Strategic Human Resources Management

Linda M. Balboul

Ph.D. Sociology
MBA Human Resources
PMP



Art & science of formulating,
implementing, and evaluating, cross-
functional decisions that enable an
organization to achieve its objectives

Strategic Management Defined

In essence, the strategic plan is a
companys game plan

Strategic Management
Strategic Management
The term strategic management is used
synonymously with strategic planning.
3 Stages of the Strategic Management Process

Strategy formulation

Strategy implementation

Strategy evaluation
Vision & Mission
Strategy Formulation
External Opportunities & Threats
Internal Strengths & Weaknesses
Long-Term Objectives
Alternative Strategies
Strategy Selection


Issues in Strategy
Formulation
Businesses to enter
Businesses to abandon
Allocation of resources
Expansion or
diversification
International markets
Mergers or joint ventures
Avoidance of hostile
takeover


Strategy Implementation
Annual Objectives
Policies
Employee Motivation
Resource Allocation
Strategy Implementation Steps
Developing a strategy-supportive culture
Creating an effective organizational structure
Redirecting marketing efforts
Preparing budgets
Developing and utilizing information systems
Linking employee compensation to organizational
performance


Strategy Evaluation
Internal Audit
External Audit
Performance Measurement
Corrective Action

Peter Drucker: Think through the overall
mission of a business.
Ask the key question:

What is our Business?

Prime Task of
Strategic Management
Anything that a firm does
especially well compared to rival
firms
Strategic Management is Gaining and
Maintaining Competitive Advantage
Strategic Management
Strategy
Strategies are the means by
which long-term objectives
will be achieved.
What Is A Strategy?

Strategic Management Process


What Is A Strategy?
Strategic Management Process

Comparing Business And Military
Strategy
A Strong Military Heritage Underlies the Study of Strategic
Management

Terms such as objectives, mission, strengths, and weaknesses were first
formulated to address problems on the battlefield.

A fundamental difference between military and business strategy is that
business strategy is formulated, implemented, and evaluated with the
assumption of competition, while military strategy is based on an
assumption of conflict.

The similarities between military and business strategy can be seen in
Sun Tzus The Art of War.
Strategic Management Model
Benefits of Strategic Management
Nonfinancial Benefits

Enhanced awareness of threats
Improved understanding of competitors strategies
Increased employee productivity
Reduced resistance to change
Clearer understanding of performance-reward
relationship
Enhanced problem-prevention capabilities
Why Some Firms Do No Strategic Planning
Lack of knowledge of strategic planning
Poor reward structures
Fire fighting
Waste of time
Too expensive
Laziness
Content with success
Fear of failure
Overconfidence
Prior bad experience
Self-interest
Fear of the unknown

Strategic Management (Buzz Word)

Strategy Is Modern-day War

Defining Our Strategy

IKEA: Well-defined Strategy

What Do We Want To Become/Where Do We
Want To Go?
Importance of a Vision Statement
A vision statement should answer the basic question, What do
we want to become/where do we want to go?
A clear vision provides the foundation for developing a
comprehensive mission statement.
Many organizations have both a vision and a mission
statement, but the vision statement should be established
first and foremost.
The vision statement should be short, preferably one
sentence
As many managers as possible should have input into
developing the statement.
What Is Our Business?
Drucker says asking the question, What is our business? is
synonymous with asking the question, What is our mission?
An enduring statement of purpose that distinguishes one
organization from other similar enterprises, the mission
statement is a declaration of an organizations reason for
being (raison dtre).
Sometimes called a creed statement, a statement of purpose, a
statement of philosophy, a statement of beliefs, a statement of
business principles, or a statement defining our business, a
mission statement reveals what an organization wants to be and
whom it wants to serve.


Vision Statement
What do we want to become?


Mission Statement
What is our business?
Formulate a New Business Mission and
Its Vision
Mission Statement Components
Components and Questions That a Mission Statement Should Answer

1. Customers: Who are the firms customers?
2. Products or services: What are the firms major products?
3. Markets: Geographically, where does the firm compete?
4. Technology: Is the firm technologically current?
5. Concern for survival, growth, and profitability: Is the firm committed to growth and
financial soundness?
6. Philosophy: What are the basic beliefs, values, aspirations, and ethical priorities of the
firm?
7. Self-concept: What is the firms distinctive competence or major competitive
advantage?
8. Concern for public image: Is the firm responsive to social, community, and
environmental concerns?
9. Concern for employees: Are employees a valuable asset of the firm?

Jerry McGuires Mission Statement
Define The Current Business
Decisions on:
Products and services to provide
Where to sell them
Product/Services differences from competitors
Example: Rolex sells high-priced quality watches vs.
Seiko sells inexpensive but innovative watches
Clearly Define Your Industry

BMW Case

Perform Internal And External Audits
Analyze external and internal situations
Usage of SWOT (Strengths, Weaknesses,
Opportunities and Threats) analysis through the
usage of a SWOT chart
SWOT Analysis

Analysis of Trends
Economic
Social
Cultural
Demographic/Environmental
Political, Legal, Governmental
Technological
Competitors
External Opportunities and Threats
Basic Rule Of Strategic Management
External Opportunities and Threats
Strategy Formulation
Take advantage of
External Opportunities
Avoid/minimize impact
of External Threats


It is not the strongest of the species that survive,
nor the most intelligent, but the one most responsive
to change.
Charles Darwin
External Assessment

Nothing focuses the mind better than the constant
sight of a competitor who wants to wipe you off
the map.
Wayne Calloway, Former CEO, PepsiCo
Ch 3 -41
Industrial Organization (I/O) View

-- Industry factors more important than
internal factors

Performance determined by industry forces


Economies of Scale
Industry Analysis
Barriers to market entry
Product differentiation
Level of competitiveness
I/O Perspective Firm Performance
Industry Analysis (EFE)
External Factor Evaluation Matrix
Summarize & evaluate:

Competitive Political Cultural
Technological Environmental Social
Governmental Demographic Economic
Industry Analysis (EFE)
Five-Step process
List key external factors (10-20)
Opportunities & threats
Assign weight to each (0 to 1.0)
Sum of all weights = 1.0
Assign 1-4 rating to each factor
Firms current strategies response to the factor
Multiply each factors weight by its rating
Produces a weighted score
Sum the weighted scores for each
Determines the total weighted score for the organization.
Highest possible weighted score for the organization is 4.0; the
lowest, 1.0. Average = 2.5



.20 1 .20 Political unrest/change of governments
.20 2 .10 Bad media exposure
.10 2 .05 Smokeless market/places
.15 3 .05 Production limits on tobacco
.20 2 .10 Legislation against the tobacco industry
Threats
.30 3 .10 More social pressure to quit smoking
2.10 1.00 TOTAL
.60 4 .15 Leader in discount market
.05 1 .05 Astronomical Internet growth
.15 3 .05 Increased demand
.15 1 .15 Markets untapped
Weighted
score
Rating Weight
Key External Factors
Opportunities
Sharkeya Case
Industry Analysis (EFE)

Sharkeya (in the previous example), has a
total weighted score of 2.10 indicating
that the firm is below average in its
effort to pursue strategies that
capitalize on external opportunities and
avoid threats.







Controllable activities performed
especially well or poorly

Determined relative to competitors
Internal Strengths and Weaknesses

Assessing the Internal Environment
Internal Strengths and Weaknesses
Internal Factors
Performance Measures
Ratios
Industry Averages
Survey Data
Internal Versus External Factors

What are internal factors?

STARBUCKS Case

Internal resources come from 3 categories
A. Physical resources: plant, equipment, location,
technology, raw materials, machines, etc.
B. Human resources: employees, training,
experience, intelligence, knowledge, skills, abilities,
etc.
C. Organizational resources: firm structure, planning
processes, information systems, patents,
trademarks, copyrights, databases, etc.

Key Internal Forces

Generally in the Arab world, the internal capacity to
assess external environments and explore their
trends, is lacking.
Arab management, therefore, should give priority to
internal capacity-building processes and encourage
creative rethinking of strategic initiatives and external
trends.
The Process of Performing an Internal
Assessment
1. Representative managers and employees from throughout the firm need
to be involved in determining a firms strengths and weaknesses.
2. The internal assessment requires gathering and assimilating information
about the firms management, marketing, finance/accounting,
production/operations, research and development (R&D), and
management information systems operations.
3. Performing an internal assessment requires gathering, assimilating, and
evaluating information about the firms operations too.
4. Compared to the external assessment, the process of performing an
internal assessment provides more opportunity for participants to
understand how their jobs, departments, and divisions fit into the
whole organization.

The Resource-Based View (RBV)
Internal Factors versus External Factors

The RBV takes the opposing view to that of the I/O.
The RBV approach to competitive advantage contends
that internal resources are more important than
external factors for a firm in achieving and
sustaining competitive advantage.

The Resource-Based View (RBV)
The Resource-Based View (RBV)

Translate Mission into Strategic Goals
If the companys mission is to make
quality products, what does this mission
mean, for each department, in terms of
how to improve quality?

Specific results that an organization seeks
to achieve in pursuing its basic mission

Long-term means more than one year
Long-Term Objectives

Essential for ensuring the firms success
Provide direction
Aid in evaluation
Create synergy
Reveal priorities
Focus coordination
Provide basis for planning, organizing, leading
and controlling

Long-Term Objectives
Levels of Organizational Strategy
Corporate Strategies
Diversification strategy implies that the firm will
expand by adding new product lines.
Vertical integration strategy means the firm expands
by, perhaps, producing its own raw materials, or selling
its products direct.
Consolidation strategy reduces the companys size
Geographic expansion strategy takes the company
abroad.
Corporate Strategy: Amazon.com Case
Vertical Integration Strategy

Business or Competitive Strategy

A strategy focused on how an
organization should compete in
each of its SBUs (strategic
business units)
What Is A Competitive Advantage?
373
Business Level Strategic Planning

1. Continually adapting to changes in external
trends and events and internal capabilities,
competencies and resources

Achieving Sustained Competitive
Advantage

2. Effectively formulating, implementing, and
evaluating strategies that capitalize on those
factors
Types of Competitive Strategies
Cost Leadership Strategy
Seeking to attain the lowest total overall costs relative to
other industry competitors.
Differentiation Strategy
Attempting to create a unique and distinctive product or
service for which customers will pay a premium.
Focus Strategy
Using a cost or differentiation advantage to exploit a
particular market segment rather a larger market.

Forces in the Industry Analysis
Five Forces Overview

Corporate Portfolio Analysis
Managers manage portfolio (or collection) of businesses using
a corporate portfolio matrix such as the BCG Matrix.
BCG Matrix
Developed by the Boston Consulting Group
Considers market share and industry growth rate
Classifies firms as:
Cash cows: low growth rate, high market share
Stars: high growth rate, high market share
Question marks: high growth rate, low market share
Dogs: low growth rate, low market share

The Boston Consulting Groups Growth-Share
Matrix (BCG)
M
a
r
k
e
t

G
r
o
w
t
h

R
a
t
e

Relative Market Share
Dogs
8
7
3
?
Question marks
?
2
1
Cash cows
6
Stars
5
4
Strategy Implications BCG
Star Leader in Expanding Industry
BUILD - Continue to increase market share if necessary at
expense of short-term earnings
Problem Child Low market share in Expanding Industry
HARVEST if weak, BUILD if strong.
Assess chances of dominating segment. If good, go after share. If
bad, redefine business or withdraw.
Cash Cow Leader in mature or declining industry
HOLD - Maintain share and cost leadership until further investment
becomes marginal
Maximize cash flow
Dogs Low market share in a mature or declining industry
DIVEST Plan an orderly withdrawal so as to maximize cash flow or
concentrate on niches that require limited effort



Implement the Strategies
Implementation = putting into action
Hiring people
Building plants adding new product lines

Involves management functions:

Plan
Organize
Lead
Control

Short-term milestones that firms
must achieve to reach long-term
objectives

Annual Objectives

Means by which annual
objectives will be achieved
Policies
Strategy Implementation
Mike Duke

Sam Walton
Evaluate Performance
Success of strategies dependent on changes in
external factors
E.g. New trends may reduce demand in one product
and increase the demand for another

Strategic Control necessary
Process of accessing progress towards strategic
goals and taking corrective actions
Managers study new situations and make
adjustments

Assignment
Research and analyze
Azza Fahmy case study
and provide the
following:
Proposed vision
Proposed Mission
SWOT
External Factor
Evaluation (EFE) Matrix
Your recommendation if
any

Questions?
91