The central idea behind SHRM is that all initiatives involving how people are managed need to be aligned with and in the support of the Organizational overall strategy. No Management is successful if its people is diverted from the vision and mission of the organization.

2. STRATEGIC
MANAGEMENT
In this chapter we will study the following :
Models
of Strategy
The Process of Strategic Management
Corporate Strategies

3. Strategic Human Resource
Management
HR planning
Recruitment
Selection
Organizational and
work design
Training and
development
Performance review
Compensation
Labour relations

4. Introduction
 The
central idea behind SHRM is that all
initiatives involving how people are
managed need to be aligned with and in
the support of the Organizational overall
strategy.
 No Management is successful if its
people is diverted from the vision and
mission of the organization.

5. Definition of Strategic Management
 Strategic
management is a Process by
which organizations attempt to determine
what needs to be done to achieve
corporate objectives and ,more important,
how these objectives are to be met.
STRATEGIC MANAGEMENT
Process by which Org attempts
to detm what has to be done to
achieve
Corporate Objectives

6. It means that the Strategic management
is directly related to the Corporate
objectives
Strategic planning: Also called as
Strategy Formulation Process, It is usually
done over 3-5 year time horizons by the
senior management ,with a major review
of strategic plan on annual basis.

7. The steps involved in strategic planning are:
1.
2.
3.
4.
5.
6.
Development of organizational philosophy
and mission statement.
Environmental Scanning
SWOT Analysis
Formulation of Strategic Objectives
Generation of alternative strategies for
achieving objectives.
Evaluation and selection of strategies.

8. Importance Of Human Resources to Strategy
Human resource management has become more important to
general management, largely as a result of its role in providing
Competitive Advantage. According to the strategist Michael Porter
“Human Resource Management is a key to obtain
competitive advantage”
In a growing number of organization Human Resources are now
viewed as a source of competitive advantage.
It has been found that COMPETITIVE ADVANTAGE can be
obtained with High Quality Work Force.
For Eg. : TECHNOLOGICAL DIVISIONS are established by
the companies undergoing automation which requires high quality
work force.

9. MODELS OF STRATEGY
There are basically two(2) models framed
for strategy that outlined the process of
strategy and how it should be developed.
First model: Industrial Organization Model
(I/O).
Second Model: Resource based View
(RBV).

10. Industrial Organization Model (I/O).
This is traditional model formed on the basis of
strategic management through the 1980s.
According to I/O model the primary determinant
of an organization should be the external
environment in which the organization operates
and that such considerations have the greater
impact on the performance than internal
decisions made by managers.

11. I/O MODEL
EXTERNAL
ENVIORNMENT
Organization
HR planning
Recruitment
Selection
Organizational and
work design
Training and
development
Performance review
Compensation
Labour relations

12. •
I/O model assumes that the External
Environment produce Opportunities as well as
Threats to the organization.
•
That Organizations, within an industry control or
have equal access to the resources, and these
resources are highly mobile between the firms.

13. •
The I/O model argues that organizations
should choose to locate themselves in
industries that present the greatest
opportunities and learn to utilize their
resources to suit the needs of the
environment.
•
This model further suggest that an
organization can be more successful by
offering goods and service at a lower
cost than its competitors or by
differentiating its products from those
competitors such that consumers are
willing to pay premium price.

14. RESOURCE BASED VIEW (RBV)
MODEL
 RBV
is also referred as Resource Based View
Model of the Firm.
 RBV model says that Organizations resources
and capabilities should be the basis of
organizational
decisions
rather
than
environmental conditions as said in I/O
model.
 The resources above referred are Organization’s
Human Resources

15. Organizations gains competitive advantage on
Investing over their Human Resources through
the acquisition and value of their resources.
RBV VS I/O Model
The RBV Challenges the assumptions of the I/O
model. The resource based view assumes that
an organization will identify and locate key
valuable resources and over time acquire them.
Hence under this model(RBV) the resources
may not be highly mobile across organizations
as once they are acquired by a particular
organization and that organization will attempt
to retain those resources that are of value.

16. 
In contrasting of the two approaches the I/O model
suggests that an organization’s strategy is driven by
external considerations.

The RBV argues that the strategy should be driven by
the internal conditions.

The I/O model argues that
achievement ;The RBV
determined by resources.
strategy
argues
will drive resource
that strategy is

17. RBV VS I/O Model
RBV
I/O
1) Organization’s
strategy should be driven
by the internal conditions.
1) Organization’s strategy
is driven by external
considerations
2) Strategy is determined
by resources.
2) Strategy will drive
resource acquisition

18. The Process of Strategic Management
To understand the Process of Strategic
Management we will consider both the
Strategic model i.e. I/O & RBV .
In this line, the process of Strategic
Management is presented as a series of
Five(5) distinct steps, as outlined in the
diagram:

19. The Process of Strategic Management
Environmental
Analysis
Competition /
Industry Structure
Govt.Regulations
MISSION
STATEMENT
Technology
Market Trends
Economic Trends
Organization
Self-Assessment
Resources
Financial
Physical
Human
Technological
Capital
Goals &
Objectives
Strategy
Management Systems
Culture
Structure
Power Dynamics/Politics
Decision-Making Process
Past Strategy &
Performance
Work Systems
Identify Assumptions

20. (I)Missions Statement ….contd
 This
is the First Stage of any organization
to establish an mission statements .
Although all the organizations have
mission statements that in very simple
terms explains the Organizations Purpose
and reason for its existence.
 Mission
statement are usually very Broad
and generally limited to no more than a
couple of sentences.

21.  As
the mission statement looks very
simple but it is often very difficult to
construct because it serves as the
foundation for everything that the
organization does.
 It
requires clear cut picture and
understanding
and
vision
of
the
organization and also on what the
organization is all about & why it exist in
the first place.

22. (II) Analysis of Environment or
Environmental Analysis
 After
establishing the Mission Statement the
next step is to analyze the External Environment
in which the organization operates consistent
with the I/O model of Strategic Management.
 Decision
makers need to analyze variety of
different
components
of
the
external
environment ,identify key players for those
components and also be very cognizant(aware)
of both threats and opportunities within the
environment.

23.  The
environmental analysis includes the
following:
1. Competition/Industry Structure
2. Govt. Regulations
3. Technology
4. Market Trends
5. Economic Trends
These are all the components of the
External Environment where the
organization is present.

24. In examining competition and industry structure, critical
issues that need to be identified includes :
1.
2.
3.
4.
5.
Who are the chief Competitors?
By what means they are competing?
Where Power is centered in the industry?
What are the Barriers to Entry?
Where is the Opportunities?
In addition to this the industries should produce
complementary or substitute goods or services
that they may impact the demand for the
organizational output.

25. In examining government regulations
issues related to the scope of laws
regulations that may impact what
organization does are identified.
the
and
the
This involves everything from Corporate
law/Industrial relations regulating the industries
and the employment relationship to provide
employment to the local persons .
A strategic Human Resource Management
decisions that must be made have to be done
within the context of National, State and Local
Labor Laws.

26. A Technological Environment includes looking
at automation processes, new equipments,
machinery ,new techniques for producing goods
and services and other special features.
It involves assessment of how to obtain new
technology and the decision to adopt new
technology and be a pioneer to new technology
or allow others to do so and then attempt to copy
it.

27. Analyzing Market trends involves examining:
1. Who existing Customers are?
2. What is their needs and wants?
3. How well they are satisfied?
It also involves looking the potential customers. It also
involves examining demographic, psychographic,
and life style issues among the customers such as
family status, age ,interest, residence, education
,and income level.

28. Analyzing the ECONOMIC TRENDS involves forecasting
the condition and direction of national and local
economy.
It is very much clear that the future cannot be predicted
accurately, Organizations need to plan in advance that
what may happen in the economy that can have a
significant impact on the operations
Interest rates, levels of inflation, recession, fiscal and
monetary policy, unemployment etc. are the serious
economic issues that is to be studied in depth to do any
assessment of the future direction of the firm .

29. PORTERS GENERIC STRATEGIES
In order to cope up with the competition the
firms adopt three generic strategic approaches
to gain competitive advantages:1.
2.
3.
Overall Cost Leadership
Focus.
Differentiation.

30. Overall Cost Leadership
 It
entails the firms to make all possible
attempts to achieve the lowest cost in
production & marketing.
 Main objective is to increase market
share.
 The basic component of this approach is
to increase efficiency at all level so that
costs could be lowered
 Examples
are automobile manufactures.

31. Focus
 The
attempt to serve narrow strategic target
effectively and efficiently.
 The
firms achieves better differentiation by
meeting the target customer needs.
 For
example: as per Indian climate conditions
the soaps with moisturizers are best to target the
customers.

32. Differentiation

To achieve class leadership by providing unique
characteristics to the products/service.

In other words it aims to create highly different
products and marketing program like design or brand
image.

If a firm has strengths in R&D,design,quality,control
& marketing ,this could be one of the strategic
approach routes.

33. (III) Organizational SelfAssessment
 Resources
 Management
Systems
Financial
Physical
Human
Technological
Capital
Culture
Structure
Power Dynamics/Politics
Decision Making Process
Past Strategy & Performance
Work Systems

34. Once an organization has scanned and
external environment and identified
Opportunities, it then turns into the third
process of strategic management.
assessed its
Threats &
stage of the
In this stage the key outcome is for the decision
makers to identify the organization’s primary strengths
and weakness and find ways to capitalize on strengths
and improve or minimize the weakness.
This requires for the organization to examine both
its RESOURCES and its INTERNAL MANAGEMENT
SYSTEMS

35. RESOURCES
1.Financial Resources: It affects an
organizational competitive advantage.
An organization that has the ability to
generate funds is able to convert
these funds to ASSETS.
2.Physical Resources: Includes actual
equipments
and
machinery
owned/leased as well as the location of
the business and its proximity to
customers,
labor,
raw
materials,
transportation.
3.Human Resources: This not only
includes the sum of the technical
knowledge of the employees but also
their
personal
traits
including
commitment ,loyalty, judgment, &
motivation.
An organization is only as strong or
as week depends upon its employees
and the skills, backgrounds and
motivation these employees will be a
key factor in the organizational overall
performance.
4.Technological Resources: Include
the process by which an organization
produces its goods and services. A
technology used by an organization can
be a major influence on its cost
structures and services. Large no. of
organizations
go
for
copyrights,
trademark or patents just to leverage its
resources.
5.Capital Resources: This includes all other items of value including BRAND
NAMES,REPUTATIONS with Customers, goodwill etc.Many items grouped here
are intangible and it is more sustainable in nature.

36. Management Systems
 It
includes the following
Culture
Structure
Power Dynamics/Politics
Decision Making Process
Past Strategy & Performance
Work Systems

37. Culture
In the assessment of culture an organization
needs to understand the core values and
philosophies that guide its day to day activities.
In many case the culture are not
articulated
or
expressed
but
assumptions that the individuals
organization make about the company.
clearly
rather
in the
As a part of strategic planning process the
culture should be clearly defined and also
identified

38. Structure
There is no standard type of organization structure is
present but certain types of structural configurations may
be more suited to certain types of conditions then others.
An organizational structure acts like a catalyst for
achieving certain strategic objectives.
Organization structure has significant impact on how
work is carried out ,how groups and departments
interacts with each other, and it is a place where the
accountability of performance lies.

39. Power Dynamics and Politics
Assessing the Power dynamics and politics allows an
organization to see who really controls what happens
in the organization.
Powers is not really related to Hierarchical Position;
those in low level positions can often obtain significant
amounts of power and influence behavior and activities
of others in the organization
Politics is a process by which people utilize the
power they have in order to influence outcomes in a
manner that they desire.

40. Decision Making Process
In assessing decision making one needs to look at
1. Whether decisions are made by individuals or groups?
2. Who gets involved in decision making?
3. How information is collected, distributed, and made
available to the individuals?
4. How long it takes for a decision to be make?
These assessments can allow the organization to see
whether its decision making process promote or inhibit
effective performance as defined by the organization’s
strategic objectives.

41. Past strategy & Performance
In assessing the past strategy & performance of the
organization it is critical to understand its internal
environment.
By looking at the past strategic initiatives and measuring
the organizational success in meeting them, an
organization can attempt to determine how & why it was
not successful in the past.
On this basis the organization can study the causes of
failure or success of the past strategies and attempts to
capitalize on its successes or take remedial actions for
its shortcomings

42. Work Systems
It is critical to examine the work systems,worksystems
involves the Design of Jobs & allocation of
responsibilities to assist an organization in meeting its
objectives.
The organization needs to ensure that it has designed
work systems in an optimal manner to allow the
organization to pursue its current and future objectives.

43. Measuring Strength & Weakness
To measure Strength and Weakness three(3)
measures are used for judging the degree of
strength or weakness of an organization:
1.
2.
3.
Attribute or quality Measures.
Effectiveness Measures.
Efficiency Measures.

44. Attribute Measures
Attribute means Quality or Characteristics or
Traits. This refer to statements developed to
identify or list a characteristics or quality an
organization possess or likely to possess in the
near future.
1.
2.
Example :
Our key strength is to decentralized system of
working we follow
Our key weakness is the large work force.

45.  This
represents the presence of characteristics
without attaching a unit of measurement i.e. To
what extent a strength is genuinely contributing
towards competitive advantage.

46. Effectiveness Measures
 Here
the characteristics is expressed by a
statement that identifies the capability of
organization & will help to achieve a specific task
or objective.
 For
example a company might say that
induction of Yoga has increased the energy level
in our employees.
 Weakness
statement is that the distance
between manufacturing unit and the market is
more, leading to an increase in the product cost.

47. Efficiency Measures
 It
helps in measuring the productivity of an
organization.
 Any
statement given by the senior
management related to rejection of
product is related to the quality of
product and hence ,this weakness
needs rectification.

48. BATES & ELDREDGE APPROACH
B&E have described a conceptual approach for
analyzing strength and weakness
They suggested three(3) dimensions :
FINANCE
MANAGEMENT
OPERATIONS

49.  The
management Dimension covers top
management functions and broader issues in
relation to the entire organization. These could
be strategic planning process and system ,
climate, culture, values and so on.
 The
operations dimension includes resource
conversion and functions like production ,
materials management and marketing.
 The
finance dimensions include capital
resources, working capital and credit policies
etc.

50. 
Bates and Elderberg, have suggested the use of the
following dimensions for evaluating the strategic
planning systems of a firm:
1.
Critical factors: These involve the identification of
present and future conditions likely to have a
bearing on the achievement of objectives.
2.
Resources: These entail identifying and providing the
resources required both for present and future
achievement of objectives.
3.
Objectives: These are to be spelt clearly in terms of
the results and details used for measurement.
4.
Appraisal: This involves comparison of actual and
expected performance for possible corrective action.
5.
Resource Development: this implies establishment
and delegation of responsibilities and authority for
critical factors.

51. The 7-S Framework
Dimension
Marketing
Finance
Human Resource
Production
Strategy
Structure
System
Shared Values/Super ordinate Goals
Skills
Style
Staff
The 7-S Frame work can also be used at the corporate level and functional level. The
selection of an approach /framework depends on the following conditions/situations:
1. The level at which the exercise is being performed.
2. The characteristics that are being examined i.e. Mgt Culture, Mkt. Mgt.
3. The type of use that the management wants to employ the approach.
Depending on the answers to the above ,a single or a combination of frameworks can
be used for conducting corporate audit

52. Establishing Goals & Objectives
IV STAGE
Once an organization has established and articulated its
mission ,assessed its external environment and
identified internal resources and management systems
that affects its performance, it is then ready to
establish its goals and objectives for the next time
period.
Goals: It should be specific & measurable, decision
makers should also identify how performance towards
these goals will be measured and evaluated.

53. Goals also need to be flexible, because the whole
process of setting goals involves dealing with the
future and anticipating what might or might not happen .
Goals can be adjusted upward as well as downward in
response to how events in the environment have
unfolded

54. (V) Setting Strategy
Once goals have been defined ,an organization is ready to
determine its strategy.
Strategy ,very simple how the organization intends to achieve
goals.
It is important to know that there is no model way to manage human
resources strategically because every organization is different.
Ideally the HR Strategy serve as framework by which an
organization can develop a consistent and aligned set of
Practices, Policies, and Programs that will allow the employees
to achieve the organizational objectives.

55. Step & Ladder Approach to Strategic
Management Process
Environmental Analysis
EXTERNAL
Social
Environmental
Task Environment
(Opportunities
& Threats)
Implementation of
Strategy
Mission
Evaluation
& Control
Objectives
Strategies
Policies
Programmes
Budgets
INTERNAL
Procedures
Strategy Formulation
Structure
Culture
Resources
(Strength &
Weakness)
Performance

56. CORPORATE STRATEGY

57. Hierarchy of Strategy
1.
2.
3.
Business firms usually consider three
types of Strategies:
Corporate Strategy
Corporate
Strategy
Business Strategy
Functional Strategy
Business
Strategy
Hierarchy of Strategy
Functional
Strategy

58. Contextual/
Related
Factors
Hierarchy of Strategic Decision Making
Corporate Level Strategy
Product Market
Corporate Management
Capital Market
What business we are in?
Business
Business
Business
Unit-1
Unit-2
Unit-3
Business Level Strategy
How to compete?
Labor Market
Technology
Govt.Policies
Trade/
agreement
Policies
Stakeholders
Interest
Functional Level Strategy
R&D
Mkt.
HR
Mfg.
Fin.
How we will support the
business level competitive
strategy?
Human Resource Management: philosophy,
policies, programs, practice, processes,
relationship with managers, non-managers, trade
unions, customers & suppliers

59. 
Corporate Strategy: Provides an overall direction of
organization in terms of its general attitude towards growth
management of business.

the
and
Typically they fit in three main categories of stability, growth and
retrenchment or reduction in expenditure. Example : Infosys Tech.
follows a corporate growth strategy of Predictability, Sustainability,
Profitability & de-risking (PSPD).

Business Strategy: It is the strategy followed at the business unit
or product level. For example: Infosys uses differential strategy in
its global service delivery model.

Functional Strategy: It refers to the approach in a functional area
to achieve corporate and business unit objectives. It is concerned
with the development of a distinctive competence to provide an
organization or a business unit with competitive advantage.

60. Corporate Strategies
Various types of organization strategies requires
different types of HR programmes.
In short, there are three(3) different generic (broad)
organizational strategies, and each would require a
significant approach to managing people.
1.
2.
3.
Growth Strategy
Maintaining the status
Turnaround or retrenchment strategy

61. Growth Strategy

The first strategy is Growth. Growth can allow an
organization to reap the benefits of economies of scale,
to enhance its position in the industry, and to provide
more opportunities for professional development and
advancement to its employees.
GROWTH
INTERNAL
EXTERNAL

62. Growth can be achieved internally by further
penetrating existing markets ,developing new markets or
developing new products or services to sell in existing/
new markets.
The strategic HR issues associated to growth strategies
involves adequate planning to ensure that new
employees are hired and trained in a timely manner
to handle market demand, altering current employees
about promotion and development opportunities ,
and also ensuring that the QUALITY &
PERFORMACE STANDARDS are maintained during
that period of rapid growth.

63. External Growth is achieved when any other
organization is acquired. This is commonly done with
the competitors or with the other organization that
supply the raw materials .There are two(2)key
strategic HR issues associated with external
growth:
1.
Merging dissimilar HR systems from different
organizations.: The process may involve starting from
scratch and establishing an entirely new HR strategy
for the “new Organization”.
2.
Mergers and acquisitions usually results in the
dismissal of employees: In this second external
growth strategy decisions is to be taken that who
will be retained and who will be let go.

64. THE SECOND ORGANIZATIONAL STRATEGY
involves stability or simply “maintaining the
status”.
1
2
An organization pursuing this strategy may see very
limited opportunities in its environment and decide to
continue its operations as is.
The HR issue for this type of organization is that
The organization is not growing
It has limited opportunities to offer to its employees.
There may be very less opportunity for upward mobility
and hence the employee may decide to leave and
search for new avenues with other employer.
Hence it is necessary for an Employer to identify
key employees and develop a specific retention
strategy for them.

65. Turnaround & Retrenchment Strategy

The organization downsize or streamline its operations in
attempt to build-up or maintain its basic competency.

In this particular environment there is more threats then
opportunities ,therefore organization tries to retool
itself to capitalize on its existing strengths and
remain solvent(neutral).

66. Retrenchment Strategy
 In
this strategy the main issue is “Cost
Cutting". In service organizations the
payroll is the chief expense.
 At
this time the organization also develops
the strategy to manage the ‘Survivors’.
 Many
organizations
announce
the
intention to lay off employees well in
advance of the actual notification of
individually affected employees.

67.  As
a result ,many of these “Survivors” may have
been working for several months in the fear that
their employment was in jeopardy or risk.
 When
their jobs gets retained they found that
their co workers whom they have worked for so
many years, gone.
 They
are often asked to take additional
responsibilities of those who departed generally
without compensation.
 This
makes them demoralized, depressed etc..
and boosting the moral of these employees is an
significant HR challenge.