shrm michael armstrong ch-02 concept of strategy

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StrategicHuman Resourcee

ManagementSajjad Ahmad

Minhaj Univ


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Concept of Strategy

Strategy was originally a military term, defined in theOxford English Dictionary as:

The art of a commander-in-chief; the artof projecting and directing the largermilitary movements and operations of acampaign.

strategy is the ultimate responsibility of the head of theorganization, is an art and is concerned with projectingand directing large movements.

Sajjad Ahmad Qadri Minhaj University, Lahore.


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Peter Drucker

It was Peter Drucker who long ago (1955) pointed

out in The Practice of Management the importance

of strategic decisions, which he defined as

all decisions on business objectives and on the

means to reach them.



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three outstanding pioneers

three outstanding pioneers, made their mark

Kenneth Andrews (1987),

Igor Ansoff (1987) and

Alfred Chandler (1962)

They were followed by

Michael Porter (1985), Henry Mintzberg (1987),

Hamel and Prahalad (1989) and many more who furtherdeveloped the concepts and adapted them tocontemporary conditions.



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Purpose of the Chapter-02

One of the purposes of the chapter is to counter the

belief that business strategy is a highly rational affair that

provides a firm basis for HR strategy.

Business strategy is in fact a far more intuitive,evolutionary and reactive process than most people

believe. This is the reality of strategic HRM that must beborne in mind when dealing with this compelling but

often elusive concept.



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Defining the strategy


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Strategy defined

A long term plan of an organization, for how it will balance itsinternal strengths and weaknesses with external opportunities andthreats to maintain its competitive advantage. (Fred R. David)

Strategy has two fundamental meanings.

First, it is forward looking., A good strategy is one that enablesorganizations to adapt by mastering the present and pre-empting the

future.(Abell 1993)Second, Strategic Fit; A critical aspect of top managements worktoday involves matching organizational competences (internal resourcesand skills) with the opportunities and risks created by environmentalchange in ways that will be both effective and efficient over the timesuch resources will be deployed.(Hofer and Schendel 1986),Sajjad Ahmad Qadri Minhaj University, Lahore.


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Strategy defined

Strategy has been defined in other ways by the many writers on this subject.

For example:

Strategy is the determination of the basic long-term goals and objectives

of an enterprise, and the adoption of courses of action and the allocation

of resources necessary for carrying out these goals. (Chandler, 1962)

Strategy is a set of fundamental or critical choices about the ends and

means of a business. (Child, 1972)

[Strategy involves] the constant search for ways in which the firms unique

resources can be redeployed in changing circumstances. (Rumelt, 1984)



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Strategy defined cont.

Strategy should be understood as a framework of critical ends and means.(Boxall, 1996)

Business strategy is concerned with the match between the internal

capabilities of the company and its external environment. (Kay, 1999)

The emphasis (in strategy) is on focused actions that differentiate the firmfrom its competitors. (Purcell, 1999)

Strategy, then, is a set of strategic choices, some of which may be formally

planned. It is inevitable that much, if not most, of a firms strategy emergesin a stream of action over time. (Boxall and Purcell, 2003)



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The concept of strategy


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The concept of strategy

The concept of strategy is based on a number of associated concepts:


strategycompetitiveadvantage,

distinctivecapabilities

strategicmanagement

strategicgoals

strategiccapability

resource-based

strategy

strategicplan

StrategicIntent


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i. Competitive Advantage (C.A.)

Concept of CA formulated by Michael Porter (1985).

CA arises out of a firm creating value for its customers.

To achieve it, firms select markets in which they can excel andpresent a moving target to their competitors by continuallyimproving their position.

Differentiation: offering a product or service that is perceivedindustry-wise as being unique,

Focus: seeing a particular buyer group or product market moreeffectively or efficiently than competitors who compete morebroadly.



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i. Competitive Advantage (C.A.) Cont.

Framework of three generic strategies, innovation, quality, and

cost leadership, that organizations can use to gain competitiveadvantage.

A distinction has been made by Barney (1991) between

the competitive advantage that a firm presently enjoys but others

will be able to copy, and sustained competitive advantage, which competitors cannot imitate.

This leads to the concept of distinctive capabilities.



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Distinctive capabilities

A distinctive capability (DC, or Competence)is The opportunity for companies to s

competitive advantage is determined by their capabilities. Kay (1999), it confers on the organization (Quinn 1980)

distinctive capabilities and reproducible capabilities:

Distinctive capabilities are those characteristics that cannot be replicated by competitor

only be imitated with great difficulty.

Reproducible capabilities are those that can be bought or created by any company with re

management skills, diligence and financial resources.

Most technical capabilities are reproducible. (Kay 1999).

Prahalad and Hamel (1990) argue that competitive advantage stems in the long termfirm builds core competences that are superior to those of its rivals and when it le

faster and applies its learning more effectively than its competitors.



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Strategic intent

The strategic intent sequence has been defined by Miller

and Dess (1996) as:


>> a broad vision of what the organization should be

>> the organizations mission;

>> specific goals, which are operationalized as:

>> strategic objectives


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The resource-based view

the strategic capability of a firm depends on its resource capability.

Penrose (1959), wrote that the firm is an administrative organization and a collectproductive resources.

Wernerfelt (1984), explained that strategyis a balance between the exploitation oresources and the development of new ones.

Barney (1991) argue that sustained competitive advantage stems from the acquisiteffective use of bundles of distinctive resources that competitors cannot imitate.

Competitive success does not come simply from making choices in the present; it sbuilding up distinctive capabilities over significant periods of time. (Boxall 1996)

dynamic capabilities: The capacity of a firm to renew, augment and adapt its corecompetencesover time.(Teece, Pisano and Shuen 1997)



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Strategic management

'the set of decisions and actions resulting in the formulation and

implementation of strategies designed to achieve the objectives of an

organization. 'Pearce and Robinson (1988)

Art and science of formulating, implementing, and evaluating cross-

functional decisions that enable an organization to achieve its objectiv

(Fred R David)

Boxall and Purcell (2003) believe that strategic management is a mixe

impure, interactive process, fraught with difficulties, both intellectua

and politically.



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Strategic management has been described by Burns (1992) as being primarily concernedwith:

the full scope of an organizations activities, including corporate objectives andorganizational boundaries;

matching the activities of an organization to the environment in which it operates;

ensuring that the internal structures, practices and procedures enable the organizationto achieve its objectives;

matching the activities of an organization to its resource capability, assessing the

extent to which sufficient resources can be provided to take advantage ofopportunities or to avoid threats in the organizations environment;

acquiring, divesting and reallocating resources;

translating the complex and dynamic set of external and internal variables that anorganization faces into a structured set of clear future objectives that can then beimplemented on a day-to-day basis.



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The process of strategic management is

modelled in the Figure

It involves defining the organizations

mission, analyzing the internal and

external environment, exercising strategic

choice (there is always choice),

formulating corporate and functional

strategies and goals, implementing

strategies and monitoring and evaluatingprogress in achieving goals.

But in practice it is not as simple and

linear as that.


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Strategic goals

Strategic goals define where the organization wants to

be. They may be specified in terms of actions, quantified

in terms of growth, or expressed in general terms as

aspirations rather than specifics.



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Strategic plans

Strategic plans are formal expressions of how an organizati

intends to attain its strategic goals.

Boxall and Purcell (2003) make the point that

We should not make the mistake of equating the strategie

a firm with formal strategic plans It is better if weunderstand the strategies of firms as sets of strategic choi

some of which may stem from planning exercises and set p

debates in senior management, and some of which emerge

stream of action.Sajjad Ahmad Qadri Minhaj University, Lahore.


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Strategy Formulation


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The formulation of strategy:Approaches tostrategy formulation

Whittington (1993) has identified four approaches to the formulation of strategy:

1. Classical strategy formulation as a rational process of deliberate calculation. The

process of strategy formulation is seen as being separate from the process of

implementation.

2. Evolutionary strategy formulation as an evolutionary process that is a product of

market forces in which the most efficient and productive organizations win through.

3. Processual strategy formulation as an incremental process that evolves through

discussion and disagreement. It may be impossible to specify what the strategy is untilafter the event.

4. Systemic strategy is shaped by the social system in which it is embedded. Choices

are constrained by the cultural and institutional interests of a broader society rather

than the limitations of those attempting to formulate corporate strategy.



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Approaches to strategy formulation Cont


strategy formulation as a rational process of deliberate cprocess of strategy formulation is seen as being separate

implementation.

1. Classical

strategy formulation as an evolutionary process that is aforces in which the most efficient and productive organi2. Evolutionary

strategy formulation as an incremental process that evoand disagreement. It may be impossible to specify what after the event.3. Processual

strategy is shaped by the social system in which it is embconstrained by the cultural and institutional interests ofrather than the limitations of those attempting to formustrategy.

4. Systemic


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The classical approach to formulating

strategy

Conceptually, the classical approach as described by Whittington involvesfollowing 10 steps (implementation and monitoring steps have been adde

Whittington model):

1. Define the mission.

2. Set objectives.

3. Conduct SWOT analysis.

4. Conduct gap analysis (*)

5. Define in the light of this analysis the distinctive capabilities of the

organization.



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The classical approach to formulating

strategy

6. Define the key strategic issues emerging from the previous

analysis.

7. Determine corporate and functional strategies for achieving

goals and competitive advantage, taking into account the key

strategic issues.(**)

8. Prepare integrated strategic plans for implementingstrategies.

9. Implement the strategies.

10. Monitor implementation and revise existing strategies or

develop newSajjad Ahmad Qadri Minhaj University, Lahore.


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The reality of strategic management

The reality of strategic management is that managers attempt to

behave strategically in conditions of uncertainty, change and

turbulence, even chaos.

The phenomenon of bounded rationality as described by Miller et al

(1999) applies while people by their own lights are reasoned intheir own behaviour, the reasoning behind their behaviour is

influenced by human frailties and demands from both within and

outside the organization.



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shrm michael armstrong ch-02 concept of strategy

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