CHAPTER 3: STRATEGIC PLANNING

1. CHAPTER 3: STRATEGIC PLANNING

2. Strategic Management • Strategic Human Resource Management • Involves aligning initiatives involving how people are managed with organizational mission & objectives

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

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

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 is determined by resources

6. The Process of Strategic Management • Mission statement • Environmental analysis • Organizational self-assessment • Establishing goals & objectives

7. Exhibit 3-1Process of Strategic Management

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

9. American Express Mission Statement “The mission of our program is to bring to life the American Express value of good corporate citizenship by supporting diverse communities in ways that enhance the company’s reputation with employees, customers, business partners and other stakeholders.”

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

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

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

13. Establishing Goals & Objectives • Goals should be SMART • Specific • Measurable • Attainable • Relevant • Time bound Goals should be flexible as well.

14. Levels of Strategy

15. Benefits Gaining economies of scale in operations & functions Enhancing competitive position vis-à-vis industry competitors Providing opportunities for employee professional development & 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 Corporate Strategies: Growth

16. 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 & develop specific HR retention strategies to keep them

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

18. Business Unit Strategies: Cost Leadership • Increases in efficiency & 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 & promoting efficiency through job specialization & cross-training

19. 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 & compensation for creativity • HR strategy focuses on external hiring of unique individuals & on retaining creative employees

20. Business Unit Strategies: Focus • Business attempts to satisfy needs of only a particular group or narrow market segment • 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 & focus on customer satisfaction are critical factors • Hiring members of target segment who are empathetic to customer in target segment

21. Thank you!