Chapter 1 Strategic Management 1 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

Copyright © 2013 by Nelson Education Ltd.3 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

Copyright © 2013 by Nelson Education Ltd.4 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.

Copyright © 2013 by Nelson Education Ltd.5 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

Copyright © 2013 by Nelson Education Ltd.6 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 Hemera/Thinkstock

Copyright © 2013 by Nelson Education Ltd.7 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

8 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 Copyright © 2013 by Nelson Education Ltd.

9 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 Copyright © 2013 by Nelson Education Ltd.

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 Copyright © 2013 by Nelson Education Ltd.

11 The Reality of the Strategic Process Copyright © 2013 by Nelson Education Ltd.

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 Copyright © 2013 by Nelson Education Ltd.

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 Copyright © 2013 by Nelson Education Ltd.

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 Copyright © 2013 by Nelson Education Ltd. Thinkstock

15 Growth Strategies Incremental growth: Can be attained by expanding the client base, increasing products/services, changing the distribution networks, or using technology Copyright © 2013 by Nelson Education Ltd. 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 Copyright © 2013 by Nelson Education Ltd.

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 Copyright © 2013 by Nelson Education Ltd.

Business vs. Corporate Strategies Business strategy: The action plan for a single line of business to gain competitive advantage Copyright © 2013 by Nelson Education Ltd. 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 Copyright © 2013 by Nelson Education Ltd. ©Pling/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: Copyright © 2013 by Nelson Education Ltd.

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. Copyright © 2013 by Nelson Education Ltd.

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 Copyright © 2013 by Nelson Education Ltd.

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 Copyright © 2013 by Nelson Education Ltd.

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 Copyright © 2013 by Nelson Education Ltd.

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: Copyright © 2013 by Nelson Education Ltd.

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 Copyright © 2013 by Nelson Education Ltd.

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? Copyright © 2013 by Nelson Education Ltd.

28 Dynamic Capabilities Dynamic capabilities: Organizational capabilities to adapt and renew competencies in accordance with the changing business environment Copyright © 2013 by Nelson Education Ltd.

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 Copyright © 2013 by Nelson Education Ltd.

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. Copyright © 2013 by Nelson Education Ltd.

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 Copyright © 2013 by Nelson Education Ltd.

32 Benefits of Strategy Formulation Clarity Coordination Efficiency Incentives Change Career Development Copyright © 2013 by Nelson Education Ltd. ©Pling/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 Copyright © 2013 by Nelson Education Ltd.

An Overview of the Textbook 34Copyright © 2013 by Nelson Education Ltd.