CHAPTER 3:
STRATEGIC
PLANNING

1–2
Strategic Management
• Strategic Human Resource Management
– Involves aligning initiatives involving how people are
managed with organizational mission and objectives
• Strategic Management Process
– Determining what needs to be done to achieve corporate
objectives, often over 3 - 5 years
– Examining organization and competitive environment
– Establishing optimal fit between organization and its
environment
– Reviewing and revising strategic plan

1–3
Models of Strategy
• Industrial Organization (I/O) Model
– External environment is primary determinant of organizational
strategy rather than internal decisions of managers
– Environment presents threats and opportunities
– All competing organizations control or have equal access to
resources
– Resources are highly mobile between firms
– Organizational success is achieved by:
• Offering goods and services at lower costs than
competitors
• Differentiating products to bring premium prices

1–4
Models of Strategy
• Resource-Based View (RBV)
–An organization’s resources and capabilities, not external
environmental conditions, should be basis for strategic
decisions
–Competitive advantage is gained through acquisition and value
of organizational resources
–Organizations can identify, locate and acquire key valuable
resources
–Resources are not highly mobile across organizations, and
once acquired are retained
–Valuable resources are costly to imitate and non-substitutable

1–5
Contrasting the Two Approaches
• Research provides support for both
positions
• What drives strategy?
– I/O: External considerations
– RBV: Internal considerations
• I/O: Strategy drives resource acquisition
• RBV: Strategy determined by resources

1–6
The Process of Strategic Management
• Mission statement
• Environmental analysis
• Organizational self-assessment
• Establishing goals and objectives

1–7
Exhibit 1
Process of Strategic Management

1–8
Mission Statement
• Explains purpose and reason for existence
• Usually very broad
• No more than a couple of sentences
• Serves as foundation for everything
organization does

1–9
Solectron Mission Statement
“Our mission is to provide worldwide
responsiveness to our customers by offering the
highest quality, lowest total cost, customized,
integrated, design, supply-chain and
manufacturing solutions through long-term
partnerships based on integrity and ethical
business practices.”

1–10
Analysis of Environment
• Critical components of external
environment
– Competition
– Industry structure
– Government regulations
– Technology
– Market trends
– Economic tends

1–11
Organization Self-Assessment
• Identify primary strengths and weaknesses
• Find ways to capitalize on strengths
• Find ways to improve or minimize
weaknesses
• Examine resources
– Physical
– Human
– Technological
– Capital

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Organization Self-Assessment
• Examine internal management systems
–Culture
–Organization structure
–Power dynamics and policy
–Decision-making processes
–Past strategy and performance
–Work systems

1–13
Establishing Goals & Objectives
• Goals should be:
– Specific
– Measurable
– Flexible

1–14
Corporate Strategies: Growth
• Benefits
– Gaining economies of scale in
operations and functions
– Enhancing competitive position
vis-à-vis industry competitors
– Providing opportunities for
employee professional
development and advancement
• HR Issues
– Planning for new hiring
– Alerting current employees
– Ensuring quality & performance
standards are maintained
• Internal Methods
– Penetration of existing markets
– Developing new markets
– Developing new products or
services for existing or new
markets
• External Methods
– Acquiring other organizations
– Vertical integration
• HR Issues
– Merging organizations
– Dismissing redundant employees

1–15
Corporate Strategies: Stability
• Maintaining status quo due to limited
environmental opportunities for gaining
competitive advantage
• Few employees will have opportunities for
advancement
• Critical that management identify key
employees and develop specific HR
retention strategies to keep them

1–16
Corporate Strategies:
Turnaround or Retrenchment
• Downsizing or streamlining organization in
cost-cutting attempt to adjust to competitive
environment
• Few opportunities and many environmental
threats
• Important to develop HR practices to
manage “survivors”

1–17
Business Unit Strategies: Cost Leadership
• Increases in efficiency and cutting of costs, then passing
savings to consumer
• Assumes price elasticity in demand for products or services
is high
• Assumes that customers are more price sensitive than
brand loyal
• HR strategy focuses on short-term performance measures
of results and promoting efficiency through job
specialization and cross-training

1–18
Business Unit Strategies: Differentiation
• In order to demand a premium price from consumers
– Attempting to distinguish organizational products or services from other
competitors or
– Creating perception of difference
• Organization offers employees incentives and compensation
for creativity
• HR strategy focuses on external hiring of unique
individuals, and on retaining creative employees

1–19
Business Unit Strategies: Focus
• Business attempts to satisfy needs of only a particular
group or narrow market segment (niche)
• Strategic intent is to gain consumer loyalty of neglected
groups of consumers
• Strategic HR issue is ensuring employee awareness of
uniqueness of market segment
– Thorough employee training and focus on customer satisfaction are
critical factors
– Hiring members of target segment who are empathetic to customers in
target segment

1–20
Exhibit 3-3 (page 1)
Dyer & Holder’s Typology of Strategies

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Exhibit 3-3 (page 2)
Dyer & Holder’s Typology of Strategies

Copyright © 2005 South-Western. All rights reserved. 1–22
Benefits of a Strategic Approach to HR
• Facilitates development of high-quality workforce
through focus on types of people and skills needed
• Facilitates cost-effective utilization of labor,
particularly in service industries where labor is
generally greatest cost
• Facilitates planning and assessment of
environmental uncertainty, and adaptation of
organization to external forces

Copyright © 2005 South-Western. All rights reserved. 1–23
Reading 3.1 (Wright, Dunford, & Snell)
Human Resources & Resource Based View
• “People management systems”
construct
– Not all competitive advantage begins with
people management systems
– These systems create value to the extent that
they impact stock, flow, and change of
intellectual capital/knowledge
– Basis of core competencies

Copyright © 2005 South-Western. All rights reserved. 1–24
Reading 3.1
Human Resources & Resource Based View
• “Skill” concept expanded to consider stock of
intellectual capital in firm
• “Behavior” concept reconceptualized as flow of
knowledge within firm through its creation,
transfer, and integration
• Core competence arises from combination of
firm’s stock of knowledge and flow of knowledge
through creation, transfer, and integration in a way
that is valuable, rare, inimitable, and organized

1–25
Reading 3.1
Human Resources & Resource Based View
• Dynamic capability construct illustrates the
interdependent interplay between workforce
and core competence as it changes over
time

1–26
Reading 3.2 (Capelli & Crocker-Hefter)
Distinctive Human Resources
• “Flexibility” dimension associated with
“prospectors”
• “Established markets” category linked to
classifications like “defenders”
• Employment practices are difficult to
change and transfer
• Claim: core competencies should drive
business strategy, and not vice versa

1–27
Reading 3.2
Distinctive Human Resources
• Key question: If competencies are
available to everyone in an open market,
how can they generate a unique competency
and competitive advantage for any one
firm?

1–28
Reading 3.3 (Schuler)
The Five P’s Model of SHRM
• Philosophy
– Statements of how organization values and treats
employees; essentially culture of the organization
• Policies
– Expressions of shared values and guidelines for action on
employee-related business issues
• Programs
– Coordinated and strategized approaches to initiate,
disseminate, and sustain strategic organizational change
efforts necessitated by strategic business needs

1–29
Reading 3.3
The Five P’s Model of SHRM
• Practices
– HR practices motivate behaviors that allow
individuals to assume roles consistent with
organization’s strategic objectives
– Three categories of roles:
• Leadership
• Managerial
• Operational

1–30
Reading 3.3
The Five P’s Model of SHRM
• Processes
– Continuum of participation by all employees
in specific activities to facilitate formulation
and implementation of other activities

1–31
Reading 3.3
The Five P’s Model of SHRM
• Successful SHRM efforts begin with
identification of strategic needs
• Employee participation is critical to linking
strategy and HR practices
• Strategic HR depends on systematic and analytical
mindset
• Corporate HR departments can have impact on
organization’s efforts to launch strategic
initiatives