Strategy & Analysis

Lecture 3
Learning 1. Explain why strategic planning is important to all

Objectives managers.
2. Explain with examples each of the seven steps in the
strategic planning process.
3. List with examples the main generic types of corporate
strategies and competitive strategies.
4. Define strategic human resource management and give
an example of strategic human resource management
in practice.
5. Briefly describe three important strategic human
resource management tools.
6. Explain with examples why metrics are important for
managing human resources.
Mini Case
Several years ago, the Ritz-Carlton Company took over managing the Portman Hotel in
Shanghai China. The new management reviewed the Portman’s strengths and weaknesses,
and its fast-improving local competitors. They decided that to be more competitive, they had
to significantly improve the hotel’s level of service. Achieving that aim in turn meant
formulating secondary plans, particularly human resource management plans, for hiring,
training, and rewarding hotel employees. It meant putting in place a new human resource
strategy for the Portman Hotel, one aimed at improving customer service.
Explain why strategic
management is
important to all
managers ?
Critical thinking
Goal Setting ● It involves setting objectives,

and the ●
●
making basic planning forecasts,
reviewing alternative courses of action,
Planning ●
●
evaluating which options are best,
and then choosing and implementing your plan.
Process
1. A plan shows the course of action for getting from
where you are to where you want to go in other words,
to the goal.
2. Planning is always goal-directed
Hierarchy of Goals
Mission
1
Guide to planning for the
Strategic Goals
organization as a whole
Top Management Planning 2
for the entire organization Tactical Goals
based on the Mission’s
guiding principles 3 Middle- Management
Planning for major division,
Operational Goals functions and departments of
the organization
4
First Line Management
Planning for the non-
management employees
 Strategic Planning

● A strategic plan is the company's plan for how it will match its
internal strengths and weaknesses with external opportunities and
threats in order to maintain a competitive advantage.
Strategic Management Process
Environmental
Scanning
Worksheet
Types of Strategies
Strategy 1: Corporate Strategy
Corporate Strategy
● How many and what kind of businesses should
we be in?
● For example, PepsiCo doesn't just make Pepsi-
Cola.

● Instead,PepsiCo is comprised of four main

businesses:
○ Frito-Lay North America,
○ PepsiCo Beverages North America,
○ PepsiCo International,
○ Quaker Oats North America
● PepsiCo therefore needs a corporate-level
strategy.
Concentration ( Single Business) Corporate
Strategy
● For example, with a concentration
(single business) corporate strategy,
○ the company offers one product or
product line, usually in one market.

○ WD-40 Company (which makes a

spray hardware lubricant) is one
example.
Diversification Corporate Strategy
● A diversification corporate strategy implies that the firm will expand by
adding new product lines. PepsiCo is diversified.
○ PepsiCo added chips and Quaker Oats.

● (2) Types of Diversification corporate strategy

○ Related diversification
○ Conglomerate diversification
Related Diversification
Local Example
Conglomerate Diversification
 Vertical Integration Strategy

● means the firm expands

by, perhaps, producing
its own raw materials, or
selling its products
direct.
○ Samsung opened its
own stores
○ Apple opened its
own Apple stores.
Additional examples of Corporate Strategy
● With consolidation strategy, ● With geographic expansion,
the company reduces its size. the company grows by entering
new territorial markets, for
instance, by taking the business
abroad
Strategy 2: Competitive Strategy
 Competitive Strategy
● On what basis will each of our businesses compete?
● A competitive strategy identifies how to build and strengthen the business’s
long-term competitive position in the marketplace.
● It identifies, for instance, how Pizza Hut will compete with Papa Johns or how
Walmart competes with Target.
● Managers attempt to achieve competitive advantages for each of their businesses.
Competitive Advantage
● Definition: competitive
advantage is any factors that
allow a company to differentiate
its product or service from those
of its competitors to increase
market share.
○ Managers use several standard
competitive strategies to achieve
competitive advantage:
Cost Leadership
● Cost leadership means becoming the low-cost leader in an industry.

● Walmart is a classic example.

○ Used cost leadership to become a world leader
○ Slogans: “ Always Low Prices” , “Save Money . Live Better” emphasis on
price slashing
○ It maintains its competitive advantage through its:
■ satellite-based distribution system,
■ careful (usually suburban) site location,
■ and expert control of purchasing and sales costs
Differentiation
● Differentiation is a second possible competitive strategy.

○ In a differentiation strategy, the firm seeks to be unique in its industry

along dimensions that are widely valued by buyers.

■ Volvo stresses the safety of its cars,

■ Papa Johns stresses fresh ingredients,
■ Target stresses somewhat more upscale brands than Walmart.
■ Mercedes-Benz, firms can usually charge a premium if they
successfully stake a claim to being substantially different from
competitors in some coveted way.
Focus
● Focusers carve out a
market niche (like
Ferrari).
● They compete by
providing a product or
service that their
customers cannot get
from their generalist
competitors (such as
Toyota).
HR as a competitive
Advantage
Competitive advantage in HR refers to the quality of the employees
who can not be copied, unlike company's systems and processes. It
comes down to the fact that companies with better employees have
the competitive advantage.
Strategy 3 : Functional Strategy
Functional Strategy
● What do our competitive choices (ex:maintaining the lowest costs) mean for each of
the departments that actually must do the work?
● Each individual business consists of departments: such as manufacturing, sales, and
human resource management.
● Functional strategies identify the broad guidelines that each department will follow in
order to help the business accomplish its competitive goals.
 Corporate Strategy Competitive Strategy Functional Strategy

Market influence Strategies of Marketing Strategy

Goals individual business Financial Strategy
Stakeholders
Units Production Strategy
Business Environment
HR Strategy
On what basis do we Information Strategy
compete Etc.
Strategic Fit
Strategic Fit
● Strategic fit to sum up the idea that each departments functional strategy should fit and
support the company's competitive aims.

● For example, Southwest Airlines is a low-cost leader.

○ deliver low-cost, convenient service on its routes
○ Southwest builds its departments activities around supporting certain core aims
○ Southwest core aims include limited passenger services (such as meals);
○ Short-haul, point-to-point service between mostly mid-size cities;
○ High aircraft utilization;
○ Lean highly productive ground crews
Primary Aim
● High Pay
● Highly productive grounds
crew
● Frequent Departures
● Low Cost
 Roles in Planning

Top Managers must decide: Departmental Managers

● what businesses the company will be in and ● they help the top managers
where, and on what basis it will compete. devise the strategic plan;
● formulate functional,
Example departmental plans that
● Southwest Airlines top managers could never support the overall strategic
let lower-level managers make strategic plan;
decisions (such as unilaterally deciding that ● and then execute the plans.
instead of emphasizing low cost, they were
going to retrofit the planes with first-class
cabins).
 Defining Strategic Human Resource
Management
Strategic human resource management means formulating and
executing human resource policies and practices that produce the
employee competencies and behaviors the company needs to
achieve its strategic aims.
Behavior Strategy
Briefly describe three
important strategic
human resource
management tools ?

Critically Thinking - Based on

Reading Assignment
Strategy Map

Southwest Airlines
HR Metrics &
Benchmarking
● Being able to measure
is a major function for
HR managers

HR audit an analysis by which

an organization measures
where it currently stands and
determines what it has to
accomplish to improve its HR
function.
As an example, typical broad areas to cover with the HR audit

HR Audit example
include:

1. Roles and headcount (including job descriptions, and

employees by exempt/ nonexempt and full/part-time status)
2. Legal issues (compliance with federal, state, local employment
related legislation)
3. Recruitment and selection (including selection tools,
background checks, and so on)
4. Compensation (policies, incentives, survey procedures, and so
on)
5. Employee relations (union agreements, performance
management, disciplinary procedures, employee recognition)
6. Mandated benefits (social security, unemployment insurance,
workers compensation, and so on)
Team Activity With three or four other students, form a strategic
management group for your college or university.

1. Your assignment is to develop the outline of a

strategic plan for a student club at the University of
Belize . ( consider the current needs of your local
University campus)
a. This should include such things as mission and vision
statements;
b. Strategic goals; and corporate, competitive, and
functional strategies.
c. In preparing your plan, make sure to show the main
strengths, weaknesses, opportunities, and threats the
club faces, and which prompted you to develop your
particular strategic plans