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competitive Advantage and HRM1Competitive AdvantageThe aspect of your business that gives you an edge over competition price, product features and functions, time of delivery, place of business or public perception

22How does competitive advantage emerge?External sources ofChange:Changing customer demandChanging pricesTechnological changeInternal sources of changeResource heterogeneity among firms means differential impactSome firms faster and more effective in exploiting changeSome firmshave greater creativeand innovativecapabilityThe Emergence of Competitive Advantage32Sources of Competitive AdvantageCOST ADVANTAGEDIFFERENTIATION STRATEGYCOMPETITIVEADVANTAGESimilar productat lower costPrice premiumfrom unique product46Developing Competitive AdvantageCost Leadership: the primary focus of a cost leadership strategy is to achieve low costs relative to competitors. Lowering costs lead to lowering prices, which can increase demand for products or services

Differentiation Strategies: the primary focus of a differentiation strategy is Creating uniqueness such that the organizations goods and services are clearly Distinguished from those of its competitors.5Recent Approaches to Cost ReductionDramatic changes in strategy and structureto adjust to the business conditions of the 1990sKey elements:Plant closuresOutsourcingDelayering and cuts in administrative staff

The fundamental rethinking and radicalredesign of business processes to achievedynamic improvements in performance. Several jobs combined into one Steps of a process combined in natural orderMinimizing steps, controls, and reconciliationUse case managers as single points of contactHybrid centralization/ decentralization CORPORATERESTRUCTURINGBUSINESSPROCESSREENGINEERING622Other StrategiesInnovation strategy: the primary focus here is developing products or services different from those of competitors or offering something new and different. A vital component of any innovation strategy is getting employees to broaden their skills. Quality enhancement strategy: the primary focus here is enhancing the product and/or services. Quality enhancement often means changing the processes of production in ways that require workers to be more involved and more flexible. Cost reduction strategy: firms typically attempt to gain competitive advantage by being the lowest cost producer.

7Barneys VRIO frameworkVRIO frameworkis the tool used to analyze firms internal resources and capabilities to find out if they can be a source of sustained competitive advantage.

The tool was originally developed by Barney, J. B. (1991) in his work Firm Resources and Sustained Competitive Advantage, where the author identified four attributes that firms resources must possess in order to become a source of sustainedcompetitive advantage8Barneys VRIO Framework,Valuable:if a resource adds value by enabling a firm to exploit opportunities or defend against threats.

Rare: resources that can only be acquired by one or very few companies are considered rare.

Costly to imitate: a resource is costly to imitate if other organizations that doesnt have it cant imitate, buy or substitute it at a reasonable price.(Patents)

Organized to capture value: the resources itself do not confer any advantage for a company if its not organized to capture the value from them.9

10Examples Value: FedEx, which are the market leaders in the courier business, value is created by focusing on employees first.

Rareness: Nordstromis one of the most reputed brands in the retail sector. The recruiting process, compensation practices and culture at Nordstroms have helped the organization to maintain the highest sales in the nation.11ExamplesImitate: DuPonts competitors are simply unable to match DuPonts safety record. DuPonts superior safety performance stems at least partly from its unique history that competitors find impossible to imitate.

Organized to capture value: BothGeneral MotorsandFordrecruit assembly line workers from the same basic labor market. But, Ford has been more successful at developing a cooperative, team-based culture than General Motors. Clearly the HR function, through either directly controlling or strongly influencing the characteristics of human resources in organizations plays an important role in developing and maintaining a firms competitive advantage.12Google ExampleGoogles ability to manage their people effectively is a source of both differentiation and cost advantages.

Rely on trust and relationship in people management

Google uses data about its employees to manage them

Besides being valuable, it is also a rare capability because no other company uses data based employee management so extensively.13Types of ResourcesPhysical capital resources: the physical technology used in a firm, a firms plant and equipment, its geographic location, and access to raw materials

Human capital resources: the training, experience, judgment, intelligence, relationships and insight of individual managers and workers in a firm Organizational capital resources: a firms formal reporting structure, its formal and informal planning, controlling, and coordinating systems, as well as relations among groups within a firm and between a firm and those in its environment14Human resource functions1. Job Analysis: Job analysis is the process of collecting information and making judgments about a specific job. The goal is to define the ideal individual for the job position from the perspective of the company and the employees that the successful applicant will work with

competitive advantage only occur when employees knowledge, skills and ability can add value to the firm, are rare, cannot be imitated and are not sustainable15Human Resource FunctionsJob descriptionJob Evaluation: the job evaluation began by considering several job factors such as: working conditions, necessary technical KSA (Knowledge, Skills and Ability) and behavior, salaries and required managerial skills. LeadershipEmployee Relationship: conflicts (salaries, job security, power)16

Competitive Advantage through Strategic Management Framework

17ExamplesGeneral Electric: Jack Welch, former chairman and CEO of GE, transformed the company from an aging manufacturing bureaucracy into one of the worlds largest, most valuable global multinational through the implementation of his assurance that behavior is driven by a fundamental core belief: The desire and ability of an organization to continuously learn from any source, anywhere, and to rapidly convert this learning into action is its ultimate competitive advantage.

HONDA: Hondas success turns on the companys respect for individual employees.

18Case study of Southwest AirlinesSouthwest Airlines: Creating a culture of accountability and preserving and promoting the organizations core values

Southwest has sustained growth and profitability when most airlines struggle to avoid bankruptcy.

19Role of HR in development of competitive strategy in Southwest AirlinesRecruitment:People management strategyHigher for attitudeFun loving and spiritedDesigning the advertisement to get likewise people

Screening: on the basis of Personality traits (people oriented, extrovert, good sense of humor, empathetic, team spirit etc.)20Role of HR in development of competitive strategy in Southwest AirlinesT&D: on leadership, customer care, safety, stress mgmt., corporate cultureCompensation practices: 80-90% positions are filled internationallyPay scale at parProfit sharingEmployee relationsUnionized companyNo strike No lay-off policyFlat organizational structure21ResultsFlights turnaround time reduced to 15 minLow cost airlinesMinimization of ticket booking from agentsMinimum time to book tickets22Employees as a source of gaining competitive advantageMaximize the value added by employeesAcquire rare employeesDevelop a culture that cant be copiedDevelop a high performance system.23Diversity is Competitive advantage in international BusinessA Prepared Leadership and Workforce: Diversity competency among senior and emerging leaders is achieved through stretch assignments, project participation, and opportunities to interact with and lead diverse groups and operate in diverse cultures.

Sophisticated Programs to Attract, Engage, Develop, and Retain Diverse Talent: The best companies actively seek diverse talent and foster relationships with potential recruits at an early stage through internships and, after hiring, through talent-development programs.24Diversity is Competitive advantage in international BusinessMeasuring and Demanding Inclusion: In companies that leverage diversity, the process does not end with recruitment; it shifts to including diverse views and perspectives in developing business strategy and meeting challenges.

Giving Everyone a Voice: Differences are appreciated, but the corporate culture provides space for challenging differences in search of the best business solutions.

25Strategic HRM for International Business26Basic Concepts in Strategic HRMVision: what do we want to create? Shared vision creates a sense of commonality that permeates the organisation and gives coherence to diverse activitiesMission: An enduring statement of purpose that distinguishes one organisation from other similar organisations e.g. AT&T- telephone services, P&G- television and other electronic appliances etcPolicy: policies are general statements which guides channel thinking and action in strategic decision makingStrategy: is a unified, comprehensive and integrated plan that relates to the strategic advantage of the firm to the challenges of the environment.Strategic management: is a continuous, iterative cross functional process aimed at keeping an organisation as a hole appropriately matching with the environment27Value CreationThe difference between the value of the product to the customer and cost of producing that product is referred as the Value Creation.Low Cost strategy helps to producing at low cost (E.g. location economy)Japan has cost advantage in producing computer software, India and China has low cost labour etcDifferentiation strategy helps for enhancing the value for productHUL- exploring new the customer markets, coming up with different product ranges28International Business StrategiesInternational strategy: strategy to transfer the valuable skills and products developed in the home country to the foreign markets where skills and products are not available.E.g- McDonaldsMulti-domestic Strategies: strategy of customising product and marketing strategies to the host country requirements and environmentE.g- HUL, P&G, Colgate-Palmolive etc.Global strategy: concentrate on profit earning through cost minimisation, by standardising product and developing various strategies to minimise the costE.g- Intel29International Business StrategiesTransnational strategy: process of simultaneous vale creation through global learning is called as transnational strategy, where transfer of experienced based economies and skills should flow from host to parent, host to host and parent to host countryStrategic Alliance: is an agreement between two or more competitive international business firms in order to serve a global marketIt take place between the companies carrying out the similar line of business30Examples of strategic alliancesFor sales; Nestle and General Mills (US) agreement whereby the product Honeynet Cheerios was made in General Mills US plants, shipped in bulk to Europe for packaging at a Nestle plant and then marketed in France, Spain and Portugal. Mahindra , Renault & Nissan: Renault will contribute its expertise in engineering, manufacturing and adaptation to meet customer requirements.Mahindra will contribute its in-depth understanding of the Indian market and supplier base as well as manufacturing through years of market leadership.Nissan will contribute with worldwide export opportunities and manufacturing technologies.Marketing: WIPRO GE joint venture to distribute approximately 85% of GEs healthcare products and solutions in India. For market entry: Transcend Information Inc, a global player in many telecom accessories has an agreement with Bharti Teletech to distribute the entire portfolio of Transcend products in India. 31Global Strategic management process32Global Strategic management processAnalysis of existing mission and goals: Dr. Reddys labs original mission, To become market leader in the Indian pharma Industry.In 1991 after expansion in global market the mission statement was changed: to achieve global leadership in protecting the health of masses.

2. Organizational analysis: includes, organizational structure, Marketing, Production, finance, HR

3. Analysis of international environment; Sony- low cost strategy- low priced television to enter expanding Indian middle class.Cavan Indias Fair Ever with saffron afforded by Indian ladies

33Best Modes of Entry for a MNC in other countriesIndirect exportingDirect exportingLicencingFranchisingJoint venturesDirect investmentAcquisition product sharingManagement contractsTrunkey operations34IHRM Strategies for various form of Business of MNCStrategies for Licensing; MNC helps licensee in crafting and implementing various international HRM strategies, it also deputes its PCNs on short-term as well as long-term assignments to transfer the skills to HCNs and work in the short run to transfer licensors systems, procedures and practices.Strategies for International franchising: franchiser can exercise more control over the franchised compared to that in licensing. Franchisee company perform all functions of HRM, whereas franchiser formulate HR strategies and allocates short term assignments to expatriates to work in HC for some time to exchange the policies and procedures.35IHRM Strategies for various form of Business of MNCStrategies for Direct Investment: hiring and training host country nationals for key positionsStrategies for Acquisition: major partners play important role in crafting and implementing strategies, the PCN are transfer to the HC for skills and talent, the MNC employs returnees and retirees to fill the gaps.Strategies for alliances: outsourced company managing all HR operations

36Corporate level strategiesStability strategy: growth strategy (internal growth, concentration strategies)M&A strategies: improving employees moral, counseling, adaptation of new changes etc.Horizontal Integration: Coca-Cola with Kinley HR strategy training and developing existing employees or hiring new candidates for diverse business.Conglomerate diversification: diversification into unrealated activities to the original businessE.g- Gujrat Gas company started a unit as Gujarat Finanace company, train the existing employees and transfer them into the new areas

37Merger of ICICI & BOM a case in pointICICI Bank LtdICICI was established by the Government of India in 1955 3 times the size of BoMStaff strength was only 1,400 departments into individual profit centers

Bank of Madura (BoM)Established in 1943 at Madurai, Tamil Nadu. By 2000, it was number one bank in Tamil Nadu One third the size of ICICIStaff strength was 2,500 management concentrated on the overall profitability of the Bank

38IImmediate Impact

There were large differences in profiles, grades, designations and salaries of personnel.

there was uneasiness among the staff of BoM as they felt that ICICI would push up the productivity per employee, to match the levels of ICICI

BoM employees feared that their positions would come in for a closer scrutiny.

They were not sure whether the rural branches would continue or not as ICICI's business was largely urban-oriented. 39Steps taken to Decrease resistance of change by ICICI Established clear communication channels throughout.

Training programs were conducted which emphasized on knowledge, skill, attitude and technology to upgrade skills of the employees

direct dialogue with the employee unions of the BoM to maintain good employee relations.

40By June 2001, the process of integration between ICICI and BoM was started ICICI transferred around 450 BoM employees to ICICI Bank, while 300 ICICI employees were shifted to BoM branches.

Promotion schemes for BoM employees were initiated and around 800 BoM officers were found to be eligible for the promotions.

End of the year, ICICI seemed to have successfully handled the HR aspects of the BoM merger.

41Employee behavioral pattern study PERIOD EMPLOYEE BEHAVIOR Day 1 Denial, fear, no improvement After a month Sadness, slight improvement After a Year Acceptance, significant improvement After 2 Years Relief, liking, enjoyment, business development activities 42How to Develop Effective Global Competitive Advantage.mp47 Steps to Creating a Competitive Advantage - Pepperdine University.mp443Cont---We do put people under stress by raising the bar constantly. That is the only way to ensure that performers lead the change process. K. V. Kamath, MD & CEO, ICICI

Noticing Small Changes Early helps You Adapt To The Bigger Changes That Are To Come

Change Happens, Anticipate Change, Monitor Change, Adapt To Change Quickly.

Enjoy Change! Be Ready To Change Quickly And Enjoy It Again

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