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MM ZC441: Human

Resource Management
BITS Pilani Lecture -2 ; Total slides : 43 ,date: 30 /7/16 Swati Alok
Hyderabad Campus
BITS Pilani
Hyderabad Campus

Chapter 3 : Integrating HR Strategy with Business Strategy


Learning Objectives

• Understand Strategic management process


• Understand corporate Strategy
• Understand Business Strategy
• How to align HRM functional strategy with Business
Strategy

BITS Pilani, Hyderabad Campus


“If you don’t have a strategy you
will be . . . part of somebody
else’s strategy.”
- Alvin Toffler

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© RoyaltyFree/ Stockdisc/ Getty Images
Definition of strategy
A strategy is the set of actions through which an
organization , develops resources and uses them to
deliver services or products in a way which its users find
valuable, while meeting the financial and other objectives
and constraints imposed by key stakeholders. Most
successful strategies give an organization:
– some property that is unique, or at least distinctive;
– the means for renewing its competitive advantage as the
environment changes.
Different types of stakeholder
Different stakeholders and objectives
Shareholder – dividend + stock price appreciation
Suppliers- predictable orders , bills paid
Creditors- commitment to met on time
Customers- safe products , value for price paid
Employees- fair day pay , benefits
Union- large body of fee paying members
Government- tax revenues

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Strategic management

.
Strategic management: refers to the process of crafting
strategies , their implementation and evaluation of their
effectiveness.
Strategies bridge where the company is now , with
where it wants to be tomorrow.

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Strategic Management
Process
Environmental Scanning
Strategy Formulation
– Corporate level
– Business unit level
– Functional level

Strategy Implementation
Strategy Evaluation

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The Strategic Management Process

External Analysis

• opportunities

• threats

Identify the

organization's Formulate Implement Evaluate


SWOT Analysis
current mission, goals, Strategies Strategies Results
and strategies

Internal Analysis

• strengths

• weaknesses

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FIGURE 3–6 Worksheet for Environmental Scanning

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About Surf excel

Launched in 1954
Oldest detergent used in more then 20 countries
Very strong brand communication
Available in wide variety and product size. (surf excel blue, matic, quick wash, comfort in
5 kg, 2kg, 250grm)
Solid base company of Unilever (HUL) , employee 2lks, operated in 100 countries, $868
m in R&D;
Strong competitors, (tide, nirma, ariel, oxycean, sundry)
Substitute products (liquid detergent, bars)
Lack of control in supply chain mgmt
No famous brand ambassador
High price of product
Changing life style
Applying tactics and surprise
Explore new geographical market
Political effects, economical effect, legislative effect;environmental effect
Chances of price war

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FIGURE 3–7 SWOT Matrix, with Generic Examples

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FIGURE 3–8 Type of Strategy at Each Company Level

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Types of Corporate Strategies

Corporate Strategy Possibilities

Growth Stability Renewal

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Concentration Strategy

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Integration Strategy
Corporate-level strategies are primarily directed toward improving a
company’s competitive advantage and profitability in its present
business or product line:

• Horizontal Integration
– The process of acquiring or merging with industry
competitors
• Vertical Integration
– Expanding operations backward into an industry that
produces inputs for the company or forward into an industry
that distributes the company’s products

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Raw-Materials-to-Costumer Value-Added Chain
in the Personal Computer Industry

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Full and Taper Integration

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Transfer of Competencies at
Philip Morris ( Related diversification)

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Sharing Resources at Procter &
Gamble (related Diversification)

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Types of Competitive Strategies

Business-Level
Competitive Strategies

Cost leadership Differentiation Focus/Niche

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Business strategies

Strategic Advantage
Uniqueness Perceived Low Cost Position
by the Customer
Strategic Target

Industry wide DIFFERENTIATION OVERALL


COST LEADERSHIP

Particular FOCUS
Segment Only

Source: Porter (1980)

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Functional Strategy
– All of the firm’s activities must be tailored to or
fit the chosen strategy such that the firm’s
functional strategies support its corporate and
competitive strategies.

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Strategic Human Resource
Management
Formulating and executing Human resource policies
and practices that the company needs to achieve its
strategic aims.
Three approaches to HR strategies:
– The best fit Approach: Contingency (environment not
stable, If-then; HR strategy should be based on change in
environment)
– Best Practices Approach: One size fits all/circumstances-
Prescriptive in nature
– Resource based view: use its resources to create an
environment that is favourable to itself

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Porter’s Business Unit Strategies

Cost leadership –
- HR emphasis on efficient, low-cost production, highly
structured procedures, and discourages creativity and
innovation
Differentiation -
- HR emphasis on innovation, flexibility, and renewal of
the workforce by attracting new talent from other firms
Focus –
- HR emphasis would be cross between those described
for low-cost producers and differentiators

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Competitive strategies and work flow
system
strategy structure Design dimensions

Functional High formalization,


centralization, low
Cost leadership complexity
Divisional Moderate complexity,
Market centralization,
differentiation formalization
matrix Low formalization,
Innovative decentralization ,flat
differentiation hierarchy
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Selected HR Strategies That Fit Porter’s Major
Types of Business Strategies
Business Common Organizational
Strategy Characteristics HR Strategies
Overall • Sustained capital investment • Efficient production
cost and access to capital • Explicit job descriptions
leadership • Intense supervision of labor • Detailed work planning
• Tight cost control requiring • Emphasis on technical
frequent, detailed control qualifications and skills
reports • Emphasis on job-specific
• Low-cost distribution system training
• Structured organization • Emphasis on job-based pay
and responsibilities • Use of performance
• Products designed for ease appraisal as a control device
in manufacture

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Selected HR Strategies That Fit Porter’s Major
Types of Business Strategies
Business Common Organizational
Strategy Characteristics HR Strategies
Differ- •Strong marketing abilities • Emphasis on innovation
entiation •Product engineering and flexibility
•Strong capability in basic • Broad job classes
research • Loose work planning
•Corporate reputation for • External recruitment
quality or technological • Team-based training
leadership • Emphasis on individual-
•Amenities to attract highly based pay
skilled labor, scientists, or • Use of performance
creative people. appraisal as development
tool

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Resource-Based View

• Each organization is a collection of


unique resources and capabilities that
provides the basis for its strategy and
that is the primary source of its returns
• Experience, knowledge, judgement, risk
taking propensity, wisdom of individuals
etc

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Organizations as bundles of resources
• Offices, laboratories, factories, equipment
Physical assets • Specialized equipment, important locations

Financial assets • Cash flow, cash reserves

• Leaders and managers


Human resources • Skilled and motivated employees

• Patents, research programmes, intellectual property


Intellectual resources • Capabilities and competences

Reputational assets • Brands, reputation

• Alliance partners, supplier networks


Relational resources • Governments
Strategy, Resources, Capabilities, and
Competencies
Figure 3.1

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Examples of
Firms’
Capabilities

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The Four Criteria of Sustainable Competitive Advantage

Valuable Capabilities • Help a firm neutralize threats or


exploit opportunities

Rare Capabilities • Are not possessed by many others

Costly-to-Imitate Capabilities • Historical: A unique and a valuable


organizational culture or brand name
• Social complexity: Interpersonal
relationships, trust, and friendship
among managers, suppliers, and
customers

Nonsubstitutable Capabilities • No strategic equivalent


FIGURE 3–11 Basic Model of How to Align HR Strategy and
Actions with Business Strategy

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FIGURE 3–9 Southwest Airlines’ Activity System

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Southwest Airlines

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SHRM involves five phases:

Phase 1: Scan the environment


Phase2: Identify source of competitive
advantage
Phase 3: Identify HR strategies
Phase4: Implement Strategies
Phase 5: Monitor and evaluate HR
strategies

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Summary of Ch-4

Key Terms :
• SWOT analysis
• Corporate level Strategy ( Growth, stability, Renewal)
• Business level Strategy (Cost leadership. Differentiation,
Focus)
• Linking or aligning business level strategy with HR
functions
• 3 approach to HR strategy

BITS Pilani, Hyderabad Campus

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