Nature of Strategy Process

What is strategy?– A way of getting things done– Focus on past and future– Focus on environment and internal operations

The Strategic Management Process Strategy Formulation and Implementation

– Formulation: What Do We Do?• Internal-External SWOT Analysis

• Alternatives

• Strategy Selection

– Implementation: How Do We Make it Happen• Three players in process

• Where companies often fail

• Implementers lack authority, resources, business knowledge, understanding of strategy

The Strategic Management Process

Stakeholder Analysis– Multiple constituents– Balancing of needs

SWOT: Internal Conditions

Financial Business Strategy Production & Information Technology Culture & Philosophy Management Style Organization Design/Structure Employee Characteristics, Attitudes, Behavior.

Strategy Formulation: Identify trends.

Project into the future. Predict the consequences for the firm. Prioritize consequences.

SWOT: External Conditions

Aging workforce. Immigration. Technological changes. Government influences. Labor & product market conditions. Inflationary pressures. Globalization of markets.

Strategy Formulation:Resource Based

Physical, Organizational, or Human Capital based competitive advantages.

Heterogeneous Immobile Valuable Rare Imperfect Imitatability Lack of substitutes

Sustained Competitive Advantage

Resource-Based View of the Firm– Ownership of Valuable Resource that Enables

Company to Perform Better/Cheaper– Criteria for Resources to Provide SCA

• Must add positive value

• Must be unique or rate

• Must be difficult to imitate

• Must be nonsubsitutable

– Best sources are intangible resources

Strategic Human Resource Management

The pattern of planned human resource deployments and activities intended to enable an organization to achieve its strategic plan.A simultaneous long-term and integrative perspective to planning for and management of an organization’s human resources.

Characteristics of Strategic HR Approach

Is integrated with Corporate, business, functional strategies

Has a long-range focus (3 levels of operation) 3-5 years

Recognizes Impact of External Environment

Argues: Effective HRM is source of SCA

Where does SHRM fit in the firm?

Corporate Strategy

What business should we be in?

Business Level Strategy

How to compete in the chosen market?

Functional Level Strategy

How functions ensure and contribute to success of business strategies?

Integration of HR with Business Strategy

Accomodation (reactive)– Strategic Business Planning Group ----> HRM function

Interactive– Strategic Business Planning Group <----> HRM

function

Proactive– HRM function ---> Strategic Business Planning Group

Reasons for Integration of HRM & Strategy

As environmental instability increases In service industry Where top HR executive holds equal status

with other function executives Where line mgt sees that HR planning can

help them implement strategy

HRM as a Source of SCA

Jobs differ in skill requirements, employees differ in skills possessed: Adds value

Due to normal distribution of ability: Human resources with high ability are rare

Human resources are not easily imitated Human resources are not substitutable

Linking Competitive Strategies with HRM Practices and Behaviors

Growth Retrenchment

Linking Competitive Strategies with HRM Practices and Behaviors

Change in Competitive Strategy– Needs to be accompanied by change in HR

practices– 7 – S Model

Strategic Choices:Training & Development

Focus on current or future job skills? Firm specific or general skills?

Strategic Choices:Compensation

Internal or external focus? Individual or group level? High or low risk? Membership vs. performance?

Strategic Choices:Labor & Employee Relations

Collective v. individual relationships. Formality of due process. Employees as expenses v. assets.