““Nothing we do is more important than hiring people.

At the end
of the day, you bet on people, not strategies.”
-Lawrence Bossidy

Concept of Strategy

By:
Muhammad Ali
Malik
 Subjects in Modules
 Concept of HRM
 Concept of Strategy
 Concept of SHRM
 HR Strategies (Nature,
Purpose, Development &
Implementation)
 Strategic Role of HR
 The impact of SHRM
 SHRM in Action
 HR Strategies
 Construct

 Fundamental Meanings

 Definitions

 Associated Concepts

 Examples

 Formulation of Strategy
 Strategy
Fundamental Meanings
Strategy has two fundamental meanings. First, it is forward looking. It

is about deciding where you want to go and how you mean to get there.
It is concerned with both ends and means. In this sense a strategy is a
declaration of intent: ‘This is what we want to do and this is how we
intend to do it.’

The second meaning of strategy is conveyed by the concept of strategic


fit. The focus is upon the organization and the world around it. To
maximize competitive advantage, a firm must match its capabilities and
resources to the opportunities available in the external environment.

[
 Strategy
Definitions
Strategy is the determination of the basic long-term goals and
objectives of an enterprise, and the adoption of courses of
action and the allocation of resources necessary for
carrying out these goals. (Chandler, 1962)
Strategy is a set of fundamental or critical choices about
the ends and means of a business. (Child, 1972)
 [Strategy involves] the constant search for ways in which
the firm’s unique resources can be re-deployed in changing
circumstances. (Rumelt, 1984)
 Strategy
Definitions
 Strategy is the direction and scope of an organization over the
longer term, which matches its resources to its changing
environment, and in particular, to its markets, customers and
clients to meet stakeholder expectations.
(Johnson and Scholes, 1993)
 Strategy should be understood as a framework of critical ends and
means. (Boxall, 1996)
 Business strategy is concerned with the match between the
internal capabilities of the company and its external environment.
(Kay, 1999)
 The emphasis (in strategy) is on focused actions that differentiate
the firm from its competitors. (Purcell, 1999)
 Strategy
Definitions
 Strategy is the set of plans from top management to achieve
results consistent with the organizational mission and objectives.
(Wright, Kroll & Parnell, 1997)
 Strategy is the theory of the firm on how to compete successfully.
It also considers performance as a factor influenced by strategy, as
it can be considered that to compete successfully means having a
satisfactory performance. (Barney, 2001)
 Concept of Strategy

Associated Concepts
The concept of strategy is based on a number of associated concepts:
Competitive
 advantage,
Resource-based view,


distinctive capabilities,


strategic intent,


strategic capability,


strategic management,


strategic goals


strategic plans


[
 Concept of Strategy
Competitive Advantage

• Competitive advantage arises out when a firm creates value for

its customers. Firms select markets in which they can excel
and become a moving target to their competitors by
continually improving their position.
Michael Porter (1985)

• Importance of differentiation offers a product or service ‘that

is perceived industry-wise as being unique’, and focus –
seeing a particular buyer group or product market ‘more
effectively or efficiently than competitors who compete more
broadly’.

• Well-known framework of three generic strategies includes

innovation, quality and cost leadership. Organizations use
these to gain competitive advantage.
• Competitive advantage stems in the long term. Firms build ‘core competences’ which are
superior to its rivals, when it learns faster and applies its learning more effectively than its
competitors.

[
 Concept of Strategy
Resource-Based View

• The resource-based view (RBV) argues that firms possess resources, a subset of which enable
them to achieve competitive advantage, and a subset of those that lead to superior long-term
performance. Resources that are valuable and rare can lead to the creation of competitive
advantage.
• Developed by J. Barney. Resources and capabilities are the key drivers of sustained
competitive advantage and greater profitability

Valuable (increase Organizationally

efficiency and exploited
effectiveness) Ability to fully exploit
Rare should not be potential of a resource
common
(through aligning
Imperfectly imitable
difficulty copying by strategy, process and
competitor structure)
 Concept of Strategy
Resource-Based View

• The strategic capability of a firm depends on its resource capability. The firm is an
administrative organization and a collection of productive resources.
Penrose (1959)

• Strategy ‘is a balance between the exploitation of existing resources and the development
of new ones’.
Wernerfelt (1984)

• Sustained competitive advantage stems from the acquisition and effective use of bundles
of distinctive resources that competitors cannot imitate.
Barney (1991)

• Competitive success does not come simply from making choices in the present; it stems
from building up distinctive capabilities over significant periods of time.
Boxall (1996)

• Dynamic capabilities assume that the capacity of a firm to renew, augment and adapt its
core competences over time.
[ Teece, Pisano and Shuen (1997)
 Concept of Strategy
Distinctive Capabilities
• While a firm enjoys competitive advantage, however others will
be able to copy its product and/or service. Alternatively, a firm
enjoys sustained competitive advantage, when competitors
cannot imitate.
• Distinctive capabilities are those characteristics that cannot be
replicated by competitors or can only be imitated with great
difficulty. An important feature that confers superiority over
others (Quinn, 1980).
• Reproducible capabilities are those that can be bought or created
by any company with reasonable management skills, diligence
and financial resources. Most technical capabilities are
reproducible.
• Distinctive capabilities or core competences describe what the organization is specially or uniquely
capable of doing. Key capabilities can exist in such areas as technology, innovation, marketing,
delivering quality, and making good use of human [
and financial resources.
• If a company is aware of what its distinctive capabilities are, it can then concentrate on using and
developing them without diverting its effort into less rewarding activities .
 Concept of Strategy
Strategic intent

The strategic intent sequence has been defined as:

1. a broad vision of what the organization should be;

2. the organization’s mission;
3. specific goals, which are operationalized as:
4. strategic objectives.
Miller and Dess (1996)
• Vision is what you want to accomplish. Mission is a general statement of how you
will achieve your vision. Goals are statements of what needs to be accomplished to
implement the strategy. Objectives are specific actions and timelines for achieving
the goal
• The leadership position the organization wants to attain and establish a clear
criterion on how progress towards achievement will be measured.
Hamel and Prahalad (1989)

[
 Concept of Strategy
Strategic capability

• The ability of an organization to develop and implement strategies that will achieve
sustained competitive advantage.

• The capacity to select the most appropriate vision, to define realistic intentions, to
match resources to opportunities and to prepare and implement strategic plans.

• Strategic capability of an organization depends on the strategic capabilities of its

managers. Managers who display high levels of strategic capability know where
they are going and know how they are going to get there. Such managers recognize
that, they must be successful now to succeed in the future.

• It is always necessary to create and sustain a sense of purpose and direction.

[
 Concept of Strategy
Strategic management

• Strategic management is the set of decisions and actions resulting in the formulation
and implementation of strategies designed to achieve the objectives of an
organization.
Pearce and Robinson (1988)
• Strategic management is primarily concerned with the following:
 matching the activities of an organization to the environment in which it
operates;
 ensuring that the internal structures, practices and procedures enable the
organization to achieve its objectives;
 matching the activities of an organization to its resource capability, assessing
the extent to which sufficient resources can be provided to take advantage of
opportunities or to avoid threats in the organization’s environment;
 acquiring, divesting (deprive) and reallocating resources;
 translating the complex and dynamic set of external and internal variables (that
an organization faces) into a structured set of clear future objectives that can
then be implemented on a day-to-day basis.
Burns (1992)
[
 Concept of Strategy
Strategic Goals

• Strategic goals define where the organization wants to be.

• May be specified in terms of actions, quantified in terms of growth, or

expressed in general terms as aspirations rather than specifics.

Strategic Plans

• Formal expressions of how an organization intends to attain its strategic

goals.

• Strategies of firms are a sets of strategic choices, some of which may stem
from planning exercises and setting debates in senior management.

[
 Strategy - Example

Doing Great in a Weak Economy

During the period of Global recession (2007-2008), most

firms were struggling (to survive, laying off employees,
closing restaurants, and reducing expansion plan).

Whereas, McDonald’s continued to increase its revenues

from $22.7 billion in 2007 to $23.5 billion in 2008.
McDonald’s net income nearly doubled during that time
from $2.4 billion to $4.3 billion.

McDonald’s achieved this through:

 Well planned strategies;
 Offering low prices, expanded menu items, extending hours and improved drive-
through windows to increase sales, thus attracting millions of new customers;
 Spent $2.1 billion to remodel many of its 32,000 restaurants and build new ones.

[
Strategic HR Management
Strategy -
 1996 – Apple Inc. was floundering;
stock prices had plunged
 1997 – Steve Jobs became
permanent CEO
 Reduced Apple’s 350 development
projects to 50 and then to 10
 Released iMac, iPod, iTunes and
iPhone
 Apple stock rose more than 9,000
percent and market value increased
by $150 billion
Examples
 1980 - Chrysler from the verge of
bankruptcy
 Lee Iacocca, new CEO
 Plea to US Congress, resulted in
federally guaranteed loans of $1.5
billion for Chrysler
 Restructured management, laid off
workers, negotiated concessions
from suppliers, creditors and unions
 Chrysler became profitable in 1982
and paid back its loans in three
years
Strategic HR Management
Strategy -
 1999/2000 - Yahoo's ad sales were
dropping; company morale was low.
 2001 - Terry Semel joined as Yahoo !
CEO
 Shifted company's focus to distributing
media and user-generated content
through channels such as Yahoo News,
Yahoo Finance and Flickr.
 Within one year, Yahoo earned $43
million in revenue ($93 million loss
previous year) Yahoo increased its
revenue nearly nine-fold and created
$30 billion in shareholder value
Examples
 1981 - Harley Davidson had U.S. market
share of 15% and reported a loss of $15
million.
 Facing steep competition from Japanese
motorcycle manufacturers, such as Honda
 1989 - Richard Teerlink stepped in as CEO
 Turned the company's focus to increasing
quality, improving service to customers and
dealers, and producing world-class
heavyweight motorcycles
 Recovered its U.S. market share to 50
percent and posted annual sales of more
than $1.7 billion
STAGES OF STRATEGY
 PESTEL analysis or PESTLE analysis (formerly known as PEST analysis) is a
framework or tool used to analyse and monitor the macro-environmental factors
that may have a profound impact on an organisation’s performance. This tool is
especially useful when starting a new business or entering a foreign market. It is
often used in collaboration with other analytical business tools such as the 
SWOT analysis and Porter’s Five Forces to give a clear understanding of a
situation and related internal and external factors. 
 Formulation of Strategy
STRATEGY
FORMULATION

A process for developing a sense of direction and ensuring strategic fit.

A logical, step-by-step affair, the outcome of which is a formal written

statement that provides a definitive guide to the organization’s
intentions.
Means of providing an analytical framework for strategic decision
making and a reference point for monitoring the implementation of
strategy.

[
 Formulation of Strategy
Approaches to Strategy Formulation

Four approaches have been identified by

Whittington (1993, 2001) as a model of analysis
• Classical – formal & rational decision making
process. The key stages are; a comprehensive
analysis of the external and internal environment,
evaluate and choose from a range of strategic
choices, making up of plans and implement the
strategy
• With this approach, profitability is assumed to be the
only goal of business, and the rational-planning
approach the means to achieve it.
[
 Formulation of Strategy
Approaches to Strategy Formulation

Evolutionary
• Strategy is made through an informal evolutionary
process in which managers rely less upon top managers
to plan and act rationally and more upon the markets to
secure profit maximization.
• Evolutionarists, therefore, argue that markets, not
managers, choose the prevailing strategies.
• The evolutionary approach suggests that markets are too
competitive for ‘expensive strategizing.
• They believe that sophisticated strategies can deliver only
a temporary advantage
[
 Formulation of Strategy
Approaches to Strategy Formulation

The Processual Approach

• Quinn (1978) recognized that in practice
strategy formation tends to be fragmented,
evolutionary and largely intuitive
• He recognizes ‘organizations and markets’ as
‘sticky, messy phenomena, from which
strategies emerge with much confusion and
in small steps
[
 Formulation of Strategy
Approaches to Strategy Formulation

The systemic approach

• Strategy is shaped by the social system within which it
operates. Strategic choices, therefore, are shaped by
the cultural and institutional interests of a broader
society.
• In reality, organisations and their members’ choices are
embedded in a network of social relations.
• Thus according to this approach, organizations differ
according to the social and economic systems in which
they are embedded. 
[
Approaches to Strategy Formulation by Whittington