ekta chapter 03 2006
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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
environmentenvironment
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
environmentenvironment
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
Human Resources & Resource Based ViewHuman Resources & Resource Based View
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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Reading 3.1Reading 3.1
Human Resources & Resource Based ViewHuman Resources & Resource Based View
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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Reading 3.2Reading 3.2
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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Reading 3.3Reading 3.3
The Five Ps Model of SHRMThe Five Ps Model of SHRM
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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Reading 3.3Reading 3.3
The Five Ps Model of SHRMThe Five Ps Model of SHRM
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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Reading 3.3Reading 3.3
The Five Ps Model of SHRMThe Five Ps Model of SHRM
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
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