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CHAPTER 3:

STRATEGIC

PLANNING

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Strategic ManagementStrategic Management

StrategicStrategic Human ResourceHuman Resource ManagementManagement

Involves aligning initiatives involving how people areInvolves aligning initiatives involving how people are

managed with organizational mission and objectivesmanaged with organizational mission and objectives

Strategic Management ProcessStrategic Management Process

Determining what needs to be done to achieve corporateDetermining what needs to be done to achieve corporate

objectives, often over 3objectives, often over 3 -- 5 years5 years

Examining organization and competitive environmentExamining organization and competitive environment Establishing optimalEstablishing optimalfitfitbetween organization and itsbetween organization and its

environmentenvironment

Reviewing and revising strategic planReviewing and revising strategic plan

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Models of StrategyModels of Strategy

Industrial Organization (I/O) ModelIndustrial Organization (I/O) Model

External environment is primary determinant ofExternal environment is primary determinant of

organizational strategy rather than internal decisions oforganizational strategy rather than internal decisions of

managersmanagers Environment presents threats and opportunitiesEnvironment presents threats and opportunities

All competing organizations control or have equal accessAll competing organizations control or have equal access

to resourcesto resources

Resources are highly mobile between firmsResources are highly mobile between firms

Organizational success is achieved by:Organizational success is achieved by:

Offering goods and services at lower costs thanOffering goods and services at lower costs than

competitorscompetitors

Differentiating products to bring premium pricesDifferentiating products to bring premium prices

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Models of StrategyModels of Strategy

ResourceResource--Based View (RBV)Based View (RBV)

An organizations resources and capabilities, not externalAn organizations resources and capabilities, not external

environmental conditions, should be basis for strategicenvironmental conditions, should be basis for strategic

decisionsdecisionsCompetitive advantage is gained through acquisition andCompetitive advantage is gained through acquisition and

value of organizational resourcesvalue of organizational resources

Organizations can identify, locate and acquire key valuableOrganizations can identify, locate and acquire key valuable

resourcesresources

Resources are not highly mobile across organizations, andResources are not highly mobile across organizations, and

once acquired are retainedonce acquired are retained

Valuable resources are costly to imitate and nonValuable resources are costly to imitate and non--

substitutablesubstitutable

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Contrasting the Two ApproachesContrasting the Two Approaches

Research provides support for bothResearch provides support for both

positionspositions

What drives strategy?What drives strategy? I/O: External considerationsI/O: External considerations

RBV: Internal considerationsRBV: Internal considerations

I/O: Strategy drives resource acquisitionI/O: Strategy drives resource acquisition RBV: Strategy determined by resourcesRBV: Strategy determined by resources

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The Process of Strategic ManagementThe Process of Strategic Management

Mission statementMission statement

Environmental analysisEnvironmental analysis

Organizational selfOrganizational self--assessmentassessment Establishing goals and objectivesEstablishing goals and objectives

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Exhibit 3Exhibit 3--11

Process of Strategic ManagementProcess of Strategic Management

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Mission StatementMission Statement

Explains purpose and reason for existenceExplains purpose and reason for existence

Usually very broadUsually very broad

No more than a couple of sentencesNo more than a couple of sentences Serves as foundation for everythingServes as foundation for everything

organization doesorganization does

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Solectron Mission StatementSolectron Mission Statement

Our mission is to provide worldwideOur mission is to provide worldwide

responsiveness to our customers by offering theresponsiveness to our customers by offering the

highest quality, lowest total cost, customized,highest quality, lowest total cost, customized,

integrated, design, supplyintegrated, design, supply--chain andchain andmanufacturing solutions through longmanufacturing solutions through long--termterm

partnerships based on integrity and ethicalpartnerships based on integrity and ethical

business practices.business practices.

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Analysis ofEnvironmentAnalysis ofEnvironment

Critical components of externalCritical components of external


CompetitionCompetition

Industry structureIndustry structure

Government regulationsGovernment regulations

TechnologyTechnology

Market trendsMarket trends Economic tendsEconomic tends

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Organization SelfOrganization Self--AssessmentAssessment

Identify primary strengths and weaknessesIdentify primary strengths and weaknesses

Find ways to capitalize on strengthsFind ways to capitalize on strengths

Find ways to improve or minimizeFind ways to improve or minimize

weaknessesweaknesses

Examine resourcesExamine resources

PhysicalPhysical

HumanHuman

TechnologicalTechnological

CapitalCapital

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Organization SelfOrganization Self--AssessmentAssessment

Examine internal management systemsExamine internal management systems

CultureCulture

Organization structureOrganization structure Power dynamics and policyPower dynamics and policy

DecisionDecision--making processesmaking processes

Past strategy and performancePast strategy and performance Work systemsWork systems

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Establishing Goals & ObjectivesEstablishing Goals & Objectives

Goals should be:Goals should be:

SpecificSpecific

MeasurableMeasurable FlexibleFlexible

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Corporate Strategy

Business Strategy

HR Strategy

HR System

(Performance Mgmt.)

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Stages in a CorporateStages in a CorporateStrategy ProcessStrategy Process

Stages in a CorporateStages in a CorporateStrategy ProcessStrategy Process

OrganisationOrganisation

Mission and GoalsMission and Goals(Define the business)(Define the business)

Strategic AnalysisStrategic Analysis(current situation, programmes and performance)(current situation, programmes and performance)

Strategic ChoiceStrategic Choice(bounded rationality, shaping the environment)(bounded rationality, shaping the environment)

Strategy ImplementationStrategy Implementation(programmes, resources & responsibilities)(programmes, resources & responsibilities)

Rational, logical

versus

interpreted & political

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Planning LevelsPlanning LevelsPlanning LevelsPlanning Levels

CEOCorporate

Level Corporate HQ

Business

LevelAviation Heating Trucks Plastics Consultancy

Functional

LevelManufacturing

Marketing

Accounting

R & D

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Corporate Strategies:Corporate Strategies: GrowthGrowth

performance standards areperformance standards are

BenefitsBenefits

Gaining economies of scale inGaining economies of scale in

operations and functionsoperations and functions

Enhancing competitiveEnhancing competitive

position visposition vis----vis industryvis industrycompetitorscompetitors

Providing opportunities forProviding opportunities for

employee professionalemployee professional

development anddevelopment and

advancementadvancement

HR IssuesHR Issues

Planning for new hiringPlanning for new hiring

Alerting current employeesAlerting current employees

Ensuring quality &Ensuring quality &

performance standards areperformance standards are emp oyeesemp oyees

Internal MethodsInternal Methods

Penetration of existingPenetration of existing

marketsmarkets

Developing new marketsDeveloping new markets

Developing new products orDeveloping new products orservices for existing or newservices for existing or new

marketsmarkets

External MethodsExternal Methods

Acquiring other organizationsAcquiring other organizations

Vertical integrationVertical integration

HR IssuesHR Issues

Merging organizationsMerging organizations

Dismissing redundantDismissing redundant

employeesemployees

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Corporate Strategies:Corporate Strategies: StabilityStability

Maintaining status quo due to limitedMaintaining status quo due to limited

environmental opportunities for gainingenvironmental opportunities for gaining

competitive advantagecompetitive advantage

Few employees will have opportunities forFew employees will have opportunities for

advancementadvancement

Critical that management identify keyCritical that management identify key

employees and develop specific HRemployees and develop specific HRretention strategies to keep themretention strategies to keep them

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Corporate Strategies:Corporate Strategies:TurnaroundTurnaround oror RetrenchmentRetrenchment

Downsizing or streamlining organization inDownsizing or streamlining organization in

costcost--cutting attempt to adjust to competitivecutting attempt to adjust to competitive


Few opportunities and many environmentalFew opportunities and many environmental

threatsthreats

Important to develop HR practices toImportant to develop HR practices to

manage survivorsmanage survivors

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Business Unit Strategies:Business Unit Strategies: Cost LeadershipCost Leadership

Increases in efficiency and cutting of costs, then passingIncreases in efficiency and cutting of costs, then passing

savings to consumersavings to consumer

Assumes price elasticity in demand for products or servicesAssumes price elasticity in demand for products or services

is highis high Assumes that customers are more price sensitive than brandAssumes that customers are more price sensitive than brand

loyalloyal

HR strategy focuses on shortHR strategy focuses on short--term performance measuresterm performance measures

of results and promoting efficiency through jobof results and promoting efficiency through jobspecialization and crossspecialization and cross--trainingtraining

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Business Unit Strategies:Business Unit Strategies: DifferentiationDifferentiation

In order to demand a premium price from consumersIn order to demand a premium price from consumers

Attempting to distinguish organizational products or services fromAttempting to distinguish organizational products or services from

other competitors orother competitors or

CreatingCreatingperceptionperception of differenceof difference

Organization offers employees incentives and compensationOrganization offers employees incentives and compensation

for creativityfor creativity

HR strategy focuses on external hiring of uniqueHR strategy focuses on external hiring of unique

individuals, and on retaining creative employeesindividuals, and on retaining creative employees

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Business Unit Strategies:Business Unit Strategies: FocusFocus

Business attempts to satisfy needs of only a particularBusiness attempts to satisfy needs of only a particular

group or narrow market segment (niche)group or narrow market segment (niche)

Strategic intent is to gain consumer loyalty of neglectedStrategic intent is to gain consumer loyalty of neglected

groups of consumersgroups of consumers

Strategic HR issue is ensuring employee awareness ofStrategic HR issue is ensuring employee awareness of

uniqueness of market segmentuniqueness of market segment

Thorough employee training and focus on customer satisfaction areThorough employee training and focus on customer satisfaction are

critical factorscritical factors

Hiring members of target segment who are empathetic to customersHiring members of target segment who are empathetic to customersin target segmentin target segment

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Exhibit 3Exhibit 3--3 (page 1)3 (page 1)

Dyer & Holders Typology of StrategiesDyer & Holders Typology of Strategies

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Exhibit 3Exhibit 3--3 (page 2)3 (page 2)

Dyer & Holders Typology of StrategiesDyer & Holders Typology of Strategies

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Benefits of a Strategic Approach to HRBenefits of a Strategic Approach to HR

Facilitates development of highFacilitates development of high--quality workforcequality workforce

through focus on types of people and skills neededthrough focus on types of people and skills needed

Facilitates costFacilitates cost--effective utilization of labor,effective utilization of labor,

particularly in service industries where labor isparticularly in service industries where labor is

generally greatest costgenerally greatest cost

Facilitates planning and assessment ofFacilitates planning and assessment of

environmental uncertainty, and adaptation ofenvironmental uncertainty, and adaptation oforganization to external forcesorganization to external forces

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Reading 3.1 (Wright, Dunford, & Snell)Reading 3.1 (Wright, Dunford, & Snell)

Human Resources & Resource Based ViewHuman Resources & Resource Based View

People management systemsPeople management systems

constructconstruct

Not all competitive advantage begins withNot all competitive advantage begins withpeople management systemspeople management systems

These systems create value to the extentThese systems create value to the extent

that they impact stock, flow, and changethat they impact stock, flow, and change

of intellectual capital/knowledgeof intellectual capital/knowledge

Basis of core competenciesBasis of core competencies

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Reading 3.1Reading 3.1


Skill concept expanded to consider stock ofSkill concept expanded to consider stock of

intellectual capital in firmintellectual capital in firm

Behavior concept reconceptualized as flow ofBehavior concept reconceptualized as flow of

knowledge within firm through its creation,knowledge within firm through its creation,transfer, and integrationtransfer, and integration

Core competence arises from combination ofCore competence arises from combination of

firms stock of knowledge and flow of knowledgefirms stock of knowledge and flow of knowledge

through creation, transfer, and integration in a waythrough creation, transfer, and integration in a waythat is valuable, rare, inimitable, and organizedthat is valuable, rare, inimitable, and organized

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Dynamic capability construct illustrates theDynamic capability construct illustrates the

interdependent interplay between workforceinterdependent interplay between workforce

and core competence as it changes overand core competence as it changes over

timetime

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Reading 3.2 (Capelli & CrockerReading 3.2 (Capelli & Crocker--Hefter)Hefter)

Distinctive Human ResourcesDistinctive Human Resources

Flexibility dimension associated withFlexibility dimension associated with

prospectorsprospectors

Established markets category linked toEstablished markets category linked to

classifications like defendersclassifications like defenders

Employment practices are difficult toEmployment practices are difficult to

change and transferchange and transfer

Claim: core competencies should driveClaim: core competencies should drive

business strategy, and not vice versabusiness strategy, and not vice versa

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Distinctive Human ResourcesDistinctive Human Resources

Key question: If competencies areKey question: If competencies are

available to everyone in an open market,available to everyone in an open market,

how can they generate a unique competencyhow can they generate a unique competency

and competitive advantage for any oneand competitive advantage for any onefirm?firm?

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Reading 3.3 (Schuler)Reading 3.3 (Schuler)

The Five Ps Model of SHRMThe Five Ps Model of SHRM

PhilosophyPhilosophy

Statements of how organization values and treatsStatements of how organization values and treats

employees; essentiallyemployees; essentiallycultureculture of the organizationof the organization

PoliciesPolicies Expressions of shared values and guidelines for actionExpressions of shared values and guidelines for action

on employeeon employee--related business issuesrelated business issues

ProgramsPrograms

Coordinated and strategized approaches to initiate,Coordinated and strategized approaches to initiate,disseminate, and sustain strategic organizationaldisseminate, and sustain strategic organizational

change efforts necessitated by strategic business needschange efforts necessitated by strategic business needs

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PracticesPractices

HR practices motivate behaviors thatHR practices motivate behaviors that

allow individuals to assume rolesallow individuals to assume roles

consistent with organizations strategicconsistent with organizations strategic

objectivesobjectives

Three categories of roles:Three categories of roles:

LeadershipLeadership

ManagerialManagerial

OperationalOperational

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ProcessesProcesses

Continuum of participation by allContinuum of participation by all

employees in specific activities toemployees in specific activities to

facilitate formulation and implementationfacilitate formulation and implementation

of other activitiesof other activities

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Successful SHRM efforts begin with identificationSuccessful SHRM efforts begin with identification

of strategic needsof strategic needs

Employee participation is critical to linkingEmployee participation is critical to linking

strategy and HR practicesstrategy and HR practices Strategic HR depends on systematic and analyticalStrategic HR depends on systematic and analytical

mindsetmindset

Corporate HR departments can have impact onCorporate HR departments can have impact on

organizations efforts to launch strategicorganizations efforts to launch strategic

initiativesinitiatives

Documents

EKTA Chapter 03 2006