Strategy: Concept and Process

Week 3 and 4
STRATEGY DEFINED

 Strategy is about deciding where you want to go and how you mean to get
there.
 A strategy is a declaration of intent: ‘This is what we want to do and this is
how we intend to do it.’
 Strategies define longer-term goals but they are more concerned with how
those goals should be achieved. Strategy is the means to create value.
 A good strategy is one that works, one that guides purposeful action to deliver
the required result.

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The concept of strategy

 The concept of strategy is based on three subsidiary concepts: competitive advantage,

distinctive capabilities and strategic fit.
competitive advantage
Three generic strategies that organizations can use to gain competitive advantage. These
are:
innovation– being the unique producer;
quality– delivering high-quality goods and services to customers;
cost leadership – the planned result of policies aimed at ‘managing away expense’.

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The concept of strategy (cont’d)

 Distinctive capabilities :
 The opportunities for companies to sustain competitive advantage
[are] determined by their capabilities. Distinctive capabilities are
those characteristics that cannot be replicated by competitors, or
can only be imitated with great difficulty.

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The concept of strategy (cont’d)

 Strategic fit
 The concept of strategic fit states that to maximize competitive
advantage a firm must match its capabilities and resources to the
opportunities available in the external environment.

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What is Strategy Formulation

 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. 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).

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What is Strategy Formulation (cont’d)?

 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.

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THE FORMULATION OF STRATEGY

 The formulation of corporate strategy can be defined as a process for developing a

sense of direction. It has often been described as a logical, step-by-step affair, the
outcome of which is a formal written statement that provides a definitive guide to the
organization’s long-term intentions.
The systematic approach to formulating strategy
 In theory, the process of formulating strategy consists of the following steps:
 1. Define the mission. (the purpose or reason for the organization’s existence)
 2. Set objectives. (the end results of planned activity)
 3. Conduct internal and external environmental scans to assess internal strengths and
weaknesses and external opportunities and threats (a SWOT analysis).

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THE FORMULATION OF STRATEGY

4. Analyze existing strategies to determine their relevance in the light of the

internal and external appraisal.
5. Define in the light of this analysis the distinctive capabilities of the
organization.
6. Define the key strategic issues emerging from the previous analysis. These will
be concerned with such matters as product-market scope, enhancing shareholder
value and resource capability.
7. Determine corporate and functional strategies for achieving goals and
competitive advantage, taking into account the key strategic issues.

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THE FORMULATION OF STRATEGY

8. Prepare integrated strategic plans for implementing strategies.

9. Implement the strategies.
10. Monitor implementation and revise existing strategies or develop new
strategies as necessary.

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What are HR strategies?

 HR strategies set out what the organization intends to do about its human resource
management policies and practices and how they should be integrated with the
business strategy and with each other.
 An HR strategy can be:
 Overarching / overall / general
 Specific: focuses on specific areas
 Talent management
 Development
 Reward management, etc

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What are HR strategies? (cont’d)

 Overall HR strategies:
 describe the general intentions of the organization about how people should be
managed and developed and what steps should be taken to ensure that the organization
can attract and retain the people it needs; and ensure that employees are committed,
motivated, engaged.
 Specific HR strategies:
 High Commitment management
 High-performance management
 Corporate social responsibility
 Organization development
 Engagement
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 Knowledge management
Criteria for an effective HR strategy

 An effective HR strategy is one that works in the sense that it achieves what it sets out
to achieve.
 The criteria for an effective HR strategy are that it:
 will satisfy business needs;
 is founded on detailed analysis and study, not just wishful thinking;
 can be turned into actionable programs that anticipate implementation requirements and
problems;
 is coherent and integrated, being composed of components which fit with and support
each other;
 takes account of the needs of line managers and employees generally as well as those
of the organization and its other stakeholders.
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HR Strategy and competitive advantage-

What is your company’s competitive advantage?

 Competitive advantage means positioning your company ahead of other
companies in order to achieve superiority in quality, low cost, value or
innovation. Regardless of what it means to a company, it may be the single factor
to attaining success and business sustainability.
Thereare many strategies that contribute to achieving a competitive advantage,
but maximizing your human capital is a major contributor to achieving a
competitive edge in the marketplace.

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HR Strategy and competitive advantage-
(cont’d)
Linking HR Strategies to High Performing Companies
Itis very important of aligning human resource strategies to achieving business
goals and enhancing business performance
Competitive advantage can be achieved through people and the people practices
of organizations. Companies that leverage their human capital to achieve their
business objectives, especially growth have more positive results.
 These companies have well-defined HR practices that align with the company’s
business goal. Their employees stay employed longer and contribute positively to
the overall financial performance. Companies without a clear people plan are at
risk of losing or never obtaining a competitive advantage.

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HR Strategy and competitive advantage-
(cont’d)
HR strategies can help Companies gain a competitive advantage.
Each company has different business objectives that contribute to developing a
competitive advantage. HR strategies should be developed to achieve these
objectives.
For example, if Business Growth is the objective of the Company:
The company will need additional employees. Establishing a workforce plan is
necessary to ensure the ability to hire the right employees in the time in which
you need them. Developing a workforce plan involves forecasting how long it
will take to hire the employee, where applicants will be sourced and when the
recruiting process will begin. Failure to implement this strategy could interfere
with the ability to scale the business according to the plan and most likely the
quality of the company services and products will suffer.
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Formulating HR strategy-

There are 2 approaches

The inside-out approach : begins with the status quo HR function (in terms of
skills, processes, technologies etc) and then attempts (with varying degrees of
success) to identify linkages to the business (usually through focusing on ‘people
issues’), making minor adjustments to HR activities along the way

The outside-in approach: the starting point is the business and the customer,
competitor and business issues it faces. The HR strategy then derives directly
from these challenges to add real value.

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Implementing HR strategy

• HR strategies are to be action vehicles, they must be translated into HR policies

which provide guidelines on decision-making and HR practices which enable
the strategy to work.
• These can be the basis for implementation programmes with clearly stated
objectives and deliverables.
• To a large extent, HR strategies are implemented by line managers.

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SHRM and competitive advantage

 Strategic Human Resources Management involves aligning organization

human resources to the needs of the organization as expressed in the
organizational strategy.
 To assist an institution gain competitive advantage HR department must have
a strategic focus. This will enable it change people through its policies on
recruitment, selection and induction, talent management, planning, succession
etc. Human Resources as a driver of business strategy should nurture the
human resources to become valuable and unique with a view to providing the
basis for competitive advantage and future growth.

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SHRM and competitive advantage

 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.

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THANK YOU

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