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What is Strategy?

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Before understanding Strategic understand what

Human Resource the

Management let strategy

us first means:

Strategy in simple terms means unified course of action to achieve the goal. Strategy is a comprehensive plan for accomplishing an organizations goal. Definition of strategy: A strategy is a pattern or plan that integrates the organizations major goals, policies and action sequences into a cohesive whole. Therefore strategy is a kind of master plan, which both directs and co-ordinates the activities of an organization. Strategy is a companies plan on order to balance its internal strength and weaknesses with external opportunities and threats in order to gain and sustain a competitive advantage. Companies generally formulate 3 types of strategies: Corporate strategy: It identifies the mix of business the firm will engage in and the ways in which these business will relate to each other. It is concerned with the overall purpose and scope of the business to meet stakeholders expectations. This is a crucial level since it is heavily influenced by investors in the business acts to guide strategic decision making throughout the business. Corporate strategy is often stated explicitly in a mission statement. Business unit strategy: It identifies how each of the firms business will compete in the marketplace. It concerns with strategic decisions about choice of products, meeting needs of customers, gaining advantage over competitors, exploiting or creating new opportunities etc. Operational or functional Strategy: It identifies how manufacturing, marketing and other functions will contribute to business strategy. It is concerned with how each part of the business is organized to deliver the corporate and business-unit level strategic direction. Operational strategy therefore focuses on issues of resources, processes, people etc.

What is Strategic Management?


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Strategic management concerns with management decisions and actions responsible for long term performance of a corporation. It includes scanning of internal and external environment. Strategy formulation, implementation of strategy and evaluation and control.

Strategic management involves the following processes:

1. First step of strategic management is concerned with defining the companies vision, mission and purpose. 2. It identifies the companies internal strength and weaknesses. 3. It analyzes the opportunities and threats of external environment. 4. Developing strategies that will match strengths and weaknesses with the opportunities and threats. 5. Implementing the strategies developed in step 4. 6. Evaluating and controlling the process in order to ensure the achievement of organizations objectives.

What is Strategic Human Resource Management?


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SHRM refers to the proactive and organized alignment of human resource systems, processes, policies and practices as a whole with the mission and strategic objectives of the larger organization. Primary objective of SHRM is to enhance employee-managerial & organizational effectiveness and performance. It may be defined as an integration of HRM with the strategic goals and corporate strategy so as to improve business performance and achieve organization goals. Focus of SHRM is to improve organizations competitive performance by utilizing their human resources more effectively. It is based on belief that human resources are uniquely important to sustained business success. An organization can gain competitive advantage by strategical use of its human resources. The aim of SHRM is to ensure that the culture, style & structure of the organization and quality, commitment & motivation of employees contribute fully to the achievement of objectives.

Need and importance of SHRM


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Strategic Human Resource Management is very important in order to gain competitive performance by utilizing human resource of an organization effectively.

SHRM encourages managers to be proactive which means to think ahead. Attainment of organization objectives through human capital. It enhances individual performance by development of commitment at all levels. It enables development of need based personnel policy/HR policy as a prerequisite for optimum use of human resources. 5. Integration of HRM policy with business goals or objectives. 6. Developing supportive work culture in order to encourage creativity, team work, TQM as well as innovation and a sense of belonging. 1. 2. 3. 4.

7. Creation of flexible environment because in flexible environment employees can easily adapt to changing competitive environment. 8. Creation of flexible working hours/ function. 9. Integration of people related issues with business issues.

Corporate strategy vs Business strategy


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Corporate strategy

Business strategy

It concerns how diversified company intends to establish business positions It concerns with the actions in different industries as well as it deals and approaches crafted by with actions and approaches needed to management to produce improve performance of the group of successful performance in Meaning diverse business. one specific line of business. It deals with: 1. Taking competitive It deals with: advantage in particular 1. Kind of business in which company business in market. should be engaged. 2. Types of customer seek to 2. Goals and expectations of each and serve. every business. 3. Products of services that 3. Resource allocation to reach above should be offered. goals and expectations of each and 4. Resource allocation for that Nature every business. particular business. Wider scope: Deals with corporate as a Moderate scope: Deals with Scope whole. particular business in market. Stability strategies Growth strategies Cost leadership Retrenchment strategies Differentiation Types Combination strategies Focus/Niche

Integration of HR strategies with Business strategies


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Business strategy

HR strategy

Low cost strategy

Types of business Relevant HR strategy or strategy strategic fit Companies pursuing Enhancing labour low cost leadership productivity leadership aggressively seek Improving skills, reducing efficiencies in all movement time of

employees at work place etc. Little employment security. Few incentives, hierarchical pay, little training and traditional labour management relationship. Developing creative skills (training). Providing freedom to employees Empowering the employees. High This strategy involves participation,employment and attempt of the security, many incentives, company to produce egalitarian pay, extensive the product or render training and co-operative Differentiation the services different labour management strategy from its competitors relations. High employee participation, some employment security, This strategy focuses of some incentives, egalitarian concentrates on a specific pay, extensive training and market or customer co-operative labour Focus/Niche strategy group. management relationship.

operations including human resource to gain competitive edge. It does not mean cost control or cost cuts including operating with less employees.

Changing role of HRM


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The role of human resource management is changing very fast. This change is required in order to help corporates to achieve their goals. In recent years we have seen that HRM has undergone many phases. Initially main focus of HRM was on hiring and firing, however in current corporate scenario HRM has much more responsibilities like relationship building, legislation role. HR role is now shifting from protector to strategic partner. Nowadays most of the high performing organizations are flattened with least hierarchy which requires highly skilled employees to gain competitive edge in market. So HR role has drastically changed to develop and implement company strategy in order to achieve its goals. As HRM is concerned with people who work in organization, it becomes very important for HRM to hire good people, train them, retain good employees in order to achieve the organizations long term objectives. In recent years all the above HR roles are being used strategically and so now HRM is termed as SHRM.

Process of Strategic Planning


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Plan is a well thought out course of action. It lays down the specific path in which a piece of work can be done. Plans are called action guidelines. Strategic planning means setting organizational objectives and determining the course of action to attain the objectives. A strategy is the best method to make optimum use of resources and to ensure that the deployed resources will produce maximum desired results. Basic steps of strategic planning process include:

1. Identification of vision mission and objectives of the company. Vision concerns with what do we want to create? It focuses on, collective energy of insiders and give outsider and idea what an organization really is? Mission concerns with existence of that organization with the needs of society. In other words it is a declaration of organizations reason for being. Accomplishment of mission needs objectives formulation. 2. Analysis of external environment. External environment analysis includes social, technical, economical, political, international and natural environment analysis (STEPIN ). It mainly concerns with opportunity and threat analysis. For example low per capita income in India provides demand for low priced goods. 3. Analysis of internal environment. It concerns with strength and weakness analysis. It may include functional areas, organizational resources, organization structure and stakeholder 4. Revision of organizational directions, if necessary. Scanning internal and external environment reveals SWOT which helps management to reframe or revise its organizational directions. 5. Formulation of alternative strategies. Alternative strategies are formulated on the basis of available options and in accordance with organizational and environmental analysis. 6. Selecting best strategy. Best strategy is the strategy which fits organizational strength with the environmental opportunities in best possible manner. SWOT helps to rank alternative strategies and select the best strategy. 7. Implementation of selected Implementation of best selected strategy in an integral way. strategy.

8. Strategic evaluation and control. Strategic evaluation and control is necessary because the best strategy selected may sometime not result in global achievement.

What is Retrenchment Strategy?


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Retrenchment is a corporate level strategy that aims to reduce the size or diversity of an organization. Retrenchment is also reduction in expenditure to become financially stable. Retrenchment strategy is a strategy used by corporates in order to reduce the diversity or to cut the overall size of the operations of the company. This strategy is often used to cut down expenses with the goal of becoming more financially stable business. Typically the strategy involves withdrawing from certain markets or the discontinuation of selling certain products or services in order to make a beneficial turn around. Retirement is one of the retrenchment strategy. It is a point where a person stops employment completely. A person may also semi retire by reducing work hours. Many people choose to retire when they are eligible for private or public pension benefits, although some are forced to retire when physical conditions do not allow them to work any more.