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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