Chapter 2

Strategic Human
Resource Management
 Learning Objectives
LO 2-1 Describe the differences between strategy formulation
and strategy implementation.
LO 2-2 List the components of the strategic management
process.
LO 2-3 Discuss the role of the HRM function in strategy
formulation.
LO 2-4 Describe the linkages between HRM and strategy
formulation.
LO 2-5 Discuss the more popular typologies of generic
strategies and the various HRM practices associated with
each.
LO 2-6 Describe the different HRM issues and practices
associated with various directional strategies.
 Chapter Outline
2.1. Introduction
2.2. What is Strategic Management
2.3. Strategy Formulation
2.4. Strategy Implementation
2.5. The Role of Human Resources in Providing
Strategic Competitive Advantage
 2.1. Introduction
Strategic management includes
• Having the goal to deploy and allocate resources for a
competitive advantage
• Integrally involving the HRM function
• Have input in the strategic plan (HR and ability to implement)
• Have specific knowledge of strategic goals
• Know the requirement of needed skills, behaviors, attitudes
• Develop programs to ensure HR have above requirement

• Using a business model to create value for customers

 2.2. What Is Strategic Management?
Strategic Management
• A process
• An approach to addressing the competitive
challenges an organization faces
• Managing the “pattern or plan that integrates an
organization’s major goals, policies, and action
sequences into a cohesive whole.”
• Developing strategies for achieving the company’s
goals in light of its current environment

LO 2-1
 2.2. What Is Strategic Management?
Strategic HRM
• “The pattern of planned human resource deployments
and activities intended to enable an organization to
achieve its goals.”
• Strategic management is a process to address the
organization’s competitive challenges by integrating
goals, policies and action sequences into a cohesive
whole.
 2.2. What Is Strategic Management?
Components of the Strategic Management
Process
• Strategy Formulation
Strategic planning groups decide on strategy
• Strategy Implementation
Organization follows through on the strategy

LO 2-2
 2.2. What Is Strategic Management?

A Model of the Strategic Management Process

 2.2. What Is Strategic Management?
Linkage Between HRM and the Strategic
Management Process
• Strategic choice
• Where to compete? In what market?
• How to compete? On what criterion or differentiating
characteristic?
• With what will we compete? What resources to beat our
competitors? How to acquire, develop and deploy resources?
 2.2. What Is Strategic Management?
Role of HRM in Strategy Formulation
• With what will we compete?
• Four levels of integration between HRM and the
strategic management function
• administrative linkage
• one-way linkage
• two-way linkage
• integrative linkage

LO 2-3 and 2-4

2.2. What Is Strategic Management?

Linkages of Strategic Planning and HRM

2.3. Strategy Formulation?
“To connect the world’s professionals to make them more productive
and successful.”
“To be Earth’s most customer-centric company, where customers can
find and discover anything they might want to buy online, and
endeavours to offer its customers the lowest possible prices.”

“To deliver information on the people, ideas and technologies changing

the world to our community of affluent business decision makers.”

“We save people money so they can live better.”

“The maintenance of international peace and security.”

“To help people around the world plan and have the perfect trip.”

“Bring inspiration and innovation to every athlete in the world.*

If you have a body, you are an athlete.”

“Spread ideas.”
2.3. Strategy Formulation?
 2.3. Strategy Formulation?
Strengths Opportunities
SWOT - Strong brand - Expansion of existing
- Diversified portfolio platforms
Analysis - Market dominance - Increased integration
for - Focus on F&D to other app
Facebook - Strong ad business - New acquisitions

Threats
Weaknesses
- Competition
- Privacy Concerns
- Increased regulations
- Spreading fake news
- Being banned
- Overdependence on
- Data breach
advertising
- Tainted reputation
2.4. Strategy Implementation
 2.4. Strategy Implementation
Strategic implementation requires that
• “An organization has a variety of structural forms and
organizational processes to choose from when
implementing a given strategy”
• Five variables
• organizational structure
• HRM tasks
•task design
•selection, training, and development of people
•reward systems
• types of information and information systems
 2.4. Strategy Implementation
Variables to Be Considered in Strategy Implementation

Jump to long description in

appendix
 2.4. Strategy Implementation
Vertical Alignment
• HR practices and processes address the strategic
needs of the business.
• The link between strategy and HR practices is
primarily through people.
• Job analysis and design
• Recruitment
• Selection systems
• Training and development programs
• Performance management systems
• Reward systems
• Labor relations programs
2.4. Strategy Implementation
 2.4. Strategy Implementation
Pay Structure, Incentives, and Benefits
• High pay and/or benefits relative to competitors can
help company attract and retain high-quality
employees, but might have a negative impact on
overall labor costs.
• Tying pay to performance can elicit specific activities
and levels of performance from employees.
 2.4. Strategy Implementation
Labor and Employee Relations
• Employees – asset or expense?
• How much should employees participate in decision
making?
• What rights do employees have?
• What is the company’s responsibility to employees?
• The approach a company takes in making these
decisions can result in successfully achieving its
short and long-term goals or ceasing to exist.
 2.4. Strategy Implementation
Strategic Types
• Porter’s Cost and Differentiation
• Value can be created by reducing costs.

• Value can be created by differentiating a product or

service so the company can charge a premium price
relative to its competitors
 2.4. Strategy Implementation
HRM Needs in Strategic Types
Role behaviors: Behaviors required of an individual in
his or her role as a job holder in a social work
environment
• Cost strategies – high concern in quantity, short time -
companies define the skills they require and invest in
training employees in these skill areas
• Differentiation strategies – skills include cooperating
with others, developing new ideas, and taking a
balanced approach to process and results.
 2.4. Strategy Implementation

Directional Strategies
Concentration
Internal Growth
Mergers and Acquisitions
Downsizings

LO 2-6
 2.4. Strategy Implementation
Concentration Strategies
A strategy focusing on increasing market share,
reducing costs, or creating and maintaining a market
niche for products and services
• Require that the company maintain the current skills
that exist in the organization

• Need for skill-based training and fair compensation

 2.4. Strategy Implementation
Internal Growth Strategies
A focus on new market and product development,
innovation, and joint ventures.
• Companies must constantly hire, transfer and
promote individuals.

• Compensation weighted towards achievement

• Joint ventures require conflict resolution

 2.4. Strategy Implementation
Mergers and Acquisitions
An emphasis on acquiring vendors and suppliers or
buying businesses that allow a company to expand into
new markets

On the increase

HR needs to be involved
• People issues can cause problems

• Different organizational cultures

• Conflict resolution
 2.4. Strategy Implementation
Downsizing
The planned elimination of large numbers of personnel,
designed to enhance organizational effectiveness.
Trend has slowed since 2008 as it falls short of meeting
companies’ financial and organizational objectives, and
has negative effects on employee morale and productivity
The HRM function must “surgically” reduce the workforce
by cutting only the workers who are less valuable in their
performance
Early retirement programs usually result in rehiring
Survivor morale issues
 2.4. Strategy Implementation
Layoff Events and Separations 2009–2013

Jump to long description in

appendix
SOURCE: U.S. Department of Labor, Bureau of Labor Statistics, “Mass Layoffs Summary,” May 13, 2013, www.bls.gov/news.release/mslo.nr0.htm.
 2.5. The Role of Human Resources
in Providing Strategic Competitive Advantage
Emergent Strategies
• Consist of the strategies that evolve from the
grassroots of the organization
• Can be thought of as what organizations actually do,
as opposed to what they intend to do
• Usually identified by those lower in the organizational
hierarchy
Intended Strategies
• The result of the rational decision-making process used by
top managers as they develop a strategic plan.
 2.5. The Role of Human Resources
in Providing Strategic Competitive Advantage

Enhancing Firm Competitiveness

• Develop a human capital pool that gives the company
the unique ability to adapt to an ever-changing
environment.
• Learning organization
 Amazon case study

• Amazon.com’s Internet-based business model

• Beginning with selling books online - music -
anything → cut into traditional retailers’ markets
and margins.
• Created profits through selling high volume at a
low margin with very little physical assets
• Now became the 800-pound gorilla every
retailer had to face
 Amazon case study

• Brick-and-mortar store: “Amazon Go.”

• Convenience store, • Grocery store
without checkouts, cash • Customers pick the fresh
registers, and lines. selections they like
• Scan phones upon • Order other items via
entering the store, and touch-screen to be
using AI technology, to delivered later
determine items, and
send a receipt
 Amazon case study

• New stores seems to go completely against the

company’s traditional business model.
• The Amazon Go model focuses on selling lower
margin items, many of which have potential to spoil.
• requires significant investment in facilities and
people to stock shelves and fulfil orders.
Amazon can still outperform traditional grocery
stores in terms of profitability
 Amazon case study

Question 1: Do you think this is a good strategic move

by Amazon? Why or why not?
 Amazon case study

Question 1: Do you think this is a good strategic

move by Amazon? Why or why not?
Yes No
• People like to social • Against the new trend of
interact Industry 4.0
 Amazon case study

Question 2: What kinds of people issues does this

strategy entail? Do you think Amazon is equipped to
manage this kind of workforce?
 Amazon case study

Question 2: What kinds of people issues does this

strategy entail? Do you think Amazon is equipped to
manage this kind of workforce?

Answer: lack of experience within brick-and-mortar,

 Amazon case study

Question 3: How do you think traditional grocers like

Kroger Co. will react to Amazon’s entry into their
market?
 Amazon case study

Question 3: How do you think traditional grocers like

Kroger Co. will react to Amazon’s entry into their
market?

Answer: Cost strategy vs differentiation strategy