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Strategic Planning. Corporate Strategy Simplified. 1. Core Competencies “An area of specialized expertise” C.K. Prahalad and Gary Hamel (1990) Harvard Business Review Competitive advantage Something you do better than competitors. 2. Efficiency vs. Innovation. Cost Leadership
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Corporate Strategy Simplified 1. Core Competencies • “An area of specialized expertise” C.K. Prahalad and Gary Hamel (1990) Harvard Business Review • Competitive advantage • Something you do better than competitors 2. Efficiency vs. Innovation Cost Leadership Cheaper Prices Differentiation Better Products
Strategy • A set of integrated and coordinated commitments and actions intended to achieve a stated goal. • A guide for action that is closely linked to the nature of the business. • Strategic Human Resource Management • Involves aligning initiatives involving how people are managed with the organizational mission and objectives.
Models of Strategy • Industrial Organization (O/I) Model • The external environment is the primary determinant of organizational strategy rather than the internal decisions of its managers. • All competing organizations control or have equal access to resources. • Resources are highly mobile between firms. • Organizational success is achieved by offering goods and services at lower costs than competitors or by differentiating products such that they bring premium prices. • Resource-Based View (RBV) • An organization’s resources and capabilities, not external environmental conditions, should be the basis for strategic decisions. • Competitive advantage is gained through the acquisition and value of organizational resources. • Organizations can identify, locate and acquire key valuable resources. • Resources are not highly mobile across organizations and once acquired are retained. • Valuable resources are costly to imitate and non-substitutable.
Levels of Strategy • Corporate Strategy • Growth • Stability • Turnaround • Business-Level Competitive • Cost leadership • Focus • Differentiation • Functional
Internal Methods Penetration of existing markets Developing new markets Developing new products or services for existing or new markets HR Issues Planning for new hiring Alerting current employees Ensuring quality and performance standards are maintained External Methods Acquiring other organizations Vertical integration HR Issues Merging organizations Dismissing redundant employees Corporate Strategies:Growth
Corporate Strategies (cont’d) • Stability • Maintaining the status quo due to limited environmental opportunities for gaining competitive advantage. • Few employees will have opportunities for advancement. • Critical that management identify key employees and develop specific HR retention strategies to keep them. • Turnaround or Retrenchment • Downsizing or streamlining the organization in a cost-cutting attempt to adjust to the competitive environment. • Few opportunities and many environmental threats. • Important to develop HR practices to manage the “survivors.”
Competitive Strategy Behavioral imperatives for success. Innovation Focus Low Cost • Efficient Production • Lower Labor Costs: • Part-time/shift work • Repetitive work • Minimum benefits • Reengineering • Experimentation • Risk Taking • Project Management • Teamwork • Responsiveness to customers • Problem Solving • Quality Standards
Differentiation Strategy • Attempting to distinguish organizational products or services from other competitors or creating the perception of a difference in order to demand a premium price from consumers. • Organization offers employees incentives and compensation for creativity. • What types of HR issues / practices?
Cost Leadership Strategy • Increases in efficiency and cutting of costs; then passing the savings to the consumer. • Assumes price elasticity in demand for products or services is high; small change in price will cause large increase in demand. • Assumes that customers are more price sensitive than brand loyal. • What types of HR issues / practices?
Focus Strategy • Business attempts to satisfy the needs of only a particular group or narrow segment of the market. • Strategic intent is to gain consumer loyalty of neglected groups of consumers. • What types of HR issues / practices?
Benefits of a Strategic Approach to HR • Facilitates the development of a high-quality workforce through its focus on the types of people and skills needed. • Facilitates cost-effective utilization of labor, particularly in service industries where labor is generally the greatest cost. • Facilitates the planning and assessment of environmental uncertainty and the adaptation of the organization to the external forces that impact the organization.
Starbucks Coffee • Corporate Strategy? • Competitive Strategy?
What benefits will I receive as a Starbucks Partner? Partners who work full time or part time (generally 20 hours or more per week) may participate in a variety of programs including: • Progressive Compensation • Healthcare Benefits (Medical, Prescription Drugs, Dental and Vision) • Retirement Savings Plan • Stock Options and Discounted Stock Purchase Plan “Bean Stock” • Income Protection Plan (Life and Disability Coverage) • Management Bonus Plan • Adoption Assistance Plan • Domestic partner benefits • Referral programs and support resources for child and eldercare • Employee involvement • A pound of coffee each week • http://www.starbucks.com/aboutus/jobcenter_thesbuxexperience.asp
HR and Performance Performance requires HR practices that: • Match the business strategy • Are internally consistent • Fit with organizational values and beliefs HR affects performance through: • Skills acquisitions and skill development • Employee motivation • Organizational efficiencies Is HR the only truly sustainable competitive advantage?
