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McGuire, D. & Cross, C. (2003): "Examining the Matching Process Human Resource Management and Competitive Strategies: A Study of the Irish Retail Sector", Presented at the 7th Conference on International Human Resource Management, University of Limerick, June 4-6 2003.

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EXAMINING THE MATCHING PROCESS HUMAN RESOURCE MANAGEMENT AND COMPETITIVE STRATEGIES: A STUDY OF THE IRISH RETAIL SECTOR

Reference as: McGuire, D. & Cross, C. (2003): "Examining the Matching Process Human Resource Management and Competitive Strategies: A Study of the Irish Retail Sector", Presented at the 7th Conference on International Human Resource Management, University of Limerick, June 4-6 2003.

Submitted by: Christine Cross Dept. of Personnel & Employment Relations, Kemmy Business School, University of Limerick, National Technological Park, Limerick, Ireland Phone: + 353 61 213086 E-mail: christine.cross@ul.ie

David McGuire, School of Management, Napier University Business School, 219 Colinton Road, Edinburgh, EH14 1DJ, Scotland. Phone: + 44 131 455 4340 E-mail: d.mcguire@napier.ac.uk

EXAMINING THE MATCHING PROCESS HUMAN RESOURCE MANAGEMENT AND COMPETITIVE STRATEGIES: A STUDY OF THE IRISH RETAIL SECTOR

Abstract: The search to achieve sustainable competitive advantage has significantly influenced approaches to human resource management. Attempts to achieve certainty and legitimacy in business practices have led to the homogenization of organisational forms and structures. The purpose of the study is to examine competitive strategy and human resource management practice in the highly cost-focused retail sector. The findings support Schuler et al. (1997) framework for the integration of business strategy and HRM and evidence of close environmental monitoring and mimetic tendencies amongst firms within the three market segments.

Keywords: Competitive Advantage, Best practice, Institutional Theory

AUTHOR BIOGRAPHIES: Christine Cross lectures in Organisational Behaviour and Human Resource Management at the University of Limerick. A former Irish American Partnership Scholar, her main research interests are women in management and boundary setting in Human Resource Development.

David McGuire is a lecturer in Human Resource Development at Napier University Business School, Edinburgh, UK. He is a former recipient of the Irish American Fulbright Scholarship and also received a government of Ireland scholarship for his doctoral dissertation from the University of Limerick. His research interests include boundary setting in human resource development (HRD), critical approaches to HRD, and the use of competency frameworks.

EXAMINING THE MATCHING PROCESS HUMAN RESOURCE MANAGEMENT AND COMPETITIVE STRATEGIES: A STUDY OF THE IRISH RETAIL SECTOR

INTRODUCTION Increasing competition in domestic and international markets has focused attention on developing strategies that maximise the return on investment in human resources. The transition from a manufacturing labour-intensive economic model to a service-driven knowledge-centred one, coupled with an almost unprecedented level of environmental uncertainty has forced organisations towards re-evaluating the importance of human capital and readjusting their strategic priorities. As a result, there is a greater recognition that distinctive organisational competencies obtained through highly developed employee skills; unique organisational cultures and effective management systems form the basis for achieving competitive advantage (Greer 2001; Johnson & Scholes 1999). In this context, Lengnick-Hall & Lengnick-Hall (1990) argue that competitive advantage is the essence of competitive strategy encompassing those capabilities, resources, relationships and decisions, which permit an organisation to capitalise on opportunities in the marketplace and to avoid threats to its desired position. While it has long been recognised that investment in human resources can provide a sustainable source of competitive advantage and increases the likelihood of successful implementation of a firms business strategies (Greer 2001; Cunningham & Hyman 1995), it has been argued that more clarity is needed in specifying the process by which HRM is linked to competitive strategy (Guest 1999).

The development and matching of HR capabilities to competitive strategy is widely viewed as essential to enabling the realisation of the industry specific competitive advantage (Gulang 1999; Wright & McMahan 1992; Schuler & Jackson 1987). In this regard, Armstrong (2001) argues that the management of people is not a distinct function, but the means by which all

business strategies are implemented. Furthermore, a study by Martell & Carroll (1995) of 115 subsidiaries of Fortune 500 companies reports that 69% of the firms surveyed include an explicit discussion of human resource issues in their strategic plans.

The purpose of this paper is to gain a better understanding of how human resource management is linked to the competitive strategy of the firm. It begins by reviewing contemporary approaches linking HR policies and practices to overall corporate strategy. An institutional theory is advanced, which adopts a macro perspective arguing that environmental pressures impact on the behaviour and practices that institutions or organisations adopt. It provides a useful framework for examining patterns of similarity and difference in best practice amongst organisations. The distinctive features of the retail sector are then discussed. Qualitative research for this paper was collected through semi-structured interviews with senior managers and directors of a number of large multiples within the Irish retail sector. The data explores the means by which HR managers and directors define/identify the relationship between HRM strategy and overall corporate strategy and examines the approaches taken towards structuring the human resources of an organisation to achieve specified competitive strategies.

COMPETITIVE STRATEGY AND BEST PRACTICE Ensuring that an organisation can compete effectively in the marketplace is one of the principal tasks of management. In an era of transformational change, both Huselid (1995) and Barney (1995) argue that as other sources of competitive advantage have become less important, what remains, as a critical differentiating factor is the organisation, its employees and how they work. The process of relating HRM strategies and the competitive strategies of the firm has, to date, followed two distinct approaches.

The search to identify sets of high performance work practices affecting employee and organisational performance has preoccupied much of the literature on strategic HRM. This

best practice approach largely originates from within the field of HRM itself and has been inspired by the work of Pfeffer (1998; 1994). Bernard & Rodgers (2000) ascribe the growth of interest in high-performance-work-systems to the decline in competitiveness of firms adhering to traditional forms of work organisation. Certainly, the empirical evidence from studies on high-performance work systems points to the positive influence of certain HRM practices on organisational financial performance (Huselid et al. 1997; Huselid 1995).

Marchington & Grugulis (2002) argue that the concept of best practice is problematic. They suggest that, when unpacked, best practice are often less best than might be hoped; sometimes appear to present contradictory messages; are not universally applicable and tend to ignore any active input from employees. Likewise, Capelli & Crocker-Hefter (1996) argue that the notion of best practice may be overstated. They point to the success and competitiveness of many firms who have not adopted such practices as evidence for their argument that it is the core competencies of a firm that determine its competitiveness. Indeed, Truss (2001) maintains that one of the core problems underpinning the best practice approach is the lack of consensus among academics and practitioners as to which practices can be considered high performance.

The second approach, emanating from the field of strategic management, takes the view that human resource management practices and policies should take their lead from decisions on the strategic direction and position of the organisation in the market. Typical of this approach is the work of Miles and Snow (1984) who propose that organisations pursuing particular strategies will need to adopt a set of HRM policies, which match both the organisational structure and strategy. Tyson (1997) reports that this line of research has enjoyed a considerable degree of success and cites several empirical studies showing the way in which HR strategies change according to the business strategies pursued and the significance of the product life-cycle stage as a variable, accounting for business strategy changes which impact on HRM (Storey 1992; Pettigrew & Whipp 1991; Jackson et al. 1989).

The HR strategy process has not enjoyed universal acclaim however. While early research in this field of strategic management identified sources of competitive advantage, such as ease of access to capital, superior technology and the availability of natural resources, it only initially offered limited support to the potential of human capital as a source of competitive advantage (Harrell-Cook & Ferris 1997). In addition, Tyson (1997) argues that attempts to link or find a fit between generic business strategies and HR strategies are based on shaky foundations. He maintains that the concept of generic strategies is a weak one and that, in reality, companies compete on multiple bases, introducing greater complexity to the HR strategy process.

INSTITUTIONAL THEORY AND BEST PRACTICE Institutional theory is used to explain both the persistence and homogeneity of institutions, but also to explain how institutions may change over time in terms of their character and potency (DiMaggio 1986; 1988). Lawrence et al. (2002) define institutions as relatively widely diffused practices, technologies and rules that become entrenched. The level of institutionalisation depends on the extent of their diffusion and the strength of self-activating mechanisms such as rewards and sanctions.

Institutional pressures from the external environment will, it is argued, produce isomorphic effects and lead organisations to adopt similar sets of managerial practices (Lawrence 1999; DiMaggio & Powell, 1983; Meyer & Rowan, 1977). DiMaggio & Powell (1983) identify the drive to achieve certainty and legitimacy as key factors influencing the homogenisation of organisational forms. Mimetic tendancies are particularly prevalent among new entrants to markets, where trend-following avoids conflict and improves the organisations long-term chances of survival.

Recent research by Podolny (1993) and Greve (2000) indicates that imitations may be more localised and be determined by size, physical location, regulation and cognitive identity. Institutions are typically embedded in social networks; so pressures that surface in the environment travel more readily through contacts among institutions that are bound together through social contacts. Porac & Thomas (1990) posit that institutions scan their environments on the basis of the behaviour of their reference groups. Behaviours of similar sized institutions can function to lever the effects of environmental feedback. The behaviour of similar sized institutions function as an anchor when institutions seek to interpret environmental responses to specific innovations.

From an institutional theory perspective, the notion of best practice implies that organisations can reap the advantages of closely imitating others by selecting predefined tools and blueprints in performing HRM activities (Lervik et al. 2005). While Garavan (1991) recommends that firms integrate HRM/D practices with a firms overall strategy and adapt to local conditions, the reality is that organisations cope with ambiguity by imitating the visible actions of others (Greve 1995). Sahlin-Andersson (2001) cautions however that imitation may be difficult due to information problems and lack of access to role-model firms.

COMPETITIVE ADVANTAGE IN THE RETAIL SECTOR After years of concentrating on manufacturing, many commentators have started examining the links between competitive strategy and HR strategy in the service and retail sector (Boxall 2003; Peccei and Rosenthal 2001; Batt 2000; Keltner et al. 1999; Lashley 1998). Cowell (1984) argues that there are three features of the service/retail sector which makes this sector particularly distinctive from manufacturing: intangibility, time perishable capacity and inseparability.

Fitzsimmons & Fitzsimmons (1994) maintain that the intangible nature of services poses a problem for customers who must rely on the reputation of the firm. In this case, Davies &

Brooks (1989) argue that firms must clearly position themselves on price and image. Time perishable capacity refers to the seasonality and fluctuation in service demand. As Cowell (1984) points out, unlike manufacturing, building inventory to absorb variations in demand is not an option in the service sector. The inseparability aspect of the retail/service sector acknowledges the active role played by the customer in the service process. Mudie and Cottam (1999) suppose that the direct personal encounter provides customers with an opportunity to make judgments about service quality, firm image and overall demeanour of the service provider. For this reason, they argue that issues such as interior design, lighting, corporate clothing and cleanliness will strongly influence the customers view of the service.

The distinctive features of the service/retail sector gives rise to the implementation of a unique blend of human resource management practices. Batt (2000) argues that the retail sector is characterised by low-margin interactions of short duration, typically with low employee discretion and with strong monitoring of employees. He maintains that firms operating within the sector are unlikely to pay much more than the market-clearing wage because labour costs constitute a significant proportion of total costs. Furthermore, Boxall (2003) argues that workers within the sector are likely to have low to moderate levels of formal education and receive limited on-the-job training. In such cost-conscious environments, he posits that there exists little room for engaging in diverse HR strategies and there exist limited prospects for HR advantage except where premium brands can be created and sustained. Conversely, Peccei and Rosenthal (2001) propose that a low-cost soft HRM approach is particularly suited to the service and retail sector. Key elements of this approach include empowerment, a supportive management style, a focus on service quality and job redesign.

THE IRISH RETAIL SECTOR The retail sector plays an important role in the Irish economy. It accounts for the largest and arguably most significant component of the services sector in Ireland, contributing 6.0% of GDP in 1997, a rise from 5.1% of GDP in 1994 (Forfs 2000). Such an increase occurred in an economic climate where the overall contribution of the services sector to GDP remained static in the period from 1994 to 1997. In terms of employment, the number of people employed in the wholesaling and retailing sector has grown considerably since the 1980s and currently accounts for over 14% of all persons at work (CSO 2002).

Traditionally, retail activity in Ireland has been provided by a relatively large number of small, unspecialised units. In recent times, a period of structural change and reorganisation of the retail trade has resulted in their demise, with the emergence of larger sized outlets and the growth of the chain store concept. A Forfs (2000) report on the dynamics of the retail sector in Ireland indicates several notable features: Ireland has one of the highest food to non-food retail ratios in Europe with 36% of outlets in Ireland being food outlets; there has been a shift in the determinant of customer demand from price consciousness to value-for-money and a stronger preference for service and convenience; one in eleven men in the Irish retail sector work part-time compared to one in three women who work part-time and the operating margin in the food sector currently stands at 5.1%. In spite of the growth in the Irish retail sector little is known regarding the HRM practices and policies currently employed by firms in the sector.

METHODOLOGY This study examines the relationship between HRM strategies and the competitive strategies pursued by a number large food and clothing retail outlets operating in the Irish market. The major criteria used in selecting the firms were: large-scale investment in the Irish market and company presence in multiple locations across Ireland. Although, not a selection criterion for the study, most of the firms involved have significant overseas operations. There are 10

organisations operating in the Republic of Ireland, which fit into this category. For the purposes of undertaking this study, all 10 organisations were contacted and six of the ten agreed to participate in the study. All firms selected have significant involvement in the Irish food retail sector. In total, the six firms selected hold over 80% of the market share for the food sector in Ireland. Semi-structured interviews were conducted with senior HR executives of each of the respondent companies, over a six-month period. The interviews sought to identify the competitive strategies pursued by each company and profiles the recruitment and selection, training and development, reward management and employee relations policies of each company. A profile of the firms involved in the study is presented in Table 1.

Table 1: Company Profile

No. of Outlets Worldwide Company A 4,800

No. of Employees Worldwide unknown

Number of Outlets in ROI 53 (incl NI)

Principle Product Area Food

Location of Company Headquarters Each country has own HQ

Market Share in ROI 5.2%*

No. of Employees in ROI 900

Company B

760

22,000

Food

Wales

3.8%*

205

Company C

2,291

296,000

78

Food

England

24.8%

10,200

Company D

123

18,000

110 (incl NI)

Food, textiles and hardware

Dublin

21.6%

Approx 12,000

Company E

12

3,500

11

Food, textiles, hardware

Dublin

18.0%

3,500

Company F

19

4,600

19

Food

Dublin

7.9%

4,600

* Estimated

Following Schuler et al. (1997) framework for the integration of business strategy and HRM, which prescribes particular HRM policies and practices for the three competitive strategies of cost reduction, differentiation and focus, the study aims to explore the application of the framework in the Irish retail sector. An adapted version of Bowmans strategic clock was used to ascertain the competitive position of companies within the sector. It invites respondents to position their firms along the axes of price and perceived added service value, based on their competitive strategies. These are indicted in Figure 1. Finally, some

conclusions are drawn concerning the degree to which HRM strategies are matched to the competitive strategies of the firm.

RESULTS Figure 1 presents the competitive positions of the respondent companies on Bowmans strategic clock. It demonstrates a clear segmentation of the market, with companies competing vigorously on the grounds of price and perceived added service value. In addition, the observed distance between each of the subgroups suggests that they are strongly differentiated and attract their own customer base. As such, movement from one subgroup to another appears very difficult to achieve in practice and would require substantial levels of investment on behalf of the company. The following sections explore each of the subgroups in depth, providing a brief background on each of the companies participating in the study and exploring the range of human resource practices engaged in by these companies.

Figure 1: Competitive Positioning

High

Perceived Added Service Value

Cost Reduction Strategy

Quality Enhancement Strategy

Customer Focus Strategy

Low Low Price High

A Cost Reduction Strategy Background to Company A Company A has become a highly successful European-wide firm through the implementation of its affordable quality strategy. The company aims to offer the lowest prices available in the market through discounting a wide range of food and other items. Although a relatively new entrant to the Irish market, it has expanded rapidly and has currently 53 stores in the Republic of Ireland and Northern Ireland. Strategically, Company As marketing campaign comprises of distributing weekly door-to-door fliers outlining its weekly specials. It locates in suburban areas close to its traditional customer base, which tends to be low income, cost-conscious consumers. In line with this cost-focused strategy, the store layout is simple and sophisticated retail strategies are not generally employed.

Human Resource Strategy of Company A The human resource strategy adopted by company A is strongly aligned to the cost-focused strategy of the firm. Despite owning 53 stores in Ireland, the company does not have a specialist human resource function. Recruitment and selection is carried out by the sales

department (based at head office) and district managers and the company employs one training manager who manages store training across the whole of Ireland. A team of 20 training specialists assist the training manager in conducting training courses for new employees. The payroll department is based at head office.

The key human resource priorities were identified as training and staff retention. The companys human resource strategy distinguishes between employees and managers. Employees are engaged on an hourly contractual basis, with the number of hours ranging from 10 to 30 hours per week. Company As employee pay rates are equivalent to the industry average and to its competitors. The company does not deal with trade unions in any of its outlets.

New employees are trained to be multi-functional. Employee training focuses especially on quality issues, particularly in relation to food. The maxim if in doubt, throw it out is emphasised to new employees. Performance appraisal for employees is conducted at some stores depending on the ability of the store manager.

Managers are employed on a full-time basis. Company As management pay rates are above the industry norm. The company has in place a management development programme for newly appointed managers. The programme takes the form of a two-level certification process; level one covering issues of basic store management and level two dealing with warehousing and staffing issues. The programme is conducted wholly in-house with no use of external providers and takes place at individual store locations. All other training is done on an ad-hoc basis, with individual managers indicating specific areas they would like to receive further training on. All managers participate in an annual performance appraisal process.

In summary, Company A pursues a cost-reduction strategy in terms of its overall business plan and in relation to the management of its human resources. The key HR practices employed by Company A are as follows: Induction training provided to all employees Management Development programme (two-level certificate in management, warehouse management and staffing) for newly appointed managers Job security for managers Performance appraisals for managers (and employees if store manager has ability to conduct process)

A Quality Enhancement Strategy Background to Company B, C and D Company B is a large Welsh firm with a strong presence in the UK market. It established operations in Ireland in 1996 and currently has 8 stores in the Republic of Ireland. It carries a wide range of food products, but specialises in innovative frozen foods that save the customer time and money. It locates in busy shopping areas, catering to busy professionals, office workers and apartment dwellers. Its philosophy of providing quality products at affordable prices extends to its banning of genetically-modified ingredients and artificial colours and flavours in its own-branded products. It also provides free from lists to customers with allergies to enable them to find products to suit their needs. The company also emphasises its strong commitment to customers, offering services such as home deliveries and internet shopping.

Company C is a large UK-based firm with a strong presence in the UK and is located in five European countries and four Asian countries. Its Irish operations commenced in 1997 and it has 79 stores in the Republic of Ireland. The company adopts a two-prong competitive strategy focused on ensuring product availability through carrying a large product selection

and through cutting prices. It is the largest grocery e-tailer in the world and carries a large range of own brand products. In recent years, Company C has diversified its product offerings and now in addition to food products offers insurance and finance services to its customers.

Company D was founded in Ireland over 50 years ago and today is Irelands largest retailer, whilst retaining family ownership. The majority of its 123 stores are located principally in Ireland, with additional stores in two other European countries. The guiding principles of the company, reflected in its strategy are to provide its customers with a choice of good quality products at competitive prices. Company Ds grocery section stocks a combination of both own brand and branded products, with the company significantly increasing the number of own brand product food lines it offers in recent years. Its hardware and clothing ranges are almost solely own brand products.

Human Resource Strategy of Company B, C & D The human resource strategy adopted by companies B, C and D is aligned to the costconscious quality focused strategy of the firm. All three companies possess a specialist human resource function and company C and D engage a human resource manager to work at each individual outlet. Each company employs approximately 100 people in its human resource division, although in the case of company B, most of these employees are based in the UK.

Both company B and D identified recruitment, retention, absence management and labour turnover as their key human resource priorities. In contrast, company C emphasised the training of store management and health and safety issues as their principal concerns. Recruitment difficulties were reported by all three companies in the current economic climate these difficulties appeared to be particularly acute in the greater Dublin area. In all cases, the companies reported using large numbers of temporary and part-time staff to cover peak periods, such as Christmas. Company C and D reported pay rates in line with the industry norm, whereas company B reported pay rates below the industry norm.

All three companies recognise and deal with trade unions in their Irish operations. In addition, all three companies stated that HR policy was dictated by national head office and that individual outlets had no autonomy in HR policy formulation. A high degree of similarity was found in the range of HR initiatives employed by all three companies. These tend towards low cost strategies including employee training, empowerment, performance appraisal, personal development plans as well as performance related pay. All three companies offer performance related pay to senior managers, with Company D and B extending this to junior management also. More advanced HR initiatives were employed by Company C (in line with its emergent strategy of delivering better customer service) for senior level managers, including productivity bonuses, share ownership schemes, stock options, profit sharing schemes and the provision of employee assistance programs.

In summary, the human resource strategy employed by Companies B, C and D is more advanced than the cost reduction strategy used by Company A. However, the HR initiatives tend to be low-cost for employees in all three companies, with Company C employing more sophisticated HR initiatives for its managerial staff in line with its emergent strategy. Key HR practices utilised by the three companies include: Performance related pay for managers (only senior managers in Company D) Performance appraisals for all employees Personal development plans for all employees Career development opportunities within the company

Team development initiatives and employee participation at managerial level are HR initiatives also used by Companies B and C. Reflective of its emergent strategy Company C also utilises productivity bonuses, stock option and share ownership schemes.

A Customer Focus Strategy Background to Company E and F Company E is a well-known Irish firm specialising in department store retailing. It established operations in Ireland in 1900 and currently has 11 outlets in the Republic of Ireland and one outlet in Northern Ireland. While it carries a full range of food items, it also stocks clothing, household and electrical items. It locates in busy city centre shopping locations and offers branded goods at medium price points with top quality service. As such, the company aims to provide a better quality service to customers through increased staff numbers and training staff to a very high level. While company E is customer-driven in its business approach, it seeks to control costs through adopting a flat management structure.

Company F is a medium sized Irish firm, which specialises in providing fresh food and grocery products. It commenced Irish operations in 1960 and has 19 stores in the Republic of Ireland. It locates in suburban areas and its competitive strategy focuses on providing premium products coupled with a high level of customer service. It ensures the customer receives high quality service by making a series of promises which serve to set customer expectations. In order to appeal to the widest range of customers, it offers specials and runs a lower price product range; although it admits that product prices on the whole will be slightly higher than its competitors.

Human Resource Strategy of Company E & F Both companies have a stand-alone personnel function at each individual outlet, with the head of HR having a set on the executive board in Company E. Training and development and employee relations are identified as key human resource management priorities by both, with Company E indicating recruitment and selection of staff as their key priority. Management development is highlight as a key priority for Company F. Trade unions are a feature in both companies, with both signifying their pay rates closely match those of their competitors. Neither company experienced difficulties in recruiting staff in the recent past.

Both companies clearly indicate that HR strategy is determined by the needs of the business. This is visible in the sophisticated HR initiatives utilised in both companies. Joint consultation committees, employee assistance schemes, employee participation in decision making, formal management development programmes and extensive employee training are features of HR practice in both companies. Performance related pay is a feature in both companies with Company F extending this to employees at all levels. Interestingly in Company E performance appraisals are only used at management level. Owing to the way in which ownership is structured in both of these firms, stock options and share ownership schemes are unfeasible. It is however somewhat surprising that no profit sharing schemes are in operation in either company.

In reviewing the human resource strategies employed by Company E and F it is clear that both companies use a wider range of sophisticated HR initiatives. Key HR practices reflective of business strategy utilised by the two companies include: Joint consultation committees Employee participation in decision-making Employee assistance programmes

Both companies also employ HR initiatives used in Companies A, B, C, D, and E, including team development initiatives, performance related pay, performance related pay and personal development plans.

CONCLUSIONS The issue of competitive strategy and positioning is an extremely important issue within the service/retail sector. The choice of competitive strategy has significant implications for the range of human resource practices available to retail organisations. While companies

operating at the higher-cost end of the market clearly engage in more sophisticated human resource management practices, the range of practices engaged in tend to incur low organisational costs. There was no instance of any firm offering profit-sharing schemes, stock options and share ownership schemes to employees. This finding indicates that there appears to be little financial leeway within the retail sector to engage in human resource practices which are fairly commonplace within sectors such as manufacturing and pharmaceutical. In this regard, table 2 presents an overview of the practices associated with each competitive strategy.

Table 2: Overview of HR practices associated with Competitive Strategies

Induction Training for all Employees CostReduction Strategy Quality Enhancement Strategy Customer Focus Strategy Management Development Programme Managerial Job Security Managerial Performance Appraisal Performance Related Pay for Managers Performance Appraisals for all Employees Career Development Opportunities within firm Personal Development Plans for all Employees Joint Consultation Committees Employee Assistance Programmes Employee Participation in DecisionMaking

It is evident that much of the discussion on competitive advantage does not take account of the particular structural features of the service/retail sector. The low margin, cost-conscious environment that exists within the service/retail sector renders discussions on best practice less relevant than in other sectors, such as manufacturing. Likewise, it is clear from an examination of the HR initiatives utilised by each of the companies in this study that human resource activities are dictated by organisational decisions on price and service quality, rather than on the degree of fit with organisational structure. The study finds strong support for the Schuler et al. (1997) framework. It posits that the competitive strategies of cost reduction, quality enhancement and customer focus provide a useful method for understanding the different human resource approaches within the service/retail sector. The most expansive human resource approach is adopted by companies E and F, advancing a customer focused competitive strategy. Interestingly, in the case of this subgroup, both companies recognise trade unions in their day-to-day operations and further research is planned to examine the role of trade unions in influencing the human resource strategies employed by these companies.

The study highlights the existence of strategic groups within the market, which allow a company to address both its overall strategy and its human resource strategy towards specific rather than general competitors. It reveals that the food retail sector in Ireland represents a clearly differentiated market, where companies operating within this segment are distinguishable on price and service quality. However, while companies may be set apart on these dimensions, there is little to separate companies within each of the subgroups in terms of the human resource practices employed.

From an institutional theory perspective, the study found support for the existence of mimetic tendencies, with firms in each of the three market segments adopting broadly similar HR strategies. HR priorities were determined by local conditions and the strategies employed by competing firms within the same industry sector. A high degree of environmental scanning

was displayed with firms aiming to achieve certainty and stability in their competitive strategies.

The study clearly identifies the cost boundedness of competitive strategies. Financial considerations would appear a significant factor in determining the overall approach taken towards human resource management in the retail sector. This emphasis detracts from the overall objective of achieving competitive advantage through human resource management and potentially limits return on investment. Future research should focus on investigating this phenomenon in a wider context, taking into account the process by which organisations match their competitive strategies and approaches to human resource management.

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