengths and weaknesses and the possibility that the leader may be wrong.
Functional Strategy – Consideration that Help Strategists to Achieve Integration of Functional
Strategies
The key activities performed for the implementation of the corporate and business strategies
give rise to functional strategies. The functional areas in any organization are, therefore, based
on the segregation of the key activities.
But segregated activities need to be brought together, since all activities are performed to
achieve the overall objectives of an organization. Integration of functional strategies provides the
means for such integration.
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Mechanisms that ensure integration can take the form of committees, consisting of the top
management and the functional heads. These committees can be entrusted the responsibility of
integrating the functional strategies, reviewing strategy implementation, and suggesting
modifications in view of strategic changes.
Unit 6: Functional Strategy – Considerations for Integration

of Functional Strategy
There are certain considerations that help strategists achieve integration of functional strategies.
These considerations include:
1. Internal consistency,
2. Development of organizational capability
3. Trade-off decisions
4. Intensity of Linkages
5. Timing of implementation of functional strategies
1. Internal Consistency:
The segregation of key organizational tasks gives rise to the need for internal consistency. The
internal consistency in the various functional strategies ensures that the different functional
areas work for a single purpose. Absence of internal consistency may lead to a sub-optimal
implementation of strategy.
For instance, an organization pursuing a strategy of rapid expansion through differentiation may
follow an aggressive marketing, R&D emphasizes on operation, a progressive HR policy, and a
conservative financial approach to sources of funds. Among these functional areas, finance may
cause a problem as a conservative use of sources of funds may restrict the options for the
internal generation of resources.
The strategies would be consistent, if the company is able to finance its rapid expansion through
its internal sources alone. But internal sources remain inadequate to finance rapid expansion.
Therefore, a conservative financial strategy would be inconsistent with other functional
strategies.
2. Development of Organizational Capability:
The development of organizational capability in terms of strategic or competitive advantages is

relevant to the integration of functional strategies. Synergies occur across functional areas, and
core competencies emerge as a result of the concentration of resources to the areas where an
organization desires to create strategic advantage.
A company may desire to be a market leader, a low cost producer, a technologically superior
competitor, or an ideal employer. For achieving these objectives, an integrated approach to
functional strategies would be necessary.
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For instance, a company that aims to be a market leader would have to offer best quality
products at a competitive price through an efficient distribution network supported by an
aggressive promotion policy. The functional strategies relating to other areas would have to
supplement these marketing strategies. Thus the development of organizational capability
depends on the degree of integration of functional strategies.
3. Trade-Off Decisions:
The formulation and implementation of functional strategies involve trade-off decisions.

Marketing-orientation in functional strategies in some way contradicts with operationsorientation.
For instance, marketing orientation would emphasize low-volume specialized production, while
operations would require large-volume production with lesser product variations.
Some sacrifice in some areas is necessary if emphasis is laid on other functional areas. In fact,
the integration of functional strategies serves to minimize aberrations due to trade-off decisions
and optimize the implementation of strategies.
4. Intensity of Linkages:
The intensity of linkages between different functional areas is an important consideration in

determining the level of coordination between functional areas. For instance, a high
capitalintensive business with high manufacturing costs needs a strong linkage between R&D
and manufacturing.
This will help in developing cost-saving process improvements. Similarly, a low cost strategy
would require a higher level of coordination between marketing and operations. However, the
intensity of linkages may vary with the requirements of strategy from time to time.
5. Timing of Implementation of Functional Strategies:
The timing of implementation of functional strategies must be designed so that they mesh
correctly. The different functional strategies have to be implemented at the appropriate time so
that they complement each other.
For instance, a number of computer companies attempted to rush into new products with
marketing programs promising more than could be delivered. Customers were anxiously
awaiting the arrival of their new machines before production was capable of providing the
necessary output. So lead times within each functional area need to be considered in relation to
one another before plans are implemented.
Thus the strategists have to consider the above issues to make the implementation of functional
strategies effective.
Unit 7: Functional Strategy – Functional Implementation of Strategies

` (Policies)
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In the context of strategic management, by the term policy we mean specific guidelines for
taking managerial actions and decisions for successful implementation of the corporate strategy.
Following Newman and Logan (1971), we may claim that a carefully selected policy widens the
scope of the corporate strategy by including clarity in the concept and by adding workability to
the system for taking functional decision in consistency with the overall means.
Buskrik (1971), Thompson and Strickland (1989) and Alexander (1983) have also stressed upon
the need for factorization of corporate strategy into functional policies. According to them,
designing of functional policies is needed to limit discretion, appreciate uniformity in handling
similar activities, ensure consistent pattern of organizational behavior, reduce uncertainties in
repetitive problems, dispose quickly the routine issues, avoid hasty decisions during the period
of transition from the one strategic phase to another, and provide a foundation for superior
performance.
1. Production Policies:
Major issues, which a production policy should address to are the followings:
(i) Involvement of the firm in the production process

(ii) Selection, installation and maintenance of the production process
(iii) Installation and variations of the production capacity
(iv) Selection of plant location
(v) Arrangements of new and replacement of the existing production facilities, and
(vi) Outsourcing.
Involvement of the firm in the production process has two extreme states. One is the state of
complete manufacturing in an integrated way both in forward and backward directions and the
other is the state of complete buying with firm’s identity labelled before selling. Twiss (1977)
examined in details different in-between-states of production. His identification is in terms of
self-arrangement of material inputs, manufacturing of standard parts, manufacturing of minor
non-standard parts, manufacturing of major nonstandard parts, assembly operation of
components and external purchases.
According to Twiss (1977), justification for investment in productions is needed when the
organization wants to make rather than buy different parts. The cost of manufacturing, the
degree of dependence, development of core competence and special quality requirement are
the four considerations based on which the organization can compare the make and buy
alternatives and decide about the degree of its direct involvement in the production process.
Some organizations start with selling the externally purchased items. After being able to enjoy a
sizeable market, they start doing the assembly operation of the externally purchased
components. Further expansion of their activity leads to manufacturing of non-standard major
components.
In this way, these organizations start increasing their independence and develop core areas of
operation. This backward movement, in the next state, leads to making of minor special
components. Some organization even goes for manufacturing standard parts where economies
of scale can be enjoyed. There are product fields where arrangement of materials draws the
attention of production planners.
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Producers of edible oil may take interest in growing seeds through own managed cultivation,
and of fruit canning firms may like to maintain own orchards. Similarly, metal manufacturers may
operate mines to extract ores by themselves.
The polar opposite situations also arise. For example, some organizations start with dealing in
different materials. Realizing the need for value addition, and developing the requisite financial
and skill base, they go for manufacturing standard parts where the key function is production
rather than marketing. These organizations basically move in the forward direction and may, at
the end, start doing the rest of the work. When the capacity restriction leads to refusal of
customers’ demand, they go for external purchases.
Thus, there is no hard and fast rule of increasing or decreasing one’s involvement in the
production process. Depending on the nature of the product field and the position of the firm, it
may decide its own production policy. One may also think of both contractual and
selfmanufacturing to ensure timeliness, independence and core competence (COSMETIC).
In this type of integration, the concepts of both making and buying have been propounded. Such
firms are in favor of an ideal/optimal mix of make and buy decisions for every stage of
production. COSMETIC integration can offer better coordination, quality assurance and cost
management, greater independence and lesser degree of uncertainty. Further, it provides with
scopes for retention of external relationship and maintenance of standards for external
negotiations and internal evaluations.
Choice of production process mainly includes choice of technology and choice of facilities. For
some industries, this choice is very limited. But for a few others, alternative technologies do
exist and the firm has to make the proper selection. It is also important to decide on factor
intensity and degree of automation. At the time of taking the latter decision, planners have to
take into consideration response of the existing workforce. Many of the automation moves have
failed in the past due to incomplete communication from the top and resistance from the bottom.
The problem of capacity planning gives rise to several policy issues. One has to estimate the
normal period requirements and the peak period requirements, keep provisions for future growth
in demand and arrange for balanced facilities. There are two types of policy decision – one is to
minimize, if not eliminate adjustments in capacity and the other one is to adjust capacity as per
market demand.
In the former case, keeping of output stock, refusal of demand, allowing customers to be in the
waiting line, and allowing the price to vary or any combination of these four policies may be
preferred to maintain a near constant rate of production. To accommodate variations in capacity,
one may resort to additional production through overtime works, subcontracting, buying or any
combination of these three approaches.
Selection of plant location assumes importance when an organization opts for internal growth
strategy but its existing facilities cannot support the increased rate of production. This problem
of choice of location is very important for transnational companies who may prefer to carry out
manufacturing only at a few places having locational advantages and transhift the products to all
the global markets.
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Cost of production and transportation are important objective factors that regulate the strategic
choice of plants. Besides, there are subjective factors governing the choice of location. For
example, availability of skilled hands, prevailing wage rate, political environment, absenteeism
etc. are the key subjective factors, influencing plant choice.
Selection, maintenance and replacement of equipment and other production facilities are
important policy decisions that can strengthen the long-term ability of a firm to compete in the
market and realize the corporate objectives. Quality of the processing equipment can help in
gaining competitive advantages and should be taken note of. It is the quality of the equipment,
which gets reflected in the quality of the final product.
Further, equipment must be cost effective and should be based on the present State-of- Art.
Maintenance of equipment, if properly done, can increase the lives of the equipment and their
performances. Preventive maintenance can increase machine availability time, and minimize the
bottlenecks in assembly line balancing, arising out of sudden failures.
Another key area where attention should be given is outsourcing. Choices about the vendors
and their developments are important decisions, which goes beyond cost and availability. It is
essential to maintain close relationship for mutual benefit. Related issues are the mode of
transportation (by rail, road or air), the speed of delivery and the lead-time.
2. Marketing Policies:
Following Lazer and Kally (1962), one can identify three categories of marketing decisions.
Firstly, we are concerned with product mix and or service mix along with the complete package
of offer. Secondly, we are concerned with either the distribution mix in terms of channels of
distribution and actual physical distribution.
Lastly, we are concerned with the communication mix covering all types of promotional
communication for creating awareness and facilitating penetration. According to McCarthy
(1964), decision variables are expressible in terms four P’s namely Product, Price, Place and
Promotion and a combination of strategic decisions on P’s is known as marketing mix of the
firm.
If the marketing mix of the firm does not support and is not supported by other functional policies
like production and financial policies, then the corporate objectives cannot be met. It is therefore
important to interact with other functional areas for arriving at the marketing mix.
Marketing head should specify which products are to be expanded. But this requires views of
the R&D wing, in case the product concept is a new one, and the views of the production wing,
in case expansion in capacity is needed. On many occasions, expansion in volume of operation
may reduce the profit. A clearance is, therefore, needed from finance wing of the firm for
operating at super optimal level.
According to Frain (1981), the four P’s concept of McCarthy is an oversimplification of the
marketing operation.
Depending on the nature of the product field, it may present the key issues of the marketing
operation as follows:
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(i) Marketing research,
(ii)Production planning and development including packaging and branding, (iii)
Pricing decision, (iv) Distribution,
(v) Marketing communications including personal selling, advertising and sales promotion, and
(vi) After sales service.
Mixing these ingredients within a policy framework, to achieve the corporate objective, gives rise
to marketing policy. It is easy to note that the nature of the product will influence the balancing of
the ingredients. Further, the concept of a mix suggests that the relative weightage of different
ingredients may vary from time to time depending on the changes in the external environment
and internal capabilities. Thus, the marketing policy must be dynamic and not static.
In case of production policy, we have already seen that a relatively static policy is preferred. In
this sense, marketing policy formulation is different from that of production policy formulation.
The dynamicity of marketing policy stresses upon the need for continuous marketing research.
Under marketing research, the organization is interested in finding answers to a number of

queries as listed below:
(i) Who are the current users of our product? Who are the potential users?
(ii) From where do they buy the product, and when do they buy the product?
(iii) What is the size of the total market? What is our market share?
(iv) Is the market growing, static or shirking in size?
(v) What is the degree of customer satisfaction?
(vi) If customers are not satisfied, can we improve the product for their satisfaction (vii) What
new products can be introduced?
(viii) How can the customers be informed about the products? How can we motivate them to buy
our products?
All these questions may not be relevant. Depending on the type of corporate strategy adopted
by the firm, one has to modify the above list and work out the marketing policy based on the
answers received.
Marketing communication typically comprises advertising, sales promotion and publicity. Mass
communication is needed for mass selling. Personal selling needs two- way communications.
The function of personal selling is to get sales orders. But this is an exception than the rule for
mass selling. For a rapid turnover consumer product, marketing communication should receive
the highest attention of the policy makers and its priority should be significantly higher than that
of personal selling.
For durable consumer products, the nature of attention and priorities will be similar. However, for
the former case continuous marketing research assumes lot of importance and for the latter
case continuous marketing research is not so important. For industrial consumption goods,
personal selling draws maximum attention.
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But marketing communication becomes a non-issue. So is the case for marketing research. For
industrial durable products, personal selling is having the highest priority. Marketing research
and marketing communication also receive due attention.
In case of advertising as a method of communication, crucial policy decision relates to choice of

media. While economies of media is an important factor, the type of people using the media and
the condition under which the media is used are also very important for making a choice.
Magazines, televisions, outdoor media, radio, cinema, national press and regional press are the
basic media that one can opt for in a pure or mixed form. The extent of repetition, and the
number of insertions etc. are the decision problems that follow the choice of media decision.
In case of personal selling, face-to-face communication, electronic mail communication,

telephonic communication and communication through correspondence are the alternative
modes of operation. It can be carried out on the organization’s own premises, on the clients’
premises or in exhibition selling. While cost of personal selling is higher than advertising, the
information feedback is worth paying the additional amount.
The other important policy decision relates to choice of channels. Utility of place and utility of
time of a product or a service are provided by this physical process of distribution. From place
and time utilities, one can identify the transportation element and warehousing element of
decision making. Storage often makes up for economies in production and takes care of
uncertainty and seasonality of demand. For some items, storage improves the quality of product
(e.g., cheese, wine, timber).
For rapid turnover consumer products, availability should preferably be made through a variety
of retail outlets. For durable consumer goods, specialist outlets are needed where specialized
information about the products and after sales service are available to the users.
For industrial consumption goods, there can be numerous ways of ensuring distribution. There
may be direct distribution via engineers’ merchants and suppliers, and through dealers. For
industrial durable products, direct distribution to the users is in practice. It is preceded by lengthy
negotiations on specification and performance.
Thus, channel choice is dependent on the nature of the product and the size of the market. It is
also dependent on the distributional emphasis given by the organization. Some organizations
may be interested in limited coverage and some others may be interested in large-scale
penetration, i.e., wide coverage.
The concept of multiple channels or dual distribution is also getting appreciation in today’s
competitive market. By dual distribution we mean two or more channels for two or more grades
of the same product. For premium items, there may be exclusive and limited coverage, and for
items in the lower range of price bracket, there may be penetration type of distribution.
This is so because the superior grades are meant for a small market segment and the inferior
grades are meant for mass market. A somewhat similar is the concept of parallel channels.
Parallel channels, like multiple channel or dual distribution, use multiple distribution networks.
But these networks are meant for all the grades. They run parallel to each other. For example,
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one may use traditional distribution channels, and along with that, establish own sales centres at
selected geographical regions.
Adequacy of the sales force in respect of size and skill is to be examined before entering into a
new market or for operating in an existing market with greater emphasis or for offering a new
product in the market. Number of sales persons should be neither more nor less. It should be
just sufficient to implement the sales policy of the organization.
They need to be properly skilled and trained so that they can also undertake that non- sales
activity. Other than merchandising function, sales person has to keep liaison with technical
personnel, participate in value analysis programmes, collect market information and act as
customers’ business advisory. They are the persons who link the benefits of the product to the
needs of the buyers and carryout the vital strategic function.
3. Financial/Accounting Policy:
According to some experts, starting point of an organization is money and the end point of that
organization is money again. They are at least partially correct. No organization can run the
existing business without cash in hand. Further, generation of additional fund can only promote
a new expansion project.
Following is a list of some standard questions, which are to be examined by the financial
planners for drawing the policy framework:
(i) From where do we propose to get additional funds to grow – internally or externally?
(ii)If the answer is internal source, will this affect the performance of the existing business? (iii) If
the answer to question (i) is external source, how do we propose to mobilize that additional
fund
(iv) What policy on capital structure do we propose to follow? Minimum debt or highly leveraged
structure
(v) How much liquid cash or current assets do we propose to keep in hand?
(vi) What will be the effect of growth on cash flow?
(vii) What accounting system and policy do we like to use
(viii)What austerity measures are to be undertaken for generating more funds? (ix) What
financial measures are to be taken against loss making units (x) To whom we propose to
sell the loss making units? And how?
While most of the questions are meaningful for growth or stable growth strategy, a few questions
are related to turnaround and retrenchment strategies. Mainly, one is concerned with generation
of resources, mobilization of resources, structuring of resources, allocation of resources and
proper utilization of resources.
Sources of finance and capital structure are the important dimensions of financial policy. The
external generation of fund may arise out of ownership capital and or borrowed capital. A
Company may issue equity shares and or preference shares for mobilizing ownership capital.
Preference shareholders, as the name stands, enjoy preferential rights in respect of dividend
and return of capital. Holders of equity shares do not enjoy any such special right regarding
dividend and return on capital.
There are different types of preference shares like cumulative convertible preference shares,
which are convertible into equity shares between the end of the third year and the fifth year.
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Rate of dividend paid till conversion into equity shares remains constant. Debentures on the
other hand, are issued to raise borrowed capital. These are of varying terms and conditions in
respect of interest rate, conversion into shares and return of investment.
Public deposits, for a fixed time period, have become a major source of short and medium term
finance. Organizations may offer higher rates of interest than banking institutions to attract
investors and raise fund. The other sources of short-term finance are overdraft and cash credits,
bill discounting, and bank loan and trade credit.
Along with the mobilization of funds, policy makers should decide on the capital structure to
indicate the desired mix of equity capital and debt capital. There are some norms for debt –
equity ratio. These are aimed at minimizing the risks of excessive loans. For public sector
companies, the norm is 1:1 ratio and for private sector companies the norm is 2:1 ratio. For
capital-intensive industries the proportion of debt to equity is much higher. Similar is the case for
high cost projects in priority sectors, and projects in under developed regions.
Another important dimension of financial policy is investment and fund allocation decisions. A
planner has to frame policies for regulating investments in fixed assets and for restraining of
current assets.
Investment proposals, mooted by different business units, may be divided into three groups as
indicated below:
(i) Proposal for addition of a product,
(ii) Proposal for increasing the level of operation of an existing product through increased
capacity, and
(iii) Proposal for cost reduction and efficiency escalation.
Proposals are then evaluated by making within group comparison in the line of capital
budgeting. Thus, project evaluation and project selection are the two most important jobs of fund
allocation under resource constraints. The concept of Net Present Value and or Internal Rate of
Return can be employed for the purpose of evaluation.
Dividend policy is another important area for making financial policy decision. It deals with the
extent of earnings to be distributed as dividend to shareholders and the extent of earnings to be
retained in the firm for future expansion of activities. From the point of view of long term funding
of business expansion, dividend may be considered as that pan of total earnings, which cannot
be profitably utilized by the firm.
Stability of the dividend payment is a desirable consideration that can have a positive impact on
share price. The policy of paying a constant percentage of net earnings may be preferable from
the point of view of flexibility and ability of the firm. Some companies follow a third alternative.
They pay a minimum dividend per share and additional dividend when earnings are higher than
the normal earnings. In actual practice, reinvestment opportunities and financial needs of the
firm and the shareholders’ preference for dividend income against capital gains resulting out of
share prices are taken into consideration for arriving at the dividend policy. Alternatives like cash
dividend and stock dividend are also examined and an optimum mix is struck out.
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4. Personnel/Human Resource Policy:
Successful implementation of corporate strategy requires a meticulously drawn personnel/
human resource policy. In fact, any weakness in personnel/ human resource policy may weaken
the effectiveness of all the functional policies.
Major policy issues that draw the attention of the personnel planners are the followings:
(i) Recruitment of personnel,
(ii) Promotion and transfer practices,
(iii)Training and development of employees, and (iv) Relationship with the employee unions.
Recruitment policy is one and the most important policy for the organization as a whole. There
are two aspects of recruitment. One deals with the size of the workforce to ensure that the
required size is being met. Quality is the other aspect. Quality of the workers, i.e., the skill and
competence of the workers, need to be closely and thoroughly examined during the phases of
recruitment and training.
According to Yoder (1972), recruitment policy is a two Q policy where Q1 stands for quantity of
recruitment and Q2 stands for qualification of choice. Sources of recruitment vary from external
sources to internal sources. The use of internal sources that is recruitment of persons already
there in the payroll of the company may motivate the employees by offering a brighter future.
This may reduce the employee turnover, minimizing thereby the cost of recruitment and training.
But a complete inbreeding is also not good for the company. Recruitment from external sources
infuses new approaches, new ideas and new culture. As a result, striking a balance between
these two sources is very much needed to enjoy the benefit of both these sources and to
eliminate their respective limitations.
Promotion policy of an organization should be based on both seniority and merit and should
develop the career paths in such a way that employees get motivated to remain in the
organization. Exceptional performers should also be allowed to move up the hierarchical ladder
at a faster rate.
In the context of strategic implementation, which may require structural change, the scopes of
vertical promotion and horizontal transfer need to be very high. Under the leadership
implementation, strategists are matched with strategies. In a similar way, during personnel
policy-making employees are to be matched with both divisional strategies and functional
strategies. A planned transfer can enrich the experiences of the employees and thereby
increase their potentialities.
To bridge the gap between the existing performance level and the expected performance level
and to induce higher skill, efficiency and knowledge, organizations draw plans for training and
development of their employees. While training is a short- term process for increasing skills of
employees with a prefixed purpose, development is a long drawn process through which
employees make systematic improvement by acquiring knowledge and experiences for general
purposes.
The policies on employees’ training and on management development have different objectives.
Training being short-term process can benefit the strategic implementation programmes and
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there can be specific training programmes for specific strategies. But management development
policy works across strategies and strengthens the general capability of the organization.
The union-management relationship is a vital factor that can influence not only the functional
policies but also the business performances. If the bargaining power of the employees’ union
increases the role of the management declines and the company’s internal environment
becomes a politicized one.
It is also not desirable that the management adopts a hostile attitude towards the employees’
union. This results in mutual mistrust, increase in industrial disputes and reduction in efficiency.
The ideal relationship is a straightforward business relationship with the union leaders and all
should act based on maturity, rationality and solidarity.
Other Policies:
Research and development policy and the logistic policy are the two other important policies that
the functional planners should work out during the stage of strategic implementation.
Important issues for R & D are listed below:

(i) What new R & D projects are necessary to facilitate the growth of the company?
(ii) Should we assign some of these projects to outside groups?
(iii)How much money should be spent on R & D activities? Regarding the logistics, crucial
questions are the following:
(i) What should be the categorization of items consumed by the company during its
operation? Should it be based on annual consumption value or technical importance or speed of
movement?
(ii) What should be the ordering policy for the non-critical low cost items? What should be
the ordering policy for the critical high value items? What should be the policy for in-between
items? (iii) What criterion should be followed by the company for vendor selection (iv) What
should be the role of the company in vendor development?
Unit 8: Functional Strategy – In Different Functional Areas: Marketing,

Finance, Operations and Human Resource
1. Functional Strategies in Marketing:
The marketing function plays a significant role of profitably bringing about the sale of
products/services in target markets for the achievement of business’s goals. Functional
strategies in the marketing area should guide this effort in a manner consistent with the basic
strategy and other functional strategies.
Effective marketing strategies guide marketing managers in determining who will sell what,
where, when, to whom, in what quantity, and how. Marketing strategies must therefore entail
four components- products, price, place and promotion.
A marketing functional strategy for the product component should clearly identify the customer
needs the firm seeks to serve with its product and/or service. An effective functional strategy for
this component should guide marketing managers in taking decisions regarding features,
product lines, packaging, accessories, warranty, quality, and new product development.
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This strategy should facilitate a comprehensive statement of the product/service concept and
the target market(s) the firm aims to serve. This, in turn, develops consistency and continuity in
the day-to-day activities of the marketing area.
The functional strategy for the place component clarifies where, when, and by whom the
product/services are to be offered for sale. The main concern here is the channel(s) of
distribution that ensure consistency with the total marketing effort.
The promotion defines the manner in which the firm will communicate with the target market.
Functional strategy for the promotion should provide basic guidelines for the appropriate use
and mix of advertising, personal selling, sales promotion, and media selection. The promotion
effort must be consistent with other marketing strategy components, and closely integrate with
financial strategy
Functional strategy concerning the price component is perhaps the most important consideration
in marketing. The Price functional strategy influences directly the demand and supply,
profitability, consumer perception, and regulatory response. The approach to pricing strategy
may be cost, market, or competition oriented. With the competition oriented approach, pricing
decisions center around those of the firm’s competitors.
While with a cost-oriented approach, pricing decisions center on total cost and usually involve
an acceptable markup or target price ranges. Pricing is based on consumer demand when the
approach is market oriented. While one approach may predominate in a firm’s pricing strategy,
the strategy is always influenced to some degree by the other orientations also.
2. Functional Strategies in Finance:
While most operating strategies guide implementation in the immediate future, for financial
functional strategies the time frame varies because strategies in this area direct the use of
financial resources in support of the business strategy, long-term goals, and annual objectives.
Financial operating strategies with longer time horizon provide guidelines to financial managers
in long-term capital investment, use of debt financing, dividend allocation, and the firm’s
leveraging posture. Operating strategies designed to manage working capital and short-term
assets have a more immediate focus.
Long-term financial strategies usually guide capital acquisition in the sense that priorities change
infrequently over time. The desired level of debt versus equity versus internal long-term
financing of business activities is a common issue in capital acquisition strategy.
Another financial strategy of major importance is capital allocation. Growth- oriented grand
strategies generally require numerous major investments in facilities, projects, acquisitions,
and /or people. These investments cannot generally be made immediately, nor are they desired
to be. Rather, a capital allocation strategy sets priorities and timing for these investments. This
also helps manage conflicting priorities among operating managers competing for capital
resources.
Stability or retrenchment generic strategy often requires a financial strategy that focuses on the
reallocation of existing capital resources. This may require pruning product lines, production
36
facilities, or personnel to be reallocated elsewhere in the firm. The overlapping careers and
aspirations of key operating managers develop an emotional setting.
3. Functional Strategies in Operations:
Operations management is the core function in the business firm. It is the process of converting
inputs into value-added output. This function is most easily associated with manufacturing firms.
However, it applies equally to all other types of businesses including service and retail firms.
Operations functional strategies must guide decisions concerning the basic nature of the firm’s
operations system, seeking an optimum balance between investment input and operations,
output and location, facilities design and process planning on a short-term basis.
The facilities and equipment component of operations strategy involves decisions regarding
plant location, size, equipment replacement, and facilities utilization that should be consistent
with grand strategy and other operating strategies.
The purchasing function is another area to be addressed in the operations functional strategy
that answer questions relating to the number of suppliers, the criteria to be used in selecting
vendors, the purchases made in terms of volume and delivery requirements to support
operations. If such answers are critical to the success of a grand strategy, functional strategy
guidelines improve implementation.
Operations functional strategies provide guidelines for ongoing operations and encourage
efficient organization of operational resources to match long-range overall demand. Often this
component dictates whether operations will be demand oriented, inventory oriented, or
subcontracting oriented.
If demand is cyclical or seasonal, the operations strategy must ensure that operations processes
are efficiently geared to this pattern. If demand is less cyclical, a firm might emphasize
producing to inventory, desiring a steady level of production and inventories. When demand
fluctuations are less predictable, many firms subcontract to handle sudden variations in demand
while avoiding idle capacity and excess capital investment.
Thus an operations strategy should guide in decisions relating to the appropriate inventory level,
purchasing procedure, and level of quality control, trade-off in emphasizing cost versus quality in
operations, the critical level of productivity, the production schedule and the criteria followed in
adding or deleting equipment, facilities, shifts, and people.
Operations functional strategies must be coordinated with marketing strategy if the firm is to
succeed. Careful integration with financial strategy components such as capital budgeting and
investment decisions and the personnel function are also necessary.
4. Functional Strategies in Human Resource:
Organizations have responded with different strategic measures to adapt to the changing
external environment. Now it is widely accepted that integration of HR strategy with business
strategy is significant for organizational success. HR strategy that is embedded in business
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strategy of the organization not only serves to achieve the organizational objectives but also
grows up as a key resource for competitive advantage.
Fundamental changes in the business environment have created a sudden shift in focus of HR
function.
These changes include:

a. Rapid rate of business change resulting high uncertainty
b. Raising costs, increasing competitive pressures and margins
c. Rapid technological change: increasing demands for new skills through re-sourcing,
education and retraining
d. Flatter, leaner and more flexible organizations
e. Changing demographics, limited labor availability
f. Responding to external forces: legislation and regulation, litigation, union relations and union
avoidance etc.
g. Increasing multinational competition and collaboration, multilateral relationship
LESSON 3 The Formulation of Strategy
Overview:
A strategic plan is a living document that changes and grows as the conditions around it change.
If an organization recognizes that it must constantly be aware of the business world around it
and must be flexible to the changes that will inevitably occur, then it will be in a position to adapt
and modify its plans to achieve maximum success.

1. Understand the concept of formulation of strategy.
2. Know the different steps to maximize profitability of a Corporation
3. Analyze the contribution of the Human Resource Department on the area of profitability
through the strategies that it takes.
Course Materials:
Unit 1: Strategy formulation – General Principles
Strategy formulation is the process by which an organization chooses the most appropriate
courses of action to achieve its defined goals. This process is essential to an organization’s
success because it provides a framework for the actions that will lead to the anticipated results.
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Strategic plans should be communicated to all employees so that they are aware of the
organization’s objectives, mission, and purpose. Strategy formulation forces an organization to
carefully look at the changing environment and to be prepared for the possible changes that
may occur. A strategic plan also enables an organization to evaluate its resources, allocate
budgets, and determine the most effective plan for maximizing ROI (return on investment). A
company that has not taken the time to develop a strategic plan will not be able to provide its
employees with direction or focus. Rather than being proactive in the face of business
conditions, an organization that does not have a set strategy will find that it is being reactive; the
organization will be addressing unanticipated pressures as they arise; and the organization will
be at a competitive disadvantage.
The process of Strategy Evaluation consists of following steps-
1. Fixing benchmark of performance - While fixing the benchmark, strategists encounter

questions such as - what benchmarks to set, how to set them and how to express them. In order
to determine the benchmark performance to be set, it is essential to discover the special
requirements for performing the main task. The performance indicator that best identify and
express the special requirements might then be determined to be used for evaluation. The
organization can use both quantitative and qualitative criteria for comprehensive assessment of
performance. Quantitative criteria include determination of net profit, ROI, earning per share,
cost of production, rate of employee turnover etc. Among the Qualitative factors are subjective
evaluation of factors such as - skills and competencies, risk taking potential, flexibility etc.
2. Measurement of performance - The standard performance is a bench mark with which

the actual performance is to be compared. The reporting and communication system help in
measuring the performance. If appropriate means are available for measuring the performance
and if the standards are set in the right manner, strategy evaluation becomes easier. But
various factors such as manager’s contribution are difficult to measure. Similarly, divisional
performance is sometimes difficult to measure as compared to individual performance. Thus,
variable objectives must be created against which measurement of performance can be done.
The measurement must be done at right time else evaluation will not meet its purpose. For
measuring the performance, financial statements like - balance sheet, profit and loss account
must be prepared on an annual basis.
3. Analyzing Variance - While measuring the actual performance and comparing it with
standard performance there may be variances which must be analyzed. The strategists must
mention the degree of tolerance limits between which the variance between actual and standard
performance may be accepted. The positive deviation indicates a better performance but it is
quite unusual exceeding the target always. The negative deviation is an issue of concern
because it indicates a shortfall in performance. Thus in this case the strategists must discover
the causes of deviation and must take corrective action to overcome it.
4. Taking Corrective Action - Once the deviation in performance is identified, it is essential

to plan for a corrective action. If the performance is consistently less than the desired
performance, the strategists must carry a detailed analysis of the factors responsible for such
performance. If the strategists discover that the organizational potential does not match with the
performance requirements, then the standards must be lowered. Another rare and drastic
corrective action is reformulating the strategy which requires going back to the process of
39
strategic management, reframing of plans according to new resource allocation trend and
consequent means going to the beginning point of strategic management process.
Unit 2: Strategy formulation – Steps and Factors to Consider
Strategy formulation requires a defined set of six steps for effective implementation. Those steps
are:
1. define the organization,
2. define the strategic mission,
3. define the strategic objectives,
4. define the competitive strategy, 5. implement strategies, and
6. evaluate progress.
In this reading, we will explore each of the six steps for strategy formulation.
Step 1. Define the Organization
The first step in defining an organization is to identify the company’s customers. Without a
strong customer base, whose needs are being filled, an organization will not be successful. A
company must identify the factors that are valued by its customers. Is the value based on a
superior product or service relative to the competition? Are your customers buying your products
for your low prices? Do you produce products that meet image needs of your customers?
Let’s review some of the ways in which companies can define themselves. End Benefit
Organizations must remember that people are buying benefits not features.
For example, if an airline only defined itself as being in the business of flying people from one
place to another, then it would view its competition as being only other airlines. However, if it
views itself as being in the transportation business, then it will recognize that its competition
includes not only other airlines, but also trains, buses, car rental companies, and other ways of
getting people from one place to another place. An airline must highlight the benefits of using its
method of transportation as a means of persuading customers to purchase its service.
Furthermore, an organization can explain how its product works or how it is built. Inevitably,
customers will ask the question, “What’s in it for me?” Companies must be able to answer this
question in order to meet the needs of their customers. They must be able to respond effectively
to the “so what?” in order to influence customers to buy their product or service.
Target Market Companies can become successful by identifying themselves with a particular
target group. This focus should not be limited only to demographic segmentation (i.e., age,
income, education, gender, income, family life-cycle, culture) but also by psychographic
indicators. For example, by understanding the values, attitudes, opinions, and lifestyles of a
company’s customers, the organization can better provide ways in which to meet its customers’
needs. For example, Nike has successfully identified itself not only with professional athletes,
but with those who want to be part of the athlete world. Nike’s marketing message has made
everyone who wishes to participate in sports feel as if they can achieve their athletic goals.
While most people who purchase Nike products are not professional athletes, the people who
buy Nike’s products are able to identify with Nike’s culture and feel like they are part of an
exclusive group. Technology Computer companies, medical research companies, and other
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companies that identify themselves with the tech world will find that they must be able to quickly
adapt to changes in the marketplace. New products, services, and inventions are frequently
introduced, making this a very difficult and challenging business environment in which to
operate. For example, Genentech, Inc. conducts genetic engineering and medical research for
the pharmaceutical industry. This company uncovers and discovers new advances every day,
making it challenging to develop a specific strategy plan for its products and services. However,
by defining the company as being in the biotech industry, it can develop a strategy for its overall
corporate goals.
Step 2. Define the Strategic Mission. An organization’s strategic mission offers a long-range
perspective of what the organization strives for going forward. A clearly stated mission will
provide the organization with a guide for carrying out its plans. Elements of a strong strategic
mission statement should include the values that the organization holds, the nature of the
business, special abilities or position the organization holds in the marketplace, and the
organization’s vision for where it wants to be in the future.
Step 3. Define the Strategic Objectives This third step in the strategic formulation process
requires an organization to identify the performance targets needed to reach clearly stated
objectives. These objectives may include: market position relative to the competition, production
of goods and services, desired market share, improved customer services, corporation
expansion, advances in technology, and sales increases. Strategic objectives must be
communicated with all employees and stakeholders in order to ensure success. All members of
the organization must be made aware of their role in the process and how their efforts contribute
to meeting the organization’s objectives. Additionally, members of the organization should have
their own set of objectives and performance targets for their individual roles.
Step 4. Define the Competitive Strategy. The next step in strategy formulation requires an
organization to determine where it fits into the marketplace. This applies not only to the
organization as a whole, but to each individual unit and department throughout the enterprise.
Each area must be aware of its role within the company and how those roles enable the
organization to maintain its competitive position. Another step in the competitive strategy
process requires an organization to develop proactive responses to potential changes in the
marketplace. As discussed in earlier readings, an organization must not wait for events in the
marketplace to occur before taking steps; they must identify possible events and be prepared to
take action. The final step in defining a competitive strategy is identifying an organization’s
resources and determining how those resources will be used. Each department, division, or
location will have its own set of needs, and a company must determine how it will allocate
resources in order to meet those needs.
Three factors must be considered when determining the overall competitive strategy: the
industry and market place, the company’s position relative to the competition, and the
company’s internal strengths and weaknesses.
1. The Industry.
When evaluating the overall industry, factors to be looked at include:•size of the market,•past
and potential market growth,•competitive profitability,•new market entries, and•industry threats.
These market factors must be evaluated on a regular basis, as small changes may have a large
41
impact on an organization’s business activities. For example, if an organization becomes aware
of new technology that is on the verge of being introduced into the marketplace, then it can
avoid making any new plans that would involve the older, existing technology available. Also, if
an organization is considering global expansion, then it would be beneficial to be aware of
emerging markets, other areas of potential growth, and what other companies have already
entered in those markets.
2. The Competition.
An organization cannot be successful unless it has a full understanding of the other players in
marketplace. A company must be able to identify the strengths and weaknesses of the
competition and analyze the ways in which the competition’s products or services meet the
needs of its customer base. Has the competition created a significant product differentiation
strategy? Has the competition cornered a specific target market? Is the competition in full-scale
competition with another company? It is essential for these questions to be answered in order to
develop the appropriate strategy for successful competition. As mentioned earlier, we discussed
how competition for an airline is not only other airlines, but also other modes of transportation.
Evaluating competition requires a company to look at organizations that provide substitutes for
its product or service as well as those who provide the same products and services.
3. Strengths & Weaknesses. Let’s go back to the traditional, well-known marketing tool of the
SWOT analysis. As you may recall, SWOT is an acronym for Strengths, Weaknesses,
Opportunities, and Threats. Opportunities and threats are external factors; strengths and
weaknesses are internal factors. When developing a competitive strategy, it is vital for an
organization to be fully aware of its internal strengths and how those strengths relate to the
competition. These strengths should be maximized and leveraged to the company’s advantage
as well as highlighted in all business and marketing activities that the company undertakes. It is
equally important for an organization to take an honest look at its areas of weakness. This is
where a company can become vulnerable to outside market conditions, such as competitive
gains, advances in technology, economic shifts, and other factors. By identifying areas in need
of improvement and taking steps to remedy those areas, a company will be in a stronger
competitive position.
Step 5. Implement Strategies.
Developing a strategy is only effective if it is put into place. An organization may take all the
necessary steps to understand the marketplace, define itself, and identify the competition.
However, without implementing the strategy, the organization’s work will be of little to no value.
The methods employed for implementing strategies are known as tactics. These individual
actions enable an organization to build a foundation for implementation. Companies are able to
identify which of their efforts are more successful than others and will uncover new methods of
implementation, if necessary.
Step 6. Evaluate Progress.
As in any plan, a regular evaluation of processes and results is vital to ongoing success. An
organization must keep track of the progress it is making as defined by its strategic plan. If goals
42
are not being met, the organization must be adaptable and flexible to recognize that changes
may be needed.
An organization should consider the following questions on a continuous basis in order to

evaluate progress: Have market conditions changed that may require a change in corporate
direction? Are there new entries in the marketplace to pose a competitive threat? Has the
organization been successful in translating their strategy into actionable steps? An organization
will be able to successfully implement its strategy both now and in the future through evaluating
feedback.
Summary:
•Strategy formulation is the course of action companies take to achieve their defined goals.
•All employees of an organization should be aware of the company’s objectives, mission, and
purpose.
•A strategic plan enables a company to evaluate resources, allocate budgets, and maximize
ROI (return on investment).
•The lack of a strategic plan will result in an organization being without direction or focus. The
company will be reactive rather than proactive.
•The six steps for strategy formulation are: define the organization, define the strategic mission,
define the strategic objectives, define the competitive strategy, implement strategies and
evaluate progress.
•Defining the organization requires a company to identify its customers by end benefits sought,
by specific target markets, or by technology.
•Defining the strategic mission ensures that the company is able to identify its values, the nature
of its business, its competitive advantage, and its vision for the future.
•Strategic objectives should be defined based on performance targets and may include
increases in market share, customer service improvements, corporate expansion, sales
increases, production methods, etc.
•Competitive strategy includes an evaluation of the overall industry and marketplace, the nature
of the competition’s position, and the company’s internal strengths and weaknesses.
•A company must implement its strategic plan in order to achieve success. It must develop
appropriate tactics, which are the action steps for meeting the strategies directives.
b•Strategies must be evaluated and revised on a regular basis in order to meet the changing
needs and challenges of the marketplace and business environment
Strategy Evaluation is as significant as strategy formulation because it throws light on the

efficiency and effectiveness of the comprehensive plans in achieving the desired results. The
managers can also assess the appropriateness of the current strategy in today’s dynamic world
with socio-economic, political and technological innovations. Strategic Evaluation is the final
phase of strategic management.
The significance of strategy evaluation lies in its capacity to co-ordinate the task performed by
managers, groups, departments etc., through control of performance. Strategic Evaluation is
significant because of various factors such as - developing inputs for new strategic planning, the
urge for feedback, appraisal and reward, development of the strategic management process,
judging the validity of strategic choice etc.
43
• Class Discussion
• Based on the activity from the previous lesson, prepare a strategic plan for your business.
Explain each strategy and the reason for choosing the same.
References:
• https://resources.saylor.org/wwwresources/archived/site/wpcontent/uploads/2013/09/
Saylor.orgs-Strategy-Formulation.pdf
• https://www.managementstudyguide.com/strategy-implementation.htm
6th Edition
Mc Graw Hill
LESSON 4 The Implementation of Strategy
Overview:
This unit will discuss the various classification of Obligations and their nature. Each type of
Obligation has its special quality which may have a different effect compared to the others.

1. Know the different classification of Obligation.
2. Understand the nature of each class and how it affects the obligation of individuals.
3. Analyze the applicability of the concepts to the day to day activities in order to avoid
unnecessary liability.
Course Materials:
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Unit 1: Strategy Implementation – General Principles
Strategy implementation is the translation of chosen strategy into organizational action so as to

achieve strategic goals and objectives. Strategy implementation is also defined as the manner in
which an organization should develop, utilize, and amalgamate organizational structure, control
systems, and culture to follow strategies that lead to competitive advantage and a better
performance. Organizational structure allocates special value developing tasks and roles to the
employees and states how these tasks and roles can be correlated so as maximize efficiency,
quality, and customer satisfaction-the pillars of competitive advantage. But, organizational
structure is not sufficient in itself to motivate the employees.
An organizational control system is also required. This control system equips managers with
motivational incentives for employees as well as feedback on employees and organizational
performance. Organizational culture refers to the specialized collection of values, attitudes,
norms and beliefs shared by organizational members and groups.
Unit 2: Strategy Implementation – Main Steps
Following are the main steps in implementing a strategy:

1. Developing an organization having potential of carrying out strategy successfully.
2. Disbursement of abundant resources to strategy-essential activities.
3. Creating strategy-encouraging policies.
4. Employing best policies and programs for constant improvement.
5. Linking reward structure to accomplishment of results.
6. Making use of strategic leadership.
Excellently formulated strategies will fail if they are not properly implemented. Also, it is essential
to note that strategy implementation is not possible unless there is stability between strategy
and each organizational dimension such as organizational structure, reward structure, resource-
allocation process, etc.
Strategy implementation poses a threat to many managers and employees in an organization.
New power relationships are predicted and achieved. New groups (formal as well as informal)
are formed whose values, attitudes, beliefs and concerns may not be known. With the change in
power and status roles, the managers and employees may employ confrontation behaviour.
Strategy Formulation vs. Strategy Implementation

Following are the main differences between Strategy Formulation and Strategy Implementation-
Strategy Formulation Strategy Implementation
Strategy Formulation includes planning and Strategy Implementation involves all those
decision-making involved in developing means related to executing the strategic plans.
organization’s strategic goals and plans.
In short, Strategy Formulation is placing the In short, Strategy Implementation is managing

Forces before the action. forces during the action.
Strategy Formulation is an Entrepreneurial Strategic Implementation is mainly an

45
Activity based on strategic decision-making. Administrative Task based on strategic and
operational decisions.
Strategy Formulation emphasizes on Strategy Implementation emphasizes on

effectiveness. efficiency.
Strategy Formulation is a rational process. Strategy Implementation is basically an

operational process.
Strategy Formulation requires co-ordination Strategy Implementation requires co-ordination

among few individuals. among many individuals.
Strategy Formulation requires a great deal of Strategy Implementation requires specific

initiative and logical skills. motivational and leadership traits.
Strategic Formulation precedes Strategy Strategy Implementation follows Strategy

Implementation. Formulation.
• Long Quiz/Class Discussion
References:
https://www.managementstudyguide.com/strategy-implementation.htm
LESSON 5 Competitive Advantage
Overview:
Strategy is an ambiguous term. Johnson and Scholes define strategy as the direction and scope
of organizations over the long-term within a challenging environment whereby through the
configuration of resources the needs of the markets are met and the stakeholders’ expectations
are fulfilled in order to achieve an advantage. Nonetheless, strategy is applied unique to each
levels of the organizations such as corporate, business unit and operational. Currently, the term
‘strategy’ is associated with every function of the organizations that purports on turning
strategies into actions as a key to achieve cost and competitive advantages. Notable is the
Strategic Human Resource Management (or simply SHRM).
46
1. Know the
2. Understand the
3. Analyze
Course Materials:
What is SHRM?
The interest of numerous organizations in ‘strategic management’ resulted in the integration of
organizational functions into strategic management processes. Human Resource Management
(HRM) field likewise sought to integrate this strategic management schema through the
development of a new discipline known as SHRM. As an outgrowth of its mother discipline,
theorists and practitioners regarded SHRM as the reconciliation of HR practices and its
determinants from a strategic context. However, the deficiency is that there is no strong
theoretical model for HR determinants & the nonexistence of clear delineation of SHRM w/
HRM.
How SHRM can contribute in achieving competitive advantage
Nonetheless, despite universalistic, contingency or configurational approaches, SHRM is an

important element of achieving the competitive edge in terms of quality, cost and flexibility.
Either processual or systemic, SHRM puts human at the center. When we say ‘human’, it does
not necessarily mean the employees, but embracing also those people whom the organizations
does business with. Through them, sustainable competitive advantage, or the achievement of
value-creating strategies that direct and indirect rivals could not implement, could be achieved.
From a resource-based perspective, there are various categories of resources that SHRM can
build upon to gain the so-called advantage such as physical, organizationsal, financial, and
technological and most especially human resources. As assets, the mere existence of human is
not sufficient but the relationship among them that therefore must be controlled for the purpose
of long-term commercial success. The sustainable competitive advantage potential of human
resources is central on the premises that human resources are valuable, rare, inimitable and
non-substitutable.
As valuable resources, human resources are heterogeneous since organizations require

different jobs which require different skills as well as differing in types and level of idiosyncratic
skills. As such, the variance placed on the contribution of individuals to the organizations means
to provide value at diverse degrees. The rarity of high quality and ability workers is due to their
skills and competency levels and the supposedly normal distribution of skills, competencies,
expertise and capabilities. For the human asset to be imitated, competitors should be able to
identify the exact source of such and duplicate exactly the elements of the human capital. In
addition, human resources should not be imperfectly mobile so that they cannot be traded.
Lastly, for the human resources to be able to provide sustainable competitive advantage, they
must not be substitutable. Achieving competitive advantage is based on the collective practices
within that are intended for the outside environment which otherwise cannot be achieved or
limited through HRM alone. These are employment security, recruitment selectivity, high
wages, incentive pay, employee ownership, information sharing, participation and
empowerment, self-managed teams, training and skills development, cross-utilization and cross-
47
training symbolic egalitarianism, wage compression and promotion from within. The emphasis is
on envisioning individual workers as sources of competitive advantage instead of
complementary or limiting factor of the organizational success.
Competitive advantage is also realized when the organizations through SHRM is continuously
investing on its reputation or image stressing the need for sound human resource policies and
practices and aligning such with the business strategies and its external context. The focus is
both on cost and quality whereby there are definite processes, systems and procedures that
consolidates competencies, continuous education, proficient performance at individual and
collegial levels and balance monetary and non-monetary reward systems.
Apart from this, the materialization of the competitive advantage is delivered by investing on
diversity and maximizing their potential through SHRM. The things to consider are
retention/turnover and motivation, morale and productivity, innovation, creativity and
problemsolving, teamworking, ensuring synergy at all levels and avoidance of legal suits. It is
also through SHRM that the creation of an inclusive workforce is plausible since there are
structured opportunities for sharing and self-disclosure, increased understanding of the cultural
diversity, demonstrated flexibility for varying needs and preferences, demonstrated unwritten
rules and mutually-satisfying conflict resolution systems.
HRM that are too centered on human as an integral asset while neglecting the key factor of
nurturing relationships with them and between them makes HRM a shallow endeavor though it
is not to say that HRM is futile. With HRM, relationships stagnate whereas with SHRM
relationships are optimized and translated into loyalty, engagement, trust and confidence among
others. SHRM, unlike HRM which is confined as a mere organizationsal function, is tended on
‘above and beyond’ behaviours. Though HRM is in charge of relationship with employees at the
business level, SHRM is responsible for the total stakeholder relationship strategy.
To have the potential of sustained competitive advantage, the resource-based view proposes
that a firm must have four attributes:
(1) valuable resources;
(2) rare resources;
(3) imperfectly imitable resources; and
(4) Non substitutability of resources (Barney, 1991; Collis & Montgomery, 1995; Conner &
Prahalad, 1996).
LESSON 6 Strategy and Diversification
Overview:
There are just as many companies (if not more) that took a while to discover their purpose, and
diversified again and again until they found out what that purpose was. These are your Nokias
(which originally sold paper products), your Avons (which originally sold books), and your
Hasbros (which originally sold textile remnants).
So the somewhat longer (and somewhat more frustrating) answer goes something like this:
diversification may not be necessary, but it may also save your business.
48

1. Know the basic details about contract.
2. Understand how contracts affect the lives of people.
3. Analyze how all these concepts could be used in a practical manner in order to avoid legal
liability.
Course Materials:
Diversification can be understood as the corporate strategy that a company implements to

increase the market share and sales volume by introducing new products in new markets or
industry, which is distinct from its core business.
Types of Diversification
1. Vertically Integrated Diversification: The form of diversification in which the firm intends to
enter in the business which is associated with the firm’s present business. In this way, the
firm stays in the same business and moves ahead or reverse in the chain and introduces
new product so as to enter the new business for the firm.
2. Forward Integration: It is a kind of vertically integrated diversification, wherein the firm
decides to move ahead in the value chain that is directly related to the firm’s existing
business, so as to ease the distribution process.
3. Backward Integration: In this type of integration, the firm opts to move backwards in the
value chain so as to create an effective supply of the goods by expanding the business and
entering the business of suppliers.
4. Horizontally Integrated Diversification: In horizontal diversification, the firm acquires one or
more than one businesses that are engaged in the similar business and at the equivalent
49
level of production-marketing chain to enter into complementary goods, or taking over
competitor’s products.
5. Related Diversification: When the new business has some sort of connection with the
existing business then it is known as related diversification. It includes the exchange of
business assets by exploiting marketing skills, manufacturing skills — economies of scale,
brand name, research and development, etc. Example: A cloth manufacturing firm enters
into the distribution of clothes.
6. Unrelated Diversification: When the new business has no relation to the value chain
activities of the company. It includes investing in new product portfolios, concentrate on
multiple products, minimization of risk by operating in various product markets,
implementation of new technologies. Example: An FMCG company enters into the textile
industry.
7. Concentric Diversification: It is similar to related diversification, wherein the new business
entered into by the firm is associated with the existing business by way of process,
technology or market. The newly entered product is a spin-off from the already existing
facilities. Hence, there are advantages of synergy with the existing operations.
8. Conglomerate Diversification: The conglomerate diversification is similar to unrelated
diversification, there is no relationship between the new business or product and the existing
business or product in any way.
Firm’s use diversification strategy to reduce risk, use surplus cash, build corporate brand equity,
increase customer base, exploit new opportunities, effective capital utilization, build
shareholder’s wealth, access to the new market, etc.
• Class Discussion
• Exercise
References:
• https://businessjargons.com/diversification.html
LESSON 7 Management of Change
Overview:
There are just as many companies (if not more) that took a while to discover their purpose, and
diversified again and again until they found out what that purpose was. These are your Nokias
50
(which originally sold paper products), your Avons (which originally sold books), and your
Hasbros (which originally sold textile remnants).
So the somewhat longer (and somewhat more frustrating) answer goes something like this:
diversification may not be necessary, but it may also save your business.

1. Know the basic details about management of change.
2. Understand how these changes could be considered as a great opportunity to improve the
performance of the business.
3. Analyze how best practice can be done during the changes.
Course Materials:
Management of Change (MOC) is a best practice used to ensure that safety, health, and
environmental risks and hazards are properly controlled when an organization makes changes
to their facilities, operations, or personnel.
No single methodology fits every company, but there is a set of practices, tools, and techniques
that can be adapted to a variety of situations. What follows is a “Top 10” list of guiding principles
for change management. Using these as a systematic, comprehensive framework, executives
can understand what to expect, how to manage their own personal change, and how to engage
the entire organization in the process.
1. Address the “human side” systematically. Any significant transformation creates “people
issues.” New leaders will be asked to step up, jobs will be changed, new skills and capabilities
must be developed, and employees will be uncertain and resistant. Dealing with these issues on
a reactive, case-by-case basis puts speed, morale, and results at risk. A formal approach for
managing change — beginning with the leadership team and then engaging key stakeholders
and leaders — should be developed early, and adapted often as change moves through the
organization. This demands as much data collection and analysis, planning, and implementation
discipline as does a redesign of strategy, systems, or processes. The change-management
approach should be fully integrated into program design and decision making, both informing
and enabling strategic direction. It should be based on a realistic assessment of the
organization’s history, readiness, and capacity to change.
2. Start at the top. Because change is inherently unsettling for people at all levels of an
organization, when it is on the horizon, all eyes will turn to the CEO and the leadership team for
strength, support, and direction. The leaders themselves must embrace the new approaches
first, both to challenge and to motivate the rest of the institution. They must speak with one
voice and model the desired behaviors. The executive team also needs to understand that,
although its public face may be one of unity, it, too, is composed of individuals who are going
through stressful times and need to be supported.
Executive teams that work well together are best positioned for success. They are aligned and
committed to the direction of change, understand the culture and behaviors the changes intend
to introduce, and can model those changes themselves. At one large transportation company,
51
the senior team rolled out an initiative to improve the efficiency and performance of its corporate
and field staff before addressing change issues at the officer level. The initiative realized initial
cost savings but stalled as employees began to question the leadership team’s vision and
commitment. Only after the leadership team went through the process of aligning and
committing to the change initiative was the work force able to deliver downstream results.
3. Involve every layer. As transformation programs progress from defining strategy and
setting targets to design and implementation, they affect different levels of the organization.
Change efforts must include plans for identifying leaders throughout the company and pushing
responsibility for design and implementation down, so that change “cascades” through the
organization. At each layer of the organization, the leaders who are identified and trained must
be aligned to the company’s vision, equipped to execute their specific mission, and motivated to
make change happen.
A major multiline insurer with consistently flat earnings decided to change performance and
behavior in preparation for going public. The company followed this “cascading leadership”
methodology, training and supporting teams at each stage. First, 10 officers set the strategy,
vision, and targets. Next, more than 60 senior executives and managers designed the core of
the change initiative. Then 500 leaders from the field drove implementation. The structure
remained in place throughout the change program, which doubled the company’s earnings far
ahead of schedule. This approach is also a superb way for a company to identify its next
generation of leadership.
4. Make the formal case. Individuals are inherently rational and will question to what extent
change is needed, whether the company is headed in the right direction, and whether they want
to commit personally to making change happen. They will look to the leadership for answers.
The articulation of a formal case for change and the creation of a written vision statement are
invaluable opportunities to create or compel leadership-team alignment.
Three steps should be followed in developing the case: First, confront reality and articulate a
convincing need for change. Second, demonstrate faith that the company has a viable future
and the leadership to get there. Finally, provide a road map to guide behavior and decision
making. Leaders must then customize this message for various internal audiences, describing
the pending change in terms that matter to the individuals.
A consumer packaged-goods company experiencing years of steadily declining earnings

determined that it needed to significantly restructure its operations — instituting, among other
things, a 30 percent work force reduction — to remain competitive. In a series of offsite
meetings, the executive team built a brutally honest business case that downsizing was the only
way to keep the business viable, and drew on the company’s proud heritage to craft a
compelling vision to lead the company forward. By confronting reality and helping employees
understand the necessity for change, leaders were able to motivate the organization to follow
the new direction in the midst of the largest downsizing in the company’s history. Instead of
being shell-shocked and demoralized, those who stayed felt a renewed resolve to help the
enterprise advance.
5. Create ownership. Leaders of large change programs must overperform during the
transformation and be the zealots who create a critical mass among the work force in favor of
change. This requires more than mere buy-in or passive agreement that the direction of change
is acceptable. It demands ownership by leaders willing to accept responsibility for making
52
change happen in all of the areas they influence or control. Ownership is often best created by
involving people in identifying problems and crafting solutions. It is reinforced by incentives and
rewards. These can be tangible (for example, financial compensation) or psychological (for
example, camaraderie and a sense of shared destiny).
At a large health-care organization that was moving to a shared-services model for

administrative support, the first department to create detailed designs for the new organization
was human resources. Its personnel worked with advisors in cross-functional teams for more
than six months. But as the designs were being finalized, top departmental executives began to
resist the move to implementation. While agreeing that the work was top-notch, the executives
realized they hadn’t invested enough individual time in the design process to feel the ownership
required to begin implementation. On the basis of their feedback, the process was modified to
include a “deep dive.” The departmental executives worked with the design teams to learn more,
and get further exposure to changes that would occur. This was the turning point; the transition
then happened quickly. It also created a forum for top executives to work as a team, creating a
sense of alignment and unity that the group hadn’t felt before.
6. Communicate the message. Too often, change leaders make the mistake of believing
that others understand the issues, feel the need to change, and see the new direction as clearly
as they do. The best change programs reinforce core messages through regular, timely advice
that is both inspirational and practicable. Communications flow in from the bottom and out from
the top, and are targeted to provide employees the right information at the right time and to
solicit their input and feedback. Often this will require overcommunication through multiple,
redundant channels.
In the late 1990s, the commissioner of the Internal Revenue Service, Charles O. Rossotti, had a
vision: The IRS could treat taxpayers as customers and turn a feared bureaucracy into a
worldclass service organization. Getting more than 100,000 employees to think and act
differently required more than just systems redesign and process change. IRS leadership
designed and executed an ambitious communications program including daily voice mails from
the commissioner and his top staff, training sessions, videotapes, newsletters, and town hall
meetings that continued through the transformation. Timely, constant, practical communication
was at the heart of the program, which brought the IRS’s customer ratings from the lowest in
various surveys to its current ranking above the likes of McDonald’s and most airlines.
7. Assess the cultural landscape. Successful change programs pick up speed and intensity
as they cascade down, making it critically important that leaders understand and account for
culture and behaviors at each level of the organization. Companies often make the mistake of
assessing culture either too late or not at all. Thorough cultural diagnostics can assess
organizational readiness to change, bring major problems to the surface, identify conflicts, and
define factors that can recognize and influence sources of leadership and resistance. These
diagnostics identify the core values, beliefs, behaviors, and perceptions that must be taken into
account for successful change to occur. They serve as the common baseline for designing
essential change elements, such as the new corporate vision, and building the infrastructure
and programs needed to drive change.
8. Address culture explicitly. Once the culture is understood, it should be addressed as

thoroughly as any other area in a change program. Leaders should be explicit about the culture
and underlying behaviors that will best support the new way of doing business, and find
53
opportunities to model and reward those behaviors. This requires developing a baseline,
defining an explicit end-state or desired culture, and devising detailed plans to make the
transition.
Company culture is an amalgam of shared history, explicit values and beliefs, and common
attitudes and behaviors. Change programs can involve creating a culture (in new companies or
those built through multiple acquisitions), combining cultures (in mergers or acquisitions of large
companies), or reinforcing cultures (in, say, long-established consumer goods or manufacturing
companies). Understanding that all companies have a cultural center — the locus of thought,
activity, influence, or personal identification — is often an effective way to jump-start culture
change.
A consumer goods company with a suite of premium brands determined that business realities
demanded a greater focus on profitability and bottom-line accountability. In addition to
redesigning metrics and incentives, it developed a plan to systematically change the company’s
culture, beginning with marketing, the company’s historical center. It brought the marketing staff
into the process early to create enthusiasts for the new philosophy who adapted marketing
campaigns, spending plans, and incentive programs to be more accountable. Seeing these
culture leaders grab onto the new program, the rest of the company quickly fell in line.
9. Prepare for the unexpected. No change program goes completely according to plan. People
react in unexpected ways; areas of anticipated resistance fall away; and the external
environment shifts. Effectively managing change requires continual reassessment of its impact
and the organization’s willingness and ability to adopt the next wave of transformation. Fed by
real data from the field and supported by information and solid decision-making processes,
change leaders can then make the adjustments necessary to maintain momentum and drive
results.
A leading U.S. health-care company was facing competitive and financial pressures from its
inability to react to changes in the marketplace. A diagnosis revealed shortcomings in its
organizational structure and governance, and the company decided to implement a new
operating model. In the midst of detailed design, a new CEO and leadership team took over.
The new team was initially skeptical, but was ultimately convinced that a solid case for change,
grounded in facts and supported by the organization at large, existed. Some adjustments were
made to the speed and sequence of implementation, but the fundamentals of the new operating
model remained unchanged.
10. Speak to the individual. Change is both an institutional journey and a very personal one.
People spend many hours each week at work; many think of their colleagues as a second
family. Individuals (or teams of individuals) need to know how their work will change, what is
expected of them during and after the change program, how they will be measured, and what
success or failure will mean for them and those around them. Team leaders should be as
honest and explicit as possible. People will react to what they see and hear around them, and
need to be involved in the change process. Highly visible rewards, such as promotion,
recognition, and bonuses, should be provided as dramatic reinforcement for embracing change.
Sanction or removal of people standing in the way of change will reinforce the institution’s
commitment.
54
Most leaders contemplating change know that people matter. It is all too tempting, however, to
dwell on the plans and processes, which don’t talk back and don’t respond emotionally, rather
than face up to the more difficult and more critical human issues. But mastering the “soft” side of
change management needn’t be a mystery.
55
8 Essential Steps for an Effective Change Management Process
Your organization is constantly experiencing change. Whether caused by new technology
implementations, process updates, compliance initiatives, reorganization, or customer service
56
improvements, change is constant and necessary for growth and profitability. A consistent
change management process will aid in minimizing the impact it has on your organization and
staff.
Below you will find 8 essential steps to ensure your change initiative is successful.
1. Identify What Will Be Improved

Since most change occurs to improve a process, a product, or an outcome, it is critical to
identify the focus and to clarify goals. This also involves identifying the resources and individuals
that will facilitate the process and lead the endeavor. Most change systems acknowledge that
knowing what to improve creates a solid foundation for clarity, ease, and successful
implementation.
2. Present a Solid Business Case to Stakeholders

There are several layers of stakeholders that include upper management who both direct and
finance the endeavor, champions of the process, and those who are directly charged with
instituting the new normal. All have different expectations and experiences and there must be a
high level of "buy-in" from across the spectrum. The process of onboarding the different
constituents varies with each change framework, but all provide plans that call for the time,
patience, and communication.
3 .Plan for the Change

This is the "roadmap" that identifies the beginning, the route to be taken, and the destination.
You will also integrate resources to be leveraged, the scope or objective, and costs into the
plan. A critical element of planning is providing a multi-step process rather than sudden,
unplanned "sweeping" changes. This involves outlining the project with clear steps with
measurable targets, incentives, measurements, and analysis. For example, a well-planed and
controlled change management process for IT services will dramatically reduce the impact of IT
infrastructure changes on the business. There is also a universal caution to practice patience
throughout this process and avoid shortcuts.
4. Provide Resources and Use Data for Evaluation

As part of the planning process, resource identification and funding are crucial elements. These
can include infrastructure, equipment, and software systems. Also consider the tools needed for
re-education, retraining, and rethinking priorities and practices. Many models identify data
gathering and analysis as an underutilized element. The clarity of clear reporting on progress
allows for better communication, proper and timely distribution of incentives, and measuring
successes and milestones.
5. Communication
This is the "golden thread" that runs through the entire practice of change management.
Identifying, planning, onboarding, and executing a good change management plan is dependent
on good communication. There are psychological and sociological realities inherent in group
cultures. Those already involved have established skill sets, knowledge, and experiences. But
they also have pecking orders, territory, and corporate customs that need to be addressed.
Providing clear and open lines of communication throughout the process is a critical element in
all change modalities. The methods advocate transparency and two-way communication
structures that provide avenues to vent frustrations, applaud what is working, and seamlessly
change what doesn't work.
57
6. Monitor and Manage Resistance, Dependencies, and Budgeting Risks
Resistance is a very normal part of change management, but it can threaten the success of a
project. Most resistance occurs due to a fear of the unknown. It also occurs because there is a
fair amount of risk associated with change – the risk of impacting dependencies, return on
investment risks, and risks associated with allocating budget to something new. Anticipating and
preparing for resistance by arming leadership with tools to manage it will aid in a smooth change
lifecycle.
7. Celebrate Success
Recognizing milestone achievements is an essential part of any project. When managing a
change through its lifecycle, it’s important to recognize the success of teams and individuals
involved. This will help in the adoption of both your change management process as well as
adoption of the change itself.
8. Review, Revise and Continuously Improve

As much as change is difficult and even painful, it is also an ongoing process. Even change
management strategies are commonly adjusted throughout a project. Like communication, this
should be woven through all steps to identify and remove roadblocks. And, like the need for
resources and data, this process is only as good as the commitment to measurement and
analysis.
• Discussion
• Write a detailed plan to make Management Change for your business.
References:
• https://www.strategy-business.com/article/rr00006?gko=dab72
• https://www.smartsheet.com/8-elements-effective-change-management-process
6th Edition
Mc Graw Hill
58
LESSON 8 International Human Resource Management
Overview:
“If you are planning for a year, plant a grain. If you are planning for a decade, plant trees. If
you are planning for a century, plant people.” -Chinese proverb
“A good global company” is “a global people company”. -Jeffrey Immelt CEO and Chairman, GE
“The single most important issue for us has been, and will continue to be, organization and
people.” Former Chairman, Unilever

1. Know the concept of International Human Resource Management.
2. Understand how it affect the strategy to be taken by the management.
3. Analyze how to choose the best strategy for specific conditions and cases.
Course Materials:
Unit 1: International Human Resource Management (IHRM) – General Principles
International Human Resource Management (IHRM) is defined as “concerned with the human
resource problems of multinational firms in foreign subsidiaries (such as expatriate
management) or more broadly, with the unfolding HRM issues that are associated with the
various stages of the internationalization process.” (International human resource management
(IHRM) • Boxall, P. 1992)
59
Mark Mendenhall (2000) sought to be more specific by outlining a number of criteria relevant to
a definition of IHRM:
• IHRM is concerned with HRM issues that cross national boundaries or are conducted in
locations other than the home country headquarters.
• IHRM is concerned with the relationships between the HRM activities of organisations
and the foreign environments in which the organisations operate.
• IHRM includes comparative HRM studies; e.g. differences in how companies in Japan,
Thailand, Austria and Switzerland plan for upgrading of employee skills and so on. International
human resource management (IHRM) (2) Slide 8.8 Wall, Minocha and Rees, International
Business, 3rd Edition, © Pearson Education Limited 2010 W
Unit 2: International Human Resource Management (IHRM) –

Factors and Functions involving IHRM
60
Cross-cultural awareness o Support provided for employees moving
to overseas subsidiaries:
o Environmental briefings o Cultural orientation o Cultural
assimilation o Language training o Sensitivity training
o Field experience.
IHRM and organisational structure

The type of international organisational structure adopted by the MNE will provide the context for
many of the IHRM issues faced by the company.
The five readily identified ‘types’ of organisational structure include:

• International division structure
• International geographic/regional structure
• International product structure
• International functional structure
• Matrix or mixed structure
61
IHRM approaches
o Ethnocentric: key positions filled by nationals of parent company
o Polycentric: host country nationals recruited to manage subsidiary in their own country o
Geocentric: best people recruited, whatever their nationality
o Regiocentric: best people recruited within region in which the subsidiary operates (e.g. EU,
USA).
Choice of IHRM approach depends upon:

• Degree and type of internationalisation
• Type of industry and markets served
• Characteristics of staff
• Cultural preferences.
Advantages and disadvantages of a ‘decentralised’ approach to IHRM

Advantages Disadvantages
Groups within the subsidiary can Tendency to become ‘exclusive’
gain in status
Groups within the subsidiary become Loss of central control, higher administrative more
cohesive, fostering group identity costs as HRM function is sent ‘down the line’
62
IHRM takes place within a culture Loss of organisational control and organisational
appropriate to the local workforce and identity
customers
IHRM Factors to be Considered in Reward Strategies:

1. A knowledge of the laws, customs, environment, and employment practices of the foreign
countries.
2. Familiarity with currency relationships and the effect of inflation on compensation.
3. An understanding of the allowances appropriate to particular countries, etc.
For example, awareness of employment related legislation in the country of operation is vital to
an appropriate international reward structure. India has as many as 45 labour laws at national
level and close to four times that at the level of state governments (Kaushik 2006).
In a global company, the training may well be centralized so that suppliers, employees and
distributors are aware of the brand image that needs to be communicated.
E.g. in Ford training programmes are set up centrally, and then translated and delivered to all
main suppliers, subsidiaries and distributors.
If, however, a more polycentric approach is taken, then the training may well be far more local,
and more in line with the local culture.
63
• Discussion
• Long Quiz
References:
• https://www.ftms.edu.my/images/Document/MOD001055%20-
%20International%20Business/CHAPTER%208.pdf
• https://www.slideshare.net/poojabharti7/international-human-resource-management2-
6th Edition
Mc Graw Hill
• Wall, Minocha and Rees, International Business, 3rd Edition, © Pearson Education Limited
2010
REFERENCES:
• https://www.yourarticlelibrary.com/hrm/environment-in-human-resource-
managementinternal-and-external-environment/35235
• https://study.com/academy/lesson/strategic-human-resource-management-
definitionimportance.html
• https://bohatala.com/impact-of-internal-and-external-environment-on-human-
resourcemanagement/
• https://www.businessmanagementideas.com/strategic-management/
functionalstrategy/21042
• https://resources.saylor.org/wwwresources/archived/site/wpcontent/uploads/2013/09/
Saylor.orgs-Strategy-Formulation.pdf
• https://www.google.com/search?client=firefox-bd&q=Competitive+Advantage++
+in+strategic+human+resource+management
• https://businessjargons.com/diversification.html
• https://www.strategy-business.com/article/rr00006?gko=dab72
• https://www.smartsheet.com/8-elements-effective-change-management-process
• https://www.ftms.edu.my/images/Document/MOD001055%20-
%20International%20Business/CHAPTER%208.pdf
• https://www.slideshare.net/poojabharti7/international-human-resource-management2- •
Human Resource Management
• Noe.Hollenbeck.Gerhart.Wright
• 6th Edition Mc Graw Hill
64

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Republic of the Philippines

POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

Mary Emilee M. Quezon

Checked and Approved by:

Dr. Agnes Y. Gonzaga Assoc. Prof. Denise A. Abril

Date: _________________ Date: __________________

THE POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

PUP: The National Polytechnic University of the Philippines

• provide democratized access to educational opportunities for the holistic development

As a state university, the Polytechnic University of the Philippines believes that:

Pillar 1: Dynamic, Transformational, and Responsible Leadership

SHARED VALUES AND PRINCIPLES

• Integrity and Accountability

POLYTECHNIC UNIVERSITY OF THE PHILIPPINES MARAGONDON

• Quality and excellent graduates

HRMA 20063 STRATEGIC HUMAN RESOURCE MANAGEMENT

COURSE TITLE : STRATEGIC HUMAN RESOURCE MANAGEMENT

After completing this course, you must be able to:

The course requirements are as follows:

Regular class (18 weeks, 3hrs/week, 54hrs)

2-3 Analysis of the Understand the basic

Lesson 1 Analysis of the Environment

Lesson 3 The Formulation of Strategy

Lesson 5 Competitive Advantage 45

Lesson 6 Strategy and Diversification 47

Lesson 7 Management of Changes 49

Lesson 8 International Human Resource Management

LESSON 1 Analysis of the Environment

1. After successful completion of this lesson, you should be able to:

Unit 1: Basic Principles

Human Resource Management

The best way to understand strategic human resources management is by comparing it to

Strategic Human Resource Management

Importance of Strategic HRM

Example of Strategic HRM

Unit 2: Environment in Human Resource Management:

(2) Organizational Culture and Conflict: As individuals have personality, organizations

(5) Employees Relations

(6) Customers’ satisfaction

Technology is a systematic application of organised knowledge to practical tasks. Technological

First; technology makes the job more intellectual or upgraded.

Actual Case: COMPETING THROUGH GLOBALIZATION

After successful completion of this lesson, you should be able to:

Unit 1: Functional Strategy – Introduction to Functional Strategy

According to Gareth R. Jones, “Functional strategy is a plan of action to strengthen an

According to Gareth R. Jones, “Functional strategy is a plan of action to strengthen an

Unit 2: Functional Strategy – Application and Importance

These are as follows:

The activities and processes—such as human resource management, research and

Functional Strategy – Concept

Functional strategy is concerned with developing and nurturing a distinctive competence to

Functional Strategy – Reasons why Functional Strategies are Needed

Functional strategies play two important roles:

i. They provide support to the overall business strategy.

Some important features of functional strategy are as follows:

Functional Strategy – Importance

1. Help in Operation of Business Functions:

2. Managerial Road Map:

3. Help in Implementation of Grand Strategy:

4. Decisional Guides to Action:

5. Improves Effectiveness and Efficiency and Creates Super Profitability:

6. Builds Competitive Advantage:

Other Benefits of Functional Strategies:

Unit 3: Functional Strategy – Classifications

Date: _ Date: __