Assessment Of The Compensation Strategy Analysis Commerce Essay


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So as to attract, motivate and retain employees, rewards, both monetary and non-monetary should be provided to them (Jackson, 2008). Rewards to the employees however should be approached with the aim of balancing the interests and cost of the employer with the expectations of the employees. As Jackson opines, rewards should comprise more than compensation. That aside, he notes that compensation is of two forms, direct compensation comprising base pay and variable pay and indirect compensation which comprise the employee benefits. To determine the effectiveness of compensation used in an organization it should be evaluated. This is done by considering four major areas that the organization competes in. These areas are customers market, internal and external labor markets and the capital. This paper seeks to briefly discuss the four market framework and then apply them in conducting a compensation strategy analysis for three organizations dealing in different customer markets. The three organizations are Microsoft Corporation, Virgin Atlantic and the PepsiCo.

The Four Market Framework

Customer Market

This refers to those people who purchase the products made by the organization. Kumar (2008) says that the success of organizations depends on their ability to provide high level value propositions.

Internal Labor

According to McDaniel (2008) when there a new vacancy in the organization, the organization may get employees within. This source constitutes the internal labor market. Promotion and transfers motivates internal recruitment of employees.

External Labor

According to McDaniel (2008) this consists of sources of employees with skills not available in the organization. Miles and Bennett (2010) support this by highlighting that external labor market contains all of those sources of labor outside the organization. They add that how far flung it is, vary depending on the requirements of the job, licensing requirements and the industry involved.


According to Tracy and Tracy (2008), this refers to the money used to purchase the assets which are used in the running of the business. They further state that capital comes from the money either borrowed or invested in the business.

Multiple Market Approach to Compensation Analysis in Microsoft Corporation

Customer Market

The customers of Microsoft Corporation consist of users of computing products such as windows, severs, and Microsoft office. The company has a strong emphasis on high value products for their customers. This means that compensation to the employees is done in order to motivate them to design high quality products for the customers. The employees pay is aimed at meeting the demands of the clients that is developing what the consumers want and beat the competitors.

Internal and External Labor Market

Jackson (2008) highlights that how the employees view the salary in terms of fairness greatly influences their performance. This is determined by the employees by comparing the benefits they get against their inputs. In internal labor market, the compensation is aimed at developing the skills that they may be needed by Microsoft in future. Employees receive compensation based on their knowledge that they apply on development of products. In external labor market, here the company offers higher rewards compared to those in other companies. This is especially in field of information technology consulting, where trainers in the areas such as Microsoft certified solution developers, systems developers, certified trainers and system administrators are well compensated.

Capital Market

The company went public in 1986. Capital is raised from internal and external sources. Internal source include the profit retention while external include the capital raised by the shareholders. This therefore means that the compensation to the employees is not aimed at raising more capital. However they aim at compensating employees so that they do not lose them to competitors.

In summary, the highly influential population job in Microsoft Corporation is that of business development managers. Their job is outstanding since they have been able to develop diverse products for the clients.

Multiple Market Approach to Compensation Analysis in Virgin Atlantic

Customer market

Virgin Atlantic offers airline services and their customers are all over the world. The rewards made to the employees are aimed at motivating employees to provide high quality services to the customers and maintain good customer relations. The employees are supposed to manage the customer information and the cargo. The rewards are aimed at encouraging the employees to meet the travel needs of the customers.

Internal and External Labor Markets

The Virgin Atlantic offer monetary and non monetary benefits to their employees. They ensure there is upward revision of salaries. The organization aims at retaining the experienced employees. These are those in the engineering department, customer relations and those in charge of managing the customer information. In the external labor market, the Virgin Atlantic offers competitive salary package to the employees. The staff members are involved in the various community projects. The rewards are higher and this means that they are able to attract and retain in engineering, cargo and customer relations departments the best human resources.

Capital Market

Virgin Atlantic is owner by the virgin group and the Singapore airlines. The shareholders raise the capital to finance the operations of the airline. Employees are paid to motivate them help customers meet their needs, retain them in virgin Atlantic and the compensation is also aimed at attracting the qualified personnel in airline. The employees’ compensation is not based on the ways equity capital is raised.

In summary, the highly influential population job in Virgin Atlantic is that of public relation managers. Their job is poor since they have been unable to address their frosty relationship with other airlines.

Multiple Market Approach to Compensation Analysis in PepsiCo

Customer market

PepsiCo deals with beverage and snack foods. The compensation to employees is aimed at motivating them to come up with high quality products for the customers. They should come up with products that can compete with products from other companies.

Internal labor market

The company is involved in constant evaluation of the performance of employees in order to determine the skills that need to be retained. There is adjustment in the work force and addressing of pay issues. This is aimed at motivating the employees to continue working for the company.

External labor market

The company compensates their employees with wages, benefits and bonuses. They offer higher rates of salaries than their competitors in the same industry in order to attract highly qualified personnel who manufacture, sell and distribute the products.

Capital market

PepsiCo Incorporated is owned by Pepsi-cola and Frito-Lay. The company generates its revenues from sales. The equity capital is raised by the shareholders of the company. The compensation paid to the employees is not tied to enabling the company raise more capital.

In summary, the highly influential population job in PepsiCo is that of the manufacturers. The job done by them is outstanding. This group of employees aims at providing quality products for consumers. They respond to the needs of the customers by manufacturing diverse products for their clients.

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