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The report for analysis of Savastores case study will discuss the factors which make the influence on the organization, and give some advices on the creation of a new and appropriate HRM resourcing strategy to help meet their developing corporate strategy. The author follows the logical structure that firstly analyzes the internal and external environment of Savastores, and then analyzes the corporate strategy of Savastores, last gives the accommodations about strategic HRM (which the HR department should consider it) and activities (which could give some advices for creation HRM resourcing strategy).
This paper will be presented at the following structure. First, an analysis of the internal and external factors for Savastores will be outlined. Second, analyze the corporate strategy for Savastores. Third, present the accommodations of strategic HRM and some advices of creation of HRM resourcing strategy. At last, conclusion will be stated.
Savatores is a supermarket chain operating across the UK and established some 40 years ago. In the recent times Savatores have improved its services such as loyalty card and online shopping service in order to enhance its quality of services. Meanwhile, the Board of Savatores set out an ambitious strategy to transform the provision and image of the Company to a quality product, quality service retailer, importantly, maintains a reputation for excellent value. The Board also has invested heavily in a number of initiatives and are considering a rebranding of the stores in the near future.
Savatores employs a significant number of people at their Regional Distribution Centers (RDCs) which avoid perishing and taking up space unnecessarily. The Board have invested in an upgraded IT system and have commissioned a fourth RDC in the South East of England to increase warehouse capacity and streamline regional operations The Board also considered that they are planning to expand product ranges beyond food and white goods to clothes, audio and many of the other lines provided by the major supermarkets. At present, the Board are investing in the extension of some strategically located stores to accommodate the new lines.
As a summary, Savatores is a large supermarket which has good relations with suppliers and contractors, and offers quality products and services for supermarket chains. In addition, Savatores try to expand its range of products and services in order to maintain the excellent value of company. These factors indicated that Savatores is ambitious to keep its competitive power and try hard to enhance its market position of the retailer market. Moreover, it is easy for the company to recruit new staff when the company need.
Over the years, Savastores found that recently its market position coming under increasing threat from the influx of European budget supermarket chain to the UK and the 'value' food lines provided by the major supermarkets. Moreover, the existing management is too mired in the Savastores' old culture and traditions and so will not have the will or dynamism to change. As for the general staff, the vast majority feel that they are overworked, underpaid and undervalued. It is not a surprise that employees are paid slightly less than counterparts in other retail organizations and because HRM has always been a problem within individual stores.
Particularly, the problems like low morale, low level of staff commitment, low job security, lots of complaint and protesting redundancies, unclear-cut of managers' duty, and so on.
External Factors for Savastores
According to the past learning of international finance course which the author has learned in China, the author found that most of the buildings of strategies are affected by the external environment factors, such as social factors (demographics), economic factors (affect the cost of business), Technological (innovation), competitive (competition in board or local), and Regulatory forces (government laws and policies). Some scholars agreed with it. Torrington et al. (2008, p.54) indicated that the environment broadly as the context of the organization, and this is clearly critical in the impact that it has on both organizational and HR strategy. They also agreed that much strategy is based on a response to the environment. Therefore, In HR aspect, some issues need considering and recognition such like to what extent to identify the employees with inadequate skills easy or difficult. In addition, we shall be concerned with what competitors are offering and with what training programs are required by the law and policy. The author provides data below by MINTEL (2010, online) which could summative illustrate the external factors for Savastores in effect:
In social aspect, the report of MINTEL showed that the world economy experienced a downturn, tight credit and slide back into recession in 2009. Although the UK came out of recession in the final quarter of 2009, the effects of the downturn will be long lasting and will linger for some time until now.
In demographics statistics, in the UK, the current aging demographic trend means fewer young workers, which will result in an ageing workforce; hence the organizations may have fewer creativity and innovation. However, the report of MINTEL also shows that the population is ageing as well, as life expectancy increases. This has significant implications for consumer markets (more pensioners and fewer pre-/no family adults).
In the politicalÂ and legislative parts, in order to increase the yield of government, the government has executed a series of operations such as VAT raiseÂ etc.
In technological aspect, in order to reduce the cost and improve the quality, new and updated technologicalÂ was required.
For competitors, the international market provide amount of competitors for the UK local companies, for instance, China, Vietnam and India such developing countries, the cheap labor cost can lead to an even lower price product.
Savastores' Corporate Strategy
First of all, the Board of Savastores set out an ambitious strategy "to transform the provision and image of the company form a 'pile`em high' 'no frills' grocer to a quality product, quality service retailer", but also keep the low paid for staff and high working hours per week. It is the corporate strategy which aims to improving the product and service quality but keeping a reducing of unit cost. In other words, it means to establish the competitive advantage. The author found that this is a cost-leadership strategy which mentioned by Michael Porter (1985). Some scholars (Michael J. Stahl, David W. Grigsby, 1997) argued that the cost leadership strategy is not the same as price leadership strategy, it means the lowest cost of operation and production as much as possible, but do not afford the cheap and lower quality products and services. In addition, Porter (1985) agreed that in order to add value, differentiation strategy could be existed. In this case, the company "employs a significant number of people at their RDCs" showed that although such strategy increases the cost, the aim is to add value.
Particularly, some scholars argued that successful strategies should be based on a mix of the cost leadership strategy and differentiation strategy. (Thompson and Martin, 2005) Furthermore, a cost leadership strategy will keep a cost advantage over their competitors to win the price war in the market, and let the competitors lose. The main purpose of implementing such strategy is becoming more effective of processes that try to find the higher average value, seeking the lower cost materials, and do not let the extra cost to the consumers.
However, in effect, no matter how good the strategy it is, there still some drawbacks will come out. For example, in this Savastores case, the management is mired in the old culture and traditions that they will not have the dynamism to change. Furthermore, the Board bent on the cost reducing, which means the staff will lose the incentive to work, resulting in a large area of absenteeism and job-hopping.
Redman and Wilkinson (2009) illustrated that "HRM has assured a vital strategic role in recent years as organizations attempt to compete through people. Strategic HRM will assist the business to anticipate the rapid and discontinuous change to its workplace, plane ahead for these, and maintain the competitive advantages". As summarize by the author, strategic HRM is one of the essential aspects forÂ business's success andÂ development.
The implementation of the strategic HRM has a lot of advantages. Initially, the competitive advantage will be earned over competitors and targets. Secondly, the implementation of the strategic HRM will help the business to gain more effective workers and decrease the potential cost. Lastly, due to the establishment of an organization culture and workforce schemes, the implementation of the strategic HRM can profit the corporate for a long term. However, when the company implement the strategic HRM, it may be occurred some problems and drawbacks. Miller and Shamisie (1996) recognized that the strategic HRM approach provides more added values when the external environment is less predictable. Analoui (2007) indicated that the external issues that affect the HR planning are hard to predict, so the behavior of people will change unexpectedly.
Miller, D. and Shamsie, J. (1996) 'The resource based vies of the firm in two environments: The Hollywood Film Studios from 1936-1965', Academy of Management Journal
Armstrong and Baron (1998) defined the performance management as "Performance management is a process which contributes to the effective management of individuals and teams in order to achieve high levels of organizational performance". Savastores have focus on the input and outcome in the organization level of performance, regarding to the main corporate strategy is reducing cost of products and services and improving the quality of products and services. In this case, Totally Quality Management (TQM) which means the 360 degree apparel can be used to protect the product quality; it concentrates on quality and aims to improve the effectiveness and competitiveness of organization. However, TQM is viewed as a not-cheap process, as improving the quality whilst, increase the cost of organization. So the manager should control the cost carefully.
Athinson (1985) suggest that organizations should have core workforce, periphery workforce and external workforce. The author recommended that Savastores should build up the flexible workforce, which means business may face changes of quantity and type in demand. "At organizational level flexibility refers to the integrative use of employment practices and organizational structures to create the capacity for innovation and change", Marchington and Wilkinson (2008) supported this view.
In effect, on average each store opens for 80 hours per week and almost three quarters part-time workers. The general staff feel overworked, underpaid and undervalued. As the advice for this approach, Savastores can through the company level of flexibility to reduce its cost, including functional, numerical, and financial flexibility. Furthermore, paying overtime provide the flexible workforce for employees who also can be profited and motivated by the flexible working hours and work life balance scheme. For the organization aspect, build up the flexible workforce also is an effective way to reduce the operation cost and respond to the quality change.
As an advice for Savastores, if the company can adjust the working hours scheme and hire more part-time and temporary workers to fill into the gap or hire some 'mercenaries' to handle the difficulty time when the demand is high.
Recruitment is the first aspect in HRM, which aims to attract the most capability staff and choose the suitable one. Cooper et al. (2003) indicated that Organizations should through the way about attracting, recruiting and retaining the quality staff that keep the high competitive advantage for operation and growth of organization. Cook (2004) point out that, in order to get the competitive advantages and excellent human resource, the organization should employ the best and suitable employees. However, if the company hired the wrong employee, it may cost a lot of budget to cover it, such like re-training. Furthermore, the company will spent an addition fee to recruit the new employee.
When the company recruit a new employee, the HR department usually use some form of job analysis and description which are very important for organization. But the author will not discuss it in this report. The author will focus on the advice of recruitments and selection which would help the Savastores and its corporate strategy.
As a large chain operating supermarket, the Board has already invested heavily in innovation with cost leadership strategy. And the Board required recruiting the managerial staff that has an international outlook in recognition of the globalization of procurement. The advice for this approach, author suggests that through the interviews role play and retrospective way to select the innovation, creative and oversea background groups as the managerial staff.
The process of the recruitment and selection should be follow the fairness principle and avoid the nepotism. The scholar claim that all the information will be presented in the internal before advertised. Generally, using the internal recruitment can reduce the risk of employing the unsuitable people because the employer had critically known their staff. Otherwise, it can also provide the opportunity for developing employees' career.
Effective Induction session
As the case showed, the Savastores face the problem that the organization cannot walk out the old culture and traditions. And it results in the difficult position that the existing management will not have the will and dynamism to change. The author states that pay an attention to effective induction session that human resource department should plan and implement an effective program in order to help the new staff growth, development and quickly participate in the organization culture.
As the advice for this approach, not only as the above benefit mention, but also the effective induction session can help the organization improve the old culture and break the traditions. For example, when the company recruits the new staff, as usual, the HR department should give them an induction and orientation to let them fill in the organization culture and operating system. However, if the HR department provides some new culture to the new staff and let them break the traditions of organization, it presents a lower cost that avoid to re-training the whole company staff. Such like the fashion language words, the old staff were affected by the new employees; they learn the new words in order to communicate smoother.
Armstrong (1991) illustrate that the reward as a methods of motivation can include both finance (money) and non-finance reward (spiritual level and power of the job position). The author indicates that the finance reward is the most important factor in motivating employees. In the case of Savastores, the author cannot found any information about the reward and motivation. As an advice for the case, employees in Savastores can be rewarded for their general work which base on their roles. For the managerial employees, the company could provide extra benefits such as company car, insurance, training course; it is better to use the annualized working hour plan, which means the employees are pay on the certain number of hours in a year. For the 'rank and file' staff, the payment methods should base on their working hours and quality. That could appropriately increase the dynamism to work. Performance-related pay may be more suitable to the managers' apply, because for the workers it is difficult to measure their performance. Furthermore, establish the big praise for every month or year could clearly increase the efficiency of production. Otherwise, due to the most of people only care themselves; the company needs to focus on the individual reward instead of team reward.
As an organization with cost leadership strategy, and the organization has ambition to expand into overseas markets, sometimes reduce the staff is necessary for improvement. In order to reduce the unnecessary expenditure and encumbrance that prevent the company to improve profit, cutting people out is a good method.
Redundancy should be the final step to implement, because it usually is seen as the negative effect and expensive cost for organization. Generally, the redundancy brings the scare and non-sense of job security to staff, and the organization have to spent another cost to recruit and training the new employees (CIPD, 2009, online). In the Savastores case, there are lots of reasons to implement redundancies, such as the ambition to expand into overseas markets, the company needs higher caliber staff that is innovation and has an international outlook; personnel managers of store have no specialist experience and the deputy general managers do the HRM work as the personnel manager.
As an advice for Savastores's resourcing strategy, the author list several recommendations below :
First, looking for volunteers, as the relative moderate methods, the company need to make the true situation clear understood by the staff that the company facing an innovation and revolution. And the Board of Savastores will compensate the volunteers. For example, relate to the working years, the company will provide the relevant compensation for them.
Second, it will be helpful for Savastores to maintain the caliber and knowledge staff which means the Board of Savastores could cut the incapable staff off and retain the more efficient team. According to the corporate strategy as 'maintaining a reputation for excellent value', it is helpful for Savastores to reduce the cost of product and service. Otherwise, it will also bring some dynamism to work, because staff afraid to lost their job. However, redundancy also leads to some drawbacks. For example, some caliber staff may leave the company because of the job security, and even work for other companies. Furthermore, some staff may leave the company for the compensation and find another job in other companies. Therefore, it is important to select the right staff to cut off and design the necessary process of redundancy.
Last, it is important for Savastores to build a formal procedure of redundancy. In this way, it will be significantly help for the planning and implement a redundancy issues. Moreover, it is necessary to follow the legal requirements to implement the redundancy.
To sum up, the report has researched the internal and external factors of Savastores which have influenced the organization. The organization strategy as a cost leadership strategy aims to reduce the production and service cost and retains the quality. The author suggest that the strategic HRM should be adopted, which purpose to keep and develop the competitive advantages for a long term success.
Lastly but not least, recommendations are focus on the area of HR activities which present both the benefits and drawbacks, and give advices for creation of HRM resourcing strategy.