Strategy management is a process, an approach to addressing the competitive challenges an oragnisation faces. It can be thought as managing the 'pattern or plan that integrates an organisation's major goal, policies and action sequences into a cohesive whole'.
These can be either the generic approach to competing or the specific adjustment and actions taken to deal with a particular situation.
First the organizations engage in the generic approach, which is the organization attempt to position itself relative to competitors.
Generic approach is a small aspect of strategic management.
The second aspect of strategic management is the process of developing strategies in achieving the organization's goal:
How to scare off competitors.
How to keep competitors weak.
How to react to pending legislation.
How to deal with various stake holders and special interest groups.
How to lower production costs.
How to raise revenues.
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What technology to implement.
How many types of people to employ.
Each of these decisions may preset competitive challenges.
It is a process for analyzing a company's competitive situation, developing the company's strategic goals and devising a plan of action and allocation of resources(human, capital and physical)
This kind of strategic approach should be emphasized in Human Resource Management.
HR managers should be trained to identify the competitive issues the company faces with regard to Human resources and think strategically how to respond.
Strategic Human Resource Management
The pattern of planned human resource deployments and activities intended to enable an organization to achieve its goals.
Components of the Strategic Management Process
Diagram T/B-Pg 71
Has two distinct yet interdependent phases:
The process of deciding on a strategic direction by defining a company's mission and goals.
Its external opportunities and threats and its internal strengths and weaknesses.
The process of devising structures and allocating resources to enact the strategy a company has taken.
This consists of structuring the organization, allocating resources, ensuring the firm has skilled employees in place and developing a reward system that align employees' behavior with the organizations strategic goal.
Both of these strategic management phases must be performed effectively.
Recently organizations have recognized that the success of the strategic management process depends largely on the extent to which the HRM function is involved.
Read Case Study T/B-Pg 72
Competing through Globalisation
The Role of HRM in Strategy Formulation
A firm's strategic management decision making process usually takes place at its top levels.
The strategic planning group consisting of the CEO, CFO, the president, and various vice Presidents.
Each component consists of people related business issues.
Therefore HRM functions need to be involved in each of those components.
Four levels of integration exist between HRM function and the strategic management function:
(See diagram on next page)
Lowest level of integration
HRM function's attention is on day to day activities
The HRM executive has no opportunity/time to strategically look at HRM issues.
The company's strategic business planning function exist without any input from HRM department.
At this level of integration the HRM department is divorced from any component of the strategic management process in both strategy formulation and strategy implementation.
The department simply engages in administrative work unrelated to the companies core business needs.
In One-Way Linkage the firm's strategic business planning function develops the strategic plan and then informs the HRM.
This level of integration constitutes strategic HRM
The role of HRM function is to design systems and or programmes that implement the strategic plan.
This link does recognize the importance of Human Resources in the strategic plan; it preludes the company from considering Human resource issues while formulating the strategic plan.
This level of integration of leads to the unsuccessful implementation of a company's strategic plan.
- Allows for consideration of Human Resource issues during strategy formulation process.
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- This integration occurs in three sequential steps:
First the strategic planning team informs the HRM function of the various strategies the company is considering.
Then HRM executives analyses the Human Resource implications of the various strategies, presenting the results of the analysis to the strategic planning team.
Finally the strategic decision is taken and the strategic plan is passed on to the HRM executive, who develops programs to implement it.
- The strategic planning function and the HRM function are interdependent in two-way linkage.
Integrative linkage is dynamic and multifaceted.
Based on continuing rather than sequential interaction.
In most cases the HR executive is an integral member of the senior management team.
In strategic HRM, the HRM function is involved in both strategy formulation and strategy implementation.
The HRM executive gives the strategic planners information about the company's human resource capabilities and these are usually a direct function of the HRM practices.
The information about human resource capabilities helps top management choose the best strategy, as the can consider how well each strategic alternative would be implemented.
Once the strategic choice has been determined, the role of HRM changes to the development and alignment of HRM practices.
(See diagram on next page)
Five major components of the strategic management process are relevant to strategy formulation.
The mission is a statement of the organization's reason for being.
It usually specifies the customers served, the needs satisfied and/or the values received by the customer and the technology used.
The mission statement is often accompanied by a statement of a company's vision and/or values.
An organization's goals are what it hopes to achieve in the medium to long term future.
They reflect how the mission will be operationalized.
External analysis consists of examining the organization's operating environment to identify the strategic opportunities and threats.
Customer markets that are not being served.
Technology advances that aid the company.
Labour pools that have not been tapped.
Potential labour shortages.
New competitors entering the market
Competitors' technological innovations.
Internal analysis attempts to identify the organization's strengths and weaknesses.
It focuses on the quantity and quality of resources available to the organization- financial, capital, technological and human resources.
Organizations have to be honestly and accurately assess each resource to decide whether it is strength or a weakness.
External analysis and internal analysis combined constitutes what has come to be called the SWOT analysis (strength, weakness, opportunities and threats).
After going through the SWOT analysis the strategic planning team has all the information it needs to generate a number of strategic alternatives.
The strategic managers compare these alternatives' ability to attain the organisation's strategic goals.