CHAPTER 3:

STRATEGIC
PLANNING
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Strategic Management
Strategic Human Resource Management
Involves aligning initiatives involving how people are
managed with organizational mission & objectives

Strategic Management Process

Determining what needs to be done to achieve corporate
objectives over 3 - 5 years
Examining organization & competitive environment
Establishing optimal fit between organization & its
environment
Reviewing & revising strategic plan

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Models of Strategy
Industrial Organization (O/I) Model
External environment is primary determinant of
organizational strategy rather than internal decisions of
managers
Environment presents threats & opportunities
All competing organizations control or have equal access to
resources
Resources are highly mobile between firms
Organizational success is achieved by
Offering goods & services at lower costs than competitors
Differentiating products to bring premium prices

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Models of Strategy
Resource-Based View (RBV)
An organizations resources & capabilities, not external
environmental conditions, should be basis for strategic
decisions
Competitive advantage is gained through acquisition & value
of organizational resources
Organizations can identify, locate & acquire key valuable
resources
Resources are not highly mobile across organizations & once
acquired are retained
Valuable resources are costly to imitate & non-substitutable
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Contrasting the Two Approaches

Research provides support for both
positions
What drives strategy?
I/O: External considerations
RBV: Internal considerations

I/O: Strategy drives resource acquisition

RBV: Strategy determined by resources

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The Process of Strategic Management

Mission statement
Environmental analysis
Organizational self-assessment
Establishing goals & objectives

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Exhibit 3-1

Process of Strategic Management

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Mission Statement

Explains purpose & reason for existence

Usually very broad
No more than a couple of sentences
Serves as foundation for everything
organization does

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Solectron Mission Statement

Our mission is to provide worldwide
responsiveness to our customers by offering the
highest quality, lowest total cost, customized,
integrated, design, supply-chain and
manufacturing solutions through long-term
partnerships based on integrity and ethical
business practices.

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Analysis of Environment
Critical components of external
environment

Competition
Industry structure
Government regulations
Technology
Market trends
Economic tends

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Organization Self-Assessment
Identify primary strengths & weaknesses
Find ways to capitalize on strengths
Find ways to improve or minimize
weaknesses
Examine resources

Physical
Human
Technological
Capital

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Organization Self-Assessment

Examine internal management systems

Culture
Organization structure
Power dynamics & policy
Decision-making processes
Past strategy & performance
Work systems

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Establishing Goals & Objectives

Goals should be:

Specific
Measurable
Flexible

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Corporate Strategies: Growth

Benefits
Gaining economies of scale in
operations & functions
Enhancing competitive position
vis--vis industry competitors
Providing opportunities for
employee professional
development & advancement

HR Issues
Planning for new hiring
Alerting current employees
Ensuring quality & performance
standards are maintained
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Internal Methods
Penetration of existing markets
Developing new markets
Developing new products or
services for existing or new
markets

External Methods
Acquiring other organizations
Vertical integration

HR Issues
Merging organizations
Dismissing redundant employees

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Corporate Strategies: Stability

Maintaining status quo due to limited
environmental opportunities for gaining
competitive advantage
Few employees will have opportunities for
advancement
Critical that management identify key
employees & develop specific HR retention
strategies to keep them
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Corporate Strategies:
Turnaround or Retrenchment

Downsizing or streamlining organization in

cost-cutting attempt to adjust to competitive
environment
Few opportunities & many environmental
threats
Important to develop HR practices to
manage survivors

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Business Unit Strategies: Cost Leadership

Increases in efficiency & cutting of costs, then
passing savings to consumer
Assumes price elasticity in demand for products
or services is high
Assumes that customers are more price sensitive
than brand loyal
HR strategy focuses on short-term performance
measures of results & promoting efficiency
through job specialization & cross-training

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Business Unit Strategies: Differentiation

In order to demand a premium price from
consumers
Attempting to distinguish organizational products or services
from other competitors or
Creating perception of difference

Organization offers employees incentives &

compensation for creativity
HR strategy focuses on external hiring of unique
individuals & on retaining creative employees

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Business Unit Strategies: Focus

Business attempts to satisfy needs of only a
particular group or narrow market segment
Strategic intent is to gain consumer loyalty of
neglected groups of consumers
Strategic HR issue is ensuring employee
awareness of uniqueness of market segment
Thorough employee training & focus on customer
satisfaction are critical factors
Hiring members of target segment who are empathetic to
customer in target segment
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Exhibit 3-3 (page 1)

Dyer & Holders Typology of Strategies

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Exhibit 3-3 (page 2)

Dyer & Holders Typology of Strategies

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Benefits of a Strategic Approach to HR

Facilitates development of high-quality
workforce through focus on types of people
& skills needed
Facilitates cost-effective utilization of labor,
particularly in service industries where
labor is generally greatest cost
Facilitates planning & assessment of
environmental uncertainty & adaptation of
organization to external forces
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Reading 3.1

Human Resources & Resource Based View

People management systems construct

Not all competitive advantage begins with
people management systems
These systems create value to extent that
they impact stock, flow, & change of
intellectual capital/knowledge
Basis of core competencies

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Reading 3.1

Human Resources & Resource Based View

Skill concept expanded to consider stock of
intellectual capital in firm
Behavior concept reconceptualized as flow of
knowledge within firm through its creation,
transfer, & integration
Core competence arises from combination of
firms stock of knowledge & flow of knowledge
through creation, transfer, & integration in a way
that is valuable, rare, inimitable, & organized

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Reading 3.1

Human Resources & Resource Based View

Dynamic capability construct illustrates
interdependent interplay between workforce
& core competence as it changes over time

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Reading 3.2

Distinctive Human Resources

Flexibility dimension associated with
prospectors
Established markets category linked to
classifications like defenders
Employment practices are difficult to
change & transfer
Core competencies should drive business
strategy & not vice versa
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Reading 3.2

Distinctive Human Resources

If competencies are available to everyone
on open market, how can they generate a
unique competency & competitive
advantage for any one firm?

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Reading 3.3

The Five Ps Model of SHRM

Philosophy
Statements of how organization values & treats employees;
essentially culture of the organization

Policies
Expressions of shared values & guidelines for action on
employee-related business issues

Programs
Coordinated & strategized approaches to initiate,
disseminate, & sustain strategic organizational change
efforts necessitated by strategic business needs

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Reading 3.3

The Five Ps Model of SHRM

Practices
HR practices motivate behaviors that allow
individuals to assume roles consistent with
organizations strategic objectives
Three categories of roles:
Leadership
Managerial
Operational
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Reading 3.3

The Five Ps Model of SHRM

Processes
Continuum of participation by all employees
in specific activities to facilitate formulation &
implementation of other activities

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Reading 3.3

The Five Ps Model of SHRM

Successful SHRM efforts begin with identification
of strategic needs
Employee participation is critical to linking
strategy & HR practices
Strategic HR depends on systematic & analytical
mindset
Corporate HR departments can have impact on
organizations efforts to launch strategic
initiatives

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