chapter 1 strategic management 1 copyright © 2013 by nelson education ltd

Chapter 1

Strategic Management

1Copyright © 2013 by Nelson Education Ltd.

Copyright © 2013 by Nelson Education Ltd. 2

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


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


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.


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


Strategy

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

Hem

era/Thinkstock


Descriptions of Strategy

Strategy: A declaration of intentStrategic 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

8


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

Copyright © 2013 by Nelson Education Ltd.

9


Objectives: The end, the goalsPlans: The product of strategy, the means to

the endStrategic 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


10

The Reality of the Strategic Process

1. Intended strategy: The agreed-upon strategy arrived at through the formal planning process

2. Emergent strategy: Created from new ideas and conditions

3. Discarded strategy: Deemed inappropriate due to changing circumstances

4. Realized strategy: The implemented plan; what actually happened


11

The Reality of the Strategic Process


12

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


13

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


14

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


Thi

nkst

ock

15

Growth Strategies

Incremental growth: Can be attained by expanding the client base, increasing products/services, changing the distribution networks, or using technology


Thinkstock

16

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


17

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


Business vs. Corporate Strategies

Business strategy:

The action plan for a single line of business to gain competitive advantage


18

19

Business vs. Corporate Strategies

Corporate strategy• Organizational-level

decisions that focus on long-term survival

• Examines questions about which competitive strategy to choose


©P

ling/Shutterstock

20

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:


21

The Strategic Planning Process

1. Establish the mission, vision, and values.

2. Develop objectives.

3. Analyze the external environment.

4. Identify the competitive advantage.

5. Determine the competitive position.

6. Implement the strategy.

7. Evaluate the performance.


22

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


23

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


24

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


25

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:


26

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


27

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?


28

Dynamic Capabilities

Dynamic capabilities: Organizational capabilities to adapt and renew competencies in accordance with the changing business environment


29

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


30

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.


31

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


32

Benefits of Strategy Formulation

• Clarity• Coordination• Efficiency• Incentives• Change• Career

Development


©P

ling/Shutterstock

33

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


chapter 1 strategic management 1 copyright © 2013 by nelson education ltd

Documents

nelson education

organizational strategy

product of strategy

conditionsdiscarded

circumstancesrealized

business strategy

organizational strategies

strategic hrmthere