CHAPTER 3:

STRATEGIC
PLANNING

Copyright 2005 South-Western. All rights reserved.

 Strategic
Strategic Management
Management

Strategic
Strategic Human
Human Resource
Resource Management
Management
Involves
Involvesaligning
aligninginitiatives
initiativesinvolving
involvinghow
howpeople
peopleare
are
managed
managedwith
withorganizational
organizationalmission
mission&&objectives
objectives
Strategic
Strategic Management
Management Process
Process
Determining
Determiningwhat
whatneeds
needstotobe bedone
donetotoachieve
achievecorporate
corporate
objectives
objectivesover
over33--55years
years
Examining
Examiningorganization
organization&&competitive
competitiveenvironment
environment
Establishing
Establishingoptimal
optimalfitfitbetween
betweenorganization
organization&&its
its
environment
environment
Reviewing
Reviewing&&revising
revisingstrategic
strategicplan
plan

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 Models
Models of
of Strategy
Strategy

Industrial
Industrial Organization
Organization (O/I)
(O/I) Model
Model
External
Externalenvironment
environmentisisprimary
primarydeterminant
determinantofof
organizational
organizationalstrategy
strategyrather
ratherthan
thaninternal
internaldecisions
decisionsofof
managers
managers
Environment
Environmentpresents
presentsthreats
threats&&opportunities
opportunities
All
Allcompeting
competingorganizations
organizationscontrol
controlororhave
haveequal
equalaccess
accesstoto
resources
resources
Resources
Resourcesare
arehighly
highlymobile
mobilebetween
betweenfirms
firms
Organizational
Organizationalsuccess
successisisachieved
achievedbyby
Offering
Offeringgoods
goods&&services
servicesatatlower
lowercosts
coststhan
thancompetitors
competitors
Differentiating
Differentiatingproducts
productstotobring
bringpremium
premiumprices
prices

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 Models
Models of
of Strategy
Strategy

Resource-Based
Resource-BasedView
View (RBV)
(RBV)
AnAnorganizations
organizationsresources
resources&&capabilities,
capabilities,not
notexternal
external
environmental
environmentalconditions,
conditions,should
shouldbe bebasis
basisfor
forstrategic
strategic
decisions
decisions
Competitive
Competitiveadvantage
advantageisisgained
gainedthrough
throughacquisition
acquisition&&value
value
ofoforganizational
organizationalresources
resources
Organizations
Organizationscan
canidentify,
identify,locate
locate&&acquire
acquirekey
keyvaluable
valuable
resources
resources
Resources
Resourcesarearenot
nothighly
highlymobile
mobileacross
acrossorganizations
organizations&&once
once
acquired
acquiredare
areretained
retained
Valuable
Valuableresources
resourcesare arecostly
costlytotoimitate
imitate&&non-substitutable
non-substitutable

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 Contrasting
Contrasting the
the Two
Two Approaches
Approaches

Research
Research provides
provides support
support for
for both
both
positions
positions
What
What drives
drives strategy?
strategy?
I/O:
I/O:External
Externalconsiderations
considerations
RBV:
RBV:Internal
Internalconsiderations
considerations
I/O:
I/O: Strategy
Strategy drives
drives resource
resource acquisition
acquisition
RBV:
RBV:Strategy
Strategy determined
determined by
by resources
resources

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 The
The Process
Process of
of Strategic
Strategic
Management
Management
Mission
Mission statement
statement
Environmental
Environmental analysis
analysis
Organizational
Organizational self-assessment
self-assessment
Establishing
Establishing goals
goals &
&objectives
objectives

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 Exhibit
Exhibit3-1
3-1
Process
Process of
of Strategic
Strategic Management
Management

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 Mission
Mission Statement
Statement

Explains
Explains purpose
purpose & & reason
reason for
for existence
existence
Usually
Usually very
very broad
broad
No
No more
more than
than aa couple
couple of
of sentences
sentences
Serves
Serves as
as foundation
foundation for
for everything
everything
organization
organization does
does

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 Solectron
Solectron Mission
Mission Statement
Statement

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

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 Analysis
Analysis of
of Environment
Environment

Critical
Critical components
components of
of external
external
environment
environment
Competition
Competition
Industry
Industrystructure
structure
Government
Governmentregulations
regulations
Technology
Technology
Market
Markettrends
trends
Economic
Economictends
tends

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 Organization
Organization Self-Assessment
Self-Assessment

Identify
Identify primary
primary strengths
strengths && weaknesses
weaknesses
Find
Find ways
ways toto capitalize
capitalize on
on strengths
strengths
Find
Find ways
ways toto improve
improve or
or minimize
minimize
weaknesses
weaknesses
Examine
Examine resources
resources
Physical
Physical
Human
Human
Technological
Technological
Capital
Capital
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 Organization
Organization Self-Assessment
Self-Assessment

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

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 Establishing
Establishing Goals
Goals &
& Objectives
Objectives

Goals
Goals should
should be:
be:
Specific
Specific
Measurable
Measurable
Flexible
Flexible

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 Corporate
Corporate Strategies:
Strategies: Growth
Growth
Benefits
Benefits Internal
InternalMethods
Methods
Gaining
Gainingeconomies
economiesofofscale
scaleinin Penetration
Penetrationofofexisting
existingmarkets
markets
operations
operations&&functions Developing
functions Developingnew
newmarkets
markets
Enhancing
Enhancingcompetitive
competitiveposition Developing
position Developingnew
newproducts
productsoror
vis--vis
vis--visindustry
industrycompetitors services
competitors servicesfor
forexisting
existingorornew
new
Providing
Providingopportunities
opportunitiesfor
for markets
markets
employee
employeeprofessional
professional External
development ExternalMethods
Methods
development&&advancement
advancement Acquiring
Acquiringother
otherorganizations
organizations
HR
HRIssues
Issues Vertical
Verticalintegration
integration
Planning
Planningfor
fornew
newhiring
hiring HR
HRIssues
Issues
Alerting
Alertingcurrent
currentemployees
employees Merging
Mergingorganizations
organizations
Ensuring
Ensuringquality
quality&&performance
performance
standards Dismissing
Dismissingredundant
redundantemployees
employees
standardsare
aremaintained
maintained

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 Corporate
Corporate Strategies:
Strategies: Stability
Stability

Maintaining
Maintaining status
status quo
quo due
due to
to limited
limited
environmental
environmental opportunities
opportunities for
for gaining
gaining
competitive
competitive advantage
advantage
Few
Few employees
employees willwill have
have opportunities
opportunities forfor
advancement
advancement
Critical
Critical that
that management
management identify
identify key
key
employees
employees & & develop
develop specific
specific HRHR retention
retention
strategies
strategies to
to keep
keep them
them

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 Corporate
Corporate Strategies:
Strategies:
Turnaround
Turnaround or
or Retrenchment
Retrenchment
Downsizing
Downsizing or or streamlining
streamlining organization
organization in
in
cost-cutting
cost-cutting attempt
attempt to
to adjust
adjust to
to competitive
competitive
environment
environment
Few
Few opportunities
opportunities & & many
many environmental
environmental
threats
threats
Important
Important to
to develop
develop HR
HR practices
practices to
to
manage
manage survivors
survivors

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 Business
Business Unit
Unit Strategies:
Strategies: Cost
Cost
Leadership
Leadership
Increases
Increases inin efficiency
efficiency & &cutting
cutting of
of costs,
costs, then
then
passing
passing savings
savings to to consumer
consumer
Assumes
Assumes price
price elasticity
elasticity in
in demand
demand forfor products
products
or
or services
services isis high
high
Assumes
Assumes that
that customers
customers areare more
more price
price sensitive
sensitive
than
than brand
brand loyal
loyal
HR
HR strategy
strategy focuses
focuses on
on short-term
short-termperformance
performance
measures
measures of of results
results &
&promoting
promoting efficiency
efficiency
through
through job
job specialization
specialization & &cross-training
cross-training

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 Business
Business Unit
Unit Strategies:
Strategies:
Differentiation
Differentiation
In
In order
order to
to demand
demand aa premium
premiumprice
price from
from
consumers
consumers
Attempting
Attemptingtotodistinguish
distinguishorganizational
organizationalproducts
productsororservices
services
from
fromother
othercompetitors
competitorsoror
Creating
Creatingperception
perceptionofofdifference
difference
Organization
Organization offers
offers employees
employees incentives
incentives & &
compensation
compensation forfor creativity
creativity
HR
HR strategy
strategy focuses
focuses onon external
external hiring
hiring of
of unique
unique
individuals
individuals &
&on on retaining
retaining creative
creative employees
employees

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 Business
Business Unit
Unit Strategies:
Strategies: Focus
Focus

Business
Business attempts
attempts to to satisfy
satisfy needs
needs of
ofonly
only aa
particular
particular group
group or or narrow
narrowmarket
market segment
segment
Strategic
Strategic intent
intent isis to
to gain
gain consumer
consumer loyalty
loyalty ofof
neglected
neglected groups
groups of of consumers
consumers
Strategic
Strategic HR
HRissue
issue isis ensuring
ensuring employee
employee
awareness
awareness of of uniqueness
uniqueness of of market
market segment
segment
Thorough
Thoroughemployee
employeetraining
training&&focus
focuson
oncustomer
customer
satisfaction
satisfactionare
arecritical
criticalfactors
factors
Hiring
Hiringmembers
membersofoftarget
targetsegment
segmentwho
whoare
areempathetic
empathetictoto
customer
customerinintarget
targetsegment
segment

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 Exhibit
Exhibit3-3
3-3(page
(page1)
1)
Dyer
Dyer &
& Holders
Holders Typology
Typology of
of
Strategies
Strategies

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 Exhibit
Exhibit3-3
3-3(page
(page2)
2)
Dyer
Dyer &
& Holders
Holders Typology
Typology of
of
Strategies
Strategies

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 Benefits
Benefits of
of aa Strategic
Strategic Approach
Approach to
to
HR
HR
Facilitates
Facilitates development
development of of high-quality
high-quality
workforce
workforce through
through focus
focus onon types
types of
of people
people
&& skills
skills needed
needed
Facilitates
Facilitates cost-effective
cost-effective utilization
utilization of
of labor,
labor,
particularly
particularly inin service
service industries
industries where
where
labor
labor isis generally
generally greatest
greatest cost
cost
Facilitates
Facilitates planning
planning && assessment
assessment of of
environmental
environmental uncertainty
uncertainty & & adaptation
adaptation ofof
organization
organization to to external
external forces
forces
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 Reading
Reading3.1
3.1
Human
Human Resources
Resources && Resource
Resource Based
Based
View
View
People
People management
management systems
systems construct
construct
Not
Not all
all competitive
competitive advantage
advantage begins
begins with
with
people
people management
management systems
systems
These
These systems
systems create
create value
value toto extent
extent that
that
they
they impact
impact stock,
stock, flow,
flow, && change
change ofof
intellectual
intellectual capital/knowledge
capital/knowledge
Basis
Basis ofof core
core competencies
competencies

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 Reading
Reading3.1
3.1
Human
Human Resources
Resources && Resource
Resource Based
Based
View
View
Skill
Skill concept
concept expanded
expanded to to consider
consider stock
stock ofof
intellectual
intellectual capital
capital in
in firm
firm
Behavior
Behavior concept
concept reconceptualized
reconceptualized as as flow
flow of
of
knowledge
knowledge within
within firm
firmthrough
through its
its creation,
creation,
transfer,
transfer,& &integration
integration
Core
Core competence
competence arises
arises from
fromcombination
combination of of
firms
firmsstock
stock of
of knowledge
knowledge & &flow
flow ofof knowledge
knowledge
through
through creation,
creation, transfer,
transfer,& &integration
integration inin aaway
way
that
that isis valuable,
valuable, rare,
rare, inimitable,
inimitable, & & organized
organized

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 Reading
Reading3.1
3.1
Human
Human Resources
Resources & & Resource
Resource Based Based
View
View
Dynamic
Dynamic capability
capability construct
construct illustrates
illustrates
interdependent
interdependent interplay
interplay between
between
workforce
workforce & & core
core competence
competence as as itit changes
changes
over
over time
time

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 Reading
Reading3.2
3.2
Distinctive
Distinctive Human
Human Resources
Resources
Flexibility
Flexibility dimension
dimension associated
associated with
with
prospectors
prospectors
Established
Established markets
markets category
category linked
linked toto
classifications
classifications like
like defenders
defenders
Employment
Employment practices
practices are
are difficult
difficult to
to
change
change & & transfer
transfer
Core
Core competencies
competencies should
should drive
drive business
business
strategy
strategy &
& not
not vice
vice versa
versa

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 Reading
Reading3.2
3.2
Distinctive
Distinctive Human
Human Resources
Resources
IfIf competencies
competencies are
are available
available to
to everyone
everyone
on
on open
open market,
market, how
how can
can they
they generate
generate aa
unique
unique competency
competency & & competitive
competitive
advantage
advantage for
for any
any one
one firm?
firm?

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 Reading
Reading3.3
3.3
The
The Five
Five Ps
Ps Model
Model of
of SHRM
SHRM
Philosophy
Philosophy
Statements
Statementsofofhow
howorganization
organizationvalues
values&&treats
treatsemployees;
employees;
essentially
essentiallyculture
cultureofofthe
theorganization
organization
Policies
Policies
Expressions
Expressionsofofshared
sharedvalues
values&&guidelines
guidelinesfor
foraction
actionon
on
employee-related
employee-relatedbusiness
businessissues
issues
Programs
Programs
Coordinated
Coordinated&&strategized
strategizedapproaches
approachestotoinitiate,
initiate,
disseminate,
disseminate,&&sustain
sustainstrategic
strategicorganizational
organizationalchange
change
efforts
effortsnecessitated
necessitatedbybystrategic
strategicbusiness
businessneeds
needs

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 Reading
Reading3.3
3.3
The
The Five
Five Ps
Ps Model
Model of
of SHRM
SHRM
Practices
Practices
HR
HR practices
practices motivate
motivate behaviors
behaviors that
that allow
allow
individuals
individuals toto assume
assume roles
roles consistent
consistent with
with
organizations
organizations strategic
strategic objectives
objectives
Three
Three categories
categories ofof roles:
roles:
Leadership
Leadership
Managerial
Managerial
Operational
Operational

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 Reading
Reading3.3
3.3
The
The Five
Five Ps
Ps Model
Model of
of SHRM
SHRM
Processes
Processes
Continuum
Continuum ofof participation
participation by by all
all employees
employees
inin specific
specific activities
activities toto facilitate
facilitate formulation
formulation &&
implementation
implementation ofof other
other activities
activities

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 Reading
Reading3.3
3.3
The
The Five
Five Ps
Ps Model
Model of
of SHRM
SHRM
Successful
Successful SHRM
SHRM efforts
efforts begin
begin with
with identification
identification
of
of strategic
strategic needs
needs
Employee
Employee participation
participation isis critical
critical to
to linking
linking
strategy
strategy &&HRHR practices
practices
Strategic
Strategic HR
HRdepends
depends on on systematic
systematic & &analytical
analytical
mindset
mindset
Corporate
Corporate HR HR departments
departments can can have
have impact
impact onon
organizations
organizationsefforts
efforts to
to launch
launch strategic
strategic initiatives
initiatives

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