Chapter 1
Strategic
Management
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Learning Outcomes
After reading this chapter, you should be able to:
• Discuss why managers need to examine the human
resource implications of their organizational
strategies
• Discuss why human resource managers need to
understand strategy
• Understand the various terms used to define strategy
and its processes
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Learning Outcomes
After reading this chapter, you should be able to:
• Describe organizational strategies, including
restructuring, growth, and stability
• Define business strategy and discuss how it differs
from corporate strategy
• Discuss the steps used in strategic planning
• List the benefits of strategic planning
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A Need for Strategic HRM
• There is a common theme among many
companies.
• Adapting organizational strategies to
include HRM is essential.
• If HRM strategies are not skillfully
applied, they can negatively affect
organizational strategy.
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Strategic Human
Resources Management
• Strategic management of people
through HR programs and policies helps
to ensure positive organizational
outcomes, such as:
– profitability
– customer satisfaction
– employee performance and
– organizational survival
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Strategy
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Strategy: The formulation of
organizational objectives,
competitive scopes, as well
as action plans for gaining
advantage
• The plan for how an
organization intends to
achieve its goals
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Descriptions of
Strategy
Strategy: A declaration of intent
Strategic intent: A tangible corporate
goal; a point of view about the
competitive positions a company hopes
to build over a decade
Strategic planning: The systematic
determination of goals and the plans to
achieve them
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Descriptions of
Strategy
Strategy formulation: The entire process of
conceptualizing the mission of an
organization, identifying the strategy, and
developing long-range performance goals
Strategy implementation: Those activities that
employees and managers of an organization
undertake to enact the strategic plan, to
achieve the performance goals
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Descriptions of
Strategy
Objectives: The end, the goals
Plans: The product of strategy, the means to
the end
Strategic plan: A written statement that
outlines the future goals of an
organization, including long-term
performance goals
Policies: Broad guidelines to action, which
establish the parameters or rules
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The Reality of the
Strategic Process
1.
2.
3.
4.
Intended strategy: The agreed-upon strategy
arrived at through the formal planning process
Emergent strategy: Created from new ideas
and conditions
Discarded strategy: Deemed inappropriate
due to changing circumstances
Realized strategy: The implemented plan;
what actually happened
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The Reality of the
Strategic Process
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Strategic Types
Corporate strategy: Organizational-level
decisions that focus on long-term survival
1. Restructuring: Includes turnaround,
divestiture, liquidation, and bankruptcies
2. Growth: Includes incremental,
international, and mergers and
acquisitions
3. Stability: Maintains status quo
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Restructuring
Strategies
Turnaround strategy: An attempt to
increase the viability of an organization
Divestiture: The sale of a division or part
of an organization
Liquidation: The termination of a
business and the sale of its assets
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Thinkstock
Restructuring
Strategies
Bankruptcy: A formal
procedure in which an
appointed trustee in
bankruptcy takes
possession of a
business’s assets and
disposes of them in
an orderly fashion
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Growth Strategies
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Incremental growth:
Can be attained by
expanding the client
base, increasing
products/services,
changing the
distribution
networks, or using
technology
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Growth Strategies
International growth: Can be attained by
seeking new customers or markets by
expanding internationally
Acquisition: The purchase of one
company by another
Merger: Two organizations combine
resources and become one
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Stability Strategies
• These are maintenance strategies
where companies do not wish to see
their companies grow and so their
strategic HRM practices remain
constant. These can be called
– status quo
– neutral
– do-nothing strategies
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Business vs. Corporate
Strategies
Business strategy:
The action plan for a single line of business to
gain competitive advantage
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Education Ltd.
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Business vs. Corporate
Strategies
Corporate strategy
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• Organizational-level
decisions that focus
on long-term survival
• Examines questions
about which
competitive strategy
to choose
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Strategic Plan Revisited
• A strategic plan describes the
organization’s future direction,
performance targets, and approaches to
achieve the targets in a formal, written
statement.
• Strategic planning can be a long
process that has numerous steps,
including the following:
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The Strategic Planning
Process
1.
2.
3.
4.
5.
6.
7.
Establish the mission, vision, and values.
Develop objectives.
Analyze the external environment.
Identify the competitive advantage.
Determine the competitive position.
Implement the strategy.
Evaluate the performance.
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Mission, Vision, Values
Mission statement: An articulation of the
purpose of the organization and the value it
creates for customers
Vision statement: A clear and compelling goal
that serves to unite an organization’s efforts
Values: The basic beliefs that govern individual
and group behaviour in an organization
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Purpose of Values
Statement
1. Conveys a sense of identity for employees
2. Generates employee commitment to
something greater than themselves
3. Adds to the stability of the organization as a
social system
4. Serves as a frame of reference for
employees to use to make sense of
organizational activities and to use as a
guide for appropriate behaviour
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Hard vs. Soft Objectives
Hard objectives: Goals that are an
expression in measurable terms of what
an organization intends to achieve
Soft objectives: Goals that define the
targets of social conduct for the
organization and may not always be
quantifiable
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What Is Competitive
Advantage?
Competitive advantage: The
characteristics of a firm that
enable it to earn higher rates of
profits than its competitors by
utilizing its resources, including:
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What Is Competitive
Advantage?
1. Tangible assets: Organizational
assets that have substance and can
be consumed
2. Intangible assets: Organizational
assets that are not concrete, such as
reputation, goodwill
3. Capabilities: Collective skills,
abilities, and expertise of an
organization
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Four Criteria of Sustained
Competitive Advantage
1. Valuable: Are the resources and
capabilities valuable to the firm?
2. Rare: Are the resources and capabilities
uncommon?
3. Inimitable: Are the resources and
capabilities hard to copy?
4. Nonsubstitutable: Are the resources and
capabilities replaceable with substitutes?
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Dynamic Capabilities
Dynamic capabilities: Organizational
capabilities to adapt and renew
competencies in accordance with the
changing business environment
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SWOT
• SWOT is an acronym for:
• Strengths,
• Weaknesses,
• Opportunities
• Threats
• Used to analyze the company’s resource
capabilities and deficiencies and its market
opportunities and threats in the future
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Porter’s Model of
Competitive Strategies
• Michael Porter made a major
contribution to the field of strategic
management by grouping the ways
organizations can compete into five
generic competitive strategies.
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Porter’s Five Generic
Competitive Strategies
1. Low-cost provider strategy
2. Broad differentiation strategy
3. Best-cost provider strategy
4. Focused or market niche strategy
based on lower cost
5. Focused or market niche strategy
based on differentiation
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Benefits of Strategy
Formulation
Clarity
Coordination
Efficiency
Incentives
Change
Career
Development
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•
•
•
•
•
•
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Errors in Strategic
Planning
• Relegating the process to official
planners and not involving executives
and managers
• Failing to use the plan as the guide to
making decisions and evaluating
performance
• Failing to align incentives and other HR
policies to the achievement of strategy
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An Overview of the
Textbook
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