STRATEGIC HUMAN RESOURCE MANAGEMENT
MODULE 1: INTRODUCTION TO STRATEGIC HUMAN RESOURCE MANAGEMENT
UNIT 2: STRATEGY: CONCEPT AND PROCESS
I. Strategy Defined
- Strategy is about deciding where you want to go and how you mean to get there.
- A strategy is a declaration of intent.
- “This is what we want to do and this is how we intend to do it.”
- Strategies define longer - term goals but they are more concerned with how those goals
should be achieved.
- Strategy is the means to create value.
- A good strategy is one that works, one that guides purposeful action to deliver the required
result.
II. The Concept of Strategy
- The concept of strategy is based on three subsidiary concepts: competitive advantage,
distinctive capabilities, and strategic fit.
1. Competitive Advantage
- The concept of competitive advantage was formulated by Michael Porter (1985).
- To achieve it, firms select markets in which they can excel and present a moving
target to their competitors by continually improving their positions.
- Porter emphasized the importance of:
Differentiation
- Which consists of offering a product or service that is perceived industry
- wise as being unique; and
Focus
- Seeing a particular buyer group or product market more effectively or
efficiently than competitors who compete more broadly.
- Porter (1985) then developed his well - known framework of three generic
strategies that organization can use to gain competitive advantage. These are:
Innovation
- Being the unique producer.
Quality
- Delivering high - quality goods and services to customers.
Cost Leadership
- The panned result of policies aimed at ‘managing away expense’.
2. Distinctive Capabilities
, - Are those characteristics that cannot be replicated by competitors, or can only be
imitated with great difficulty.
- Reproducible capabilities are those that can be bought or created by any company
with reasonable management skills, diligence, and financial resources.
- Most technical capabilities are reproducible.
- Prahalad and Hamel (1990) argue that competitive advantage stems in the long term
when a firm builds ‘core competences’ that are superior to its rivals and when it
learns faster and applies its learning more effectively than its competitors.
- Distinctive capabilities or core competences describe what the organization is
specially or uniquely capable of doing.
- They are what the company does particularly well in comparison with its
competitors.
- Key capabilities can exist in such areas as technology, innovation, marketing,
delivering quality, and making good use of human and financial resources.
- If a company is aware of what its distinctive capabilities are, it can concentrate on
using and developing them without diverting effort into less - rewarding activities.
- It can be argues that the most distinctive capability of all is that represented by the
knowledge, skills, expertise and commitment of the employees of the organization.
- This belief provides the bases for the philosophy of strategic human resource
management.
- Four criteria have been proposed by Barney (1991) for deciding whether a resource
can be regarded as a distinctive capability or competency:
Value creation for the customer
Rarity compared to competition
Non - imitability
Non - substitutability
3. Strategic Fit
- The concept of strategic fit states that to maximize competitive advantage a firm
must match its capabilities and resources to the opportunities available in the
external environment.
- As Hofer and Schendel (1986) conclude: ‘A critical aspect of top management’s
work today involves matching organizational competences (internal resources and
skills) with the opportunities and risks created by environmental change in ways
that will be both effective and efficient over the time such resources will be
deployed.’
III. Strategic Analysis
- There are two primary components of strategic analysis used by most organizations
1. Five Forces Analysis
- Tool that organizations use to analyse the external competitive environment.
MODULE 1: INTRODUCTION TO STRATEGIC HUMAN RESOURCE MANAGEMENT
UNIT 2: STRATEGY: CONCEPT AND PROCESS
I. Strategy Defined
- Strategy is about deciding where you want to go and how you mean to get there.
- A strategy is a declaration of intent.
- “This is what we want to do and this is how we intend to do it.”
- Strategies define longer - term goals but they are more concerned with how those goals
should be achieved.
- Strategy is the means to create value.
- A good strategy is one that works, one that guides purposeful action to deliver the required
result.
II. The Concept of Strategy
- The concept of strategy is based on three subsidiary concepts: competitive advantage,
distinctive capabilities, and strategic fit.
1. Competitive Advantage
- The concept of competitive advantage was formulated by Michael Porter (1985).
- To achieve it, firms select markets in which they can excel and present a moving
target to their competitors by continually improving their positions.
- Porter emphasized the importance of:
Differentiation
- Which consists of offering a product or service that is perceived industry
- wise as being unique; and
Focus
- Seeing a particular buyer group or product market more effectively or
efficiently than competitors who compete more broadly.
- Porter (1985) then developed his well - known framework of three generic
strategies that organization can use to gain competitive advantage. These are:
Innovation
- Being the unique producer.
Quality
- Delivering high - quality goods and services to customers.
Cost Leadership
- The panned result of policies aimed at ‘managing away expense’.
2. Distinctive Capabilities
, - Are those characteristics that cannot be replicated by competitors, or can only be
imitated with great difficulty.
- Reproducible capabilities are those that can be bought or created by any company
with reasonable management skills, diligence, and financial resources.
- Most technical capabilities are reproducible.
- Prahalad and Hamel (1990) argue that competitive advantage stems in the long term
when a firm builds ‘core competences’ that are superior to its rivals and when it
learns faster and applies its learning more effectively than its competitors.
- Distinctive capabilities or core competences describe what the organization is
specially or uniquely capable of doing.
- They are what the company does particularly well in comparison with its
competitors.
- Key capabilities can exist in such areas as technology, innovation, marketing,
delivering quality, and making good use of human and financial resources.
- If a company is aware of what its distinctive capabilities are, it can concentrate on
using and developing them without diverting effort into less - rewarding activities.
- It can be argues that the most distinctive capability of all is that represented by the
knowledge, skills, expertise and commitment of the employees of the organization.
- This belief provides the bases for the philosophy of strategic human resource
management.
- Four criteria have been proposed by Barney (1991) for deciding whether a resource
can be regarded as a distinctive capability or competency:
Value creation for the customer
Rarity compared to competition
Non - imitability
Non - substitutability
3. Strategic Fit
- The concept of strategic fit states that to maximize competitive advantage a firm
must match its capabilities and resources to the opportunities available in the
external environment.
- As Hofer and Schendel (1986) conclude: ‘A critical aspect of top management’s
work today involves matching organizational competences (internal resources and
skills) with the opportunities and risks created by environmental change in ways
that will be both effective and efficient over the time such resources will be
deployed.’
III. Strategic Analysis
- There are two primary components of strategic analysis used by most organizations
1. Five Forces Analysis
- Tool that organizations use to analyse the external competitive environment.
