CHAPTER 3:

STRATEGIC
MANAGEMENTCC

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 Strategic Management
• Strategic Human Resource Management
– Involves aligning initiatives involving how people are
managed with organizational mission & objectives
• Strategic Management Process
– Determining what needs to be done to achieve
corporate objectives over 3 - 5 years
– Examining organization & competitive environment
– Establishing optimal fit between organization & its
environment
– Reviewing & revising strategic plan
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 Models of Strategy
• Industrial Organization (I/O) Model
– The external environment is the primary determinant of
organizational strategy rather than the internal decisions of its
managers.
– The environment presents threats and opportunities.
– All competing organizations control or have equal access to
resources.
– Resources are highly mobile between firms
– Organization should learn to utilize the opportunities of the
environment
– Organizational success is achieved by offering goods and
services at lower costs than competitors or by differentiating
products such that they bring premium prices.
 Models of Strategy
• Resource-Based View (RBV)
–An organization’s resources & capabilities, not external
environmental conditions, should be basis for strategic
decisions
–Competitive advantage is gained through acquisition & value
of organizational resources
–Organizations can identify, locate & acquire key valuable
resources
–Resources are not highly mobile across organizations & once
acquired are retained
–Valuable resources are costly to imitate & non-substitutable

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 Contrasting the Two Approaches
• Research provides support for both positions
• What drives strategy?
– I/O: External considerations
– RBV: Internal considerations
• I/O: Strategy drives resource acquisition
• RBV: Strategy determined by resources

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 The Process of Strategic Management

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

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 Exhibit 3-1

Process of Strategic Management

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 Mission Statement
• Explains purpose & reason for existence
• Usually very broad
• No more than a couple of sentences
• Serves as foundation for everything
organization does

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 Solectron Mission Statement
“Our mission is to provide worldwide
responsiveness to our customers by offering
the highest quality, lowest total cost,
customized, integrated, design, supply-chain
and manufacturing solutions through long-
term partnerships based on integrity and
ethical business practices.”

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 Analysis of Environment
• Critical components of external environment
– Competition
– Industry structure
– Government regulations
– Technology
– Market trends
– Economic tends

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 Analysis of Environment
• Critical issues that need to be identified regarding competition
and industry structure-
• Who are the chief competitors & means by which they
compete
• Where power lies within the industry
• Barriers to entry
• Opportunities to acquire and merge with other
organizations
• Critical success factors within the industry
• Industry maturity level
• Industry who produce complementary or substitute
products.

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 Analysis of Environment (cont’d)
• Critical issues that need to be identified regarding
government regulation-
• The scope of laws and regulations that may impact the
organization
• Organization need to establish beneficial relationships with
agencies that enforce these laws.
• Critical issues that need to be identified regarding
technological sector-
• Looking for automation processes
• New materials & techniques for producing goods & services
• Improved products and special features
• How to obtain new technology

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 Analysis of Environment (cont’d)
• Analyzing market trends involves-
• Existing customers and their needs and wants
• Potential customers and how existing products/services
can address the different target groups’ need
• Examining demographic, psychographic & lifestyle issues
of consumers
• Analyzing economic trends involves-
• Forecasting the condition of national economy
• Interest rates, inflation levels, unemployment rates,
exchange rates, etc.

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 Organization Self-Assessment
• Identify primary strengths & weaknesses
• Find ways to capitalize on strengths
• Find ways to improve or minimize weaknesses
• Examine resources
– Physical
– Financial
– Human
– Technological
– Capital

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 Organization Self Assessment
• Resources
– Financial resources can significantly affect on organization’s competitive
advantage.
– Physical resources include the actual equipment & machinery owned or
leased, location, etc.
– Human resources includes the sum of technical knowledge of employees,
personal traits, loyalty, commitment, etc.
– Technological resources include the processes by which organization produces
its goods and services.
– Capital resources include all other items of value, including brand names,
reputations with customers, goodwill etc.

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Organization Self Assessment (cont’d)
• Management systems

– In assessing culture, organization needs to understand the

core values and philosophies that guide its activities.
– Organization structure has a significant impact on how work is
carried out, how groups interact with each other, where
accountability for performance lies.
– Assessing power dynamics & politics allows an organization to
see who really controls what happens in an organization.

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Organization Self Assessment (cont’d)
– In assessing decision making, one needs to look at
whether decisions are made by individuals/groups; who
gets involved in decision making; how info are collected,
distributed etc.
– By looking at past strategies & performance, the
organization can determine how & why it was or was not
successful.
– Work systems involve the design of jobs & allocation of
responsibilities to assist an organization in meeting its
objectives.

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 Establishing Goals & Objectives
• Goals should be:
– Specific
– Measurable
– Flexible

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 Setting Strategy
• How the organization intends to achieve its goals.
• The strategic choices need to be incorporated into
general HR strategy.
• HR strategy serve as a framework
• HR strategy ensure a fit between corporate strategy
and HR policies and programs
• There is no one “model” way to manage human
resources strategically.

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 Corporate Strategies
1. Growth

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

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 Corporate Strategies…
• Internal Methods • External Methods
– Penetration of existing markets – Acquiring other organizations
– Developing new markets – Horizontal / Vertical integration
– Developing new products or • HR Issues
services for existing or new – Merging dissimilar HR system
markets from different organizations into
• HR Issues one
– Planning for new hiring and – Dismissing redundant
training employees
– Alerting current employees – Develop specific retention
– Ensuring quality and strategy
performance standards are
maintained

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 Corporate Strategies: Stability

• Maintaining status quo due to limited environmental

opportunities for gaining competitive advantage

• Few employees will have opportunities for advancement

• Critical that management identify key employees &

develop specific HR retention strategies to keep them.

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 Corporate Strategies:
Turnaround or Retrenchment

• Downsizing or streamlining organization in cost-

cutting attempt to adjust to competitive environment

• Few opportunities & many environmental threats

• Important to develop HR practices to manage

“survivors.”

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 Business Unit Strategies:
Cost Leadership

 Increases in efficiency & cutting of costs, then passing

savings to consumer
 Assumes price elasticity in demand for products or
services is high
 Assumes that customers are more price sensitive than
brand loyal
 HR strategy focuses on short-term performance
measures of results & promoting efficiency through job
specialization & cross-training

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 Business Unit Strategies: Differentiation

• In order to demand a premium price from

consumers
– Attempting to distinguish organizational products or
services from other competitors or
– Creating perception of difference
• Organization offers employees incentives &
compensation for creativity
• HR strategy focuses on external hiring of unique
individuals & on retaining creative employees
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 Business Unit Strategies: Focus
• Business attempts to satisfy needs of only a particular
group or narrow market segment
• Strategic intent is to gain consumer loyalty of specific
groups of consumers
• Strategic HR issue is ensuring employee awareness of
uniqueness of market segment
– Employee training & focus on customer satisfaction are
critical factors
– Hiring members of target segment who are empathetic
to customer in target segment

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 Exhibit 3-3 (page 1)

Dyer & Holder’s Typology of Strategies

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 Exhibit 3-3 (page 2)

Dyer & Holder’s Typology of Strategies

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