1. External Competitiveness: Determining the Pay level
External competitiveness refers to the pay rates of an organization's jobs in relation to its competitors' pay rates.
External Competitiveness refers to the pay relationships among orgns the orgns pay relative to its competitors.
Thus, unlike the concept of internal equity, external equity is concerned with relative pay rates among organizations. The conventional view is that the lower bound of a jobspecific pay rate is set by the labour market and the upper bound reflects product market competition.

2. EXTERNAL COMPETITIVENESS IS EXPRESSED IN PRACTICE BY:

Selecting a pay level that is above, below or equal to competitors.

[Pay level refers to the average of array ofrates paid by an employer].

By considering the mix of pay forms relative to those of competitors.

[Pay forms refer to the mix of various types of payments that make up total compensation].
3. PAY LEVEL AND MIX FOCUS ATTENTION ON TWO OBJECTIVES:
CONTROLLABOUR COSTS
ATTRACT AND RETAIN EMPLOYEES
4. FACTORS SHAPING EXTERNAL COMPETITIVENESS
1. Labour Market Factors:

Nature of Demand

5. Nature of Supply2. Product Market Factors:

Degree of Competition

6. Level of Product Demand3. Organization Factors:

Industry, Strategy and Size

7. Individual ManagerEXTERNAL COMPETITIVENESS
8. LABOUR DEMAND

The marginal product of labour is the additional output associated with the employment of one additional HR unit, with other production factors held constant.

9. The marginal revenue of labour is the additional revenue generated when the firm employs one additional unit of HRs, with other production factors held constant.