The Competitive Environment

4

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LEARNING OUTCOMES

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1 Describe the competitive environment of human resource management

2 Identify three types of strategies and relate each to human resource management

3 Discuss human resource strategy formulation and relevant organizational factors

4 Discuss the processes through which human resource strategy is implemented

5 Discuss how the human resource function in organizations can be evaluated

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The Competitive Environment

• Organizations gain competitive advantage through management of human resources

• Human resource manager adds value to the organization by providing expertise concerning how to use firm’s human resources• To accomplish its objectives and gain

competitive advantage

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Figure

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4.1 Strategic Human Resource Management

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The Competitive Environment

• Strategic perspective• A firm gains a competitive advantage when it

implements a strategy that its competitors are unable to implement

• Influence of organizational purpose and mission • Describes the importance an organization places

on its human resources

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The Competitive Environment

• Influence of the top management team• Sets the tone for the organization and plays a

major role in shaping its culture

• Role of corporate governance• Monitors the actions of the top management

team to ensure that stockholders’ interests are protected

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Types of Strategies

• Corporate strategy: Determines what businesses the corporation will operate

• Business strategy: Deals with how the firm will compete in each market where it conducts business

• Functional strategy: Deals with how the firm will manage each of its major functions

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Corporate Level Strategies

• Pursued internally by opening additional locations or externally through mergers, joint ventures, or the acquisition of other businesses

Growth strategy

• Occurs when an organization finds that its current operations are not effective, and major changes are needed to rectify the problem

Retrenchment strategy

• Calls for maintaining status quo

Stability strategy

• Used by companies that are adding new products, product lines, or businesses to their existing core products, product lines or businesses

Diversification strategy

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Business-Level Strategy

• Adaptation model: Managers in an organization should try to match the organization’s strategy with the basic conditions of its environment• Defender strategy

• Prospector strategy

• Analyzer strategy

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Other Competitive Strategies

• Attempts to develop an image or reputation for its product or service that sets the company apart from its competitors

Differentiation strategy

• Focuses on minimizing the costs as much as possible

Cost leadership strategy

• Undertaken when an organization tries to target a specific segment of the marketplace for its products or services

Focus strategy

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Figure

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4.3 Human Resource Strategies

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Components of HR Strategy

Organizational design

Corporate culture

Unionization

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Interpersonal Processes

• Overall set of expectations held by an individual with respect to what they will contribute to the organization and what the organization will provide to individual in return

Psychological contract

• Relatively stable set of psychological attributes or traits that distinguish one person from another

Personality

• Set of forces that causes people to behave in certain ways

Motivation

• Person’s adaptive response to a stimulus that places excessive psychological or physical demands on that person

Stress

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Strategy Implementation

• Human resource managers help identify potential leadership qualities among existing employees• To help structure procedures for developing and

enhancing those qualities

• Communication is an interpersonal process directly related to the implementation of human resource strategy

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Table

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4.1 Human Resource Management That May

Lead to Improved Firm Performance

SUMMARY

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• Organization gains competitive advantage through its management of human resources

• Key to strategic operations is developing and implementing effective strategies

• Interpersonal processes are important because of the role they play in affecting the performance effectiveness exhibited by each employee in a firm

KEY TERMS

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• Adaption model (p. 85)

• Business strategy (p. 82)

• Corporate strategy (p.82)

• Cost leadership strategy (p.86)

• Culture (p.89-90)

• Differentiation strategy (p.86)

• Diversification strategy (p. 84)

• Focus strategy (p.87)

• Functional strategy(ies [p.87])

• Growth strategy (p. 82)

• Mission (p.79)

• Motivation (p. 91)

• Organization design (p. 89)

• Personality (p. 91)

• Psychological contract (p. 91)

• Purpose (p. 79)

• Related diversification (p. 84)

• Retrenchment strategy (p.83)

KEY TERMS

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• Stability strategy (p. 84)

• Stress (p.92)

• Top management team (p. 79-80)

• Unrelated diversification (p. 84)

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