MASTER OF INTERNATIONAL BUSINESS MIB __________________________

1. MASTER OF INTERNATIONAL BUSINESS (MIB) __________________________ HUMAN RESOURCE MANAGEMENT (TPM516M) TOPIC 1 THE STRATEGIC PROCESS

2. 2 Topic 1: THE STRATEGIC PROCESS WHAT IS STRATEGIC MANAGEMENT Strategic Management: Definition Strategy: Description Characteristics of successful strategy Effective Strategic Managers ought to have knowledge, skills and vision Analysing the company Analysing the environment The current strategic position Developing strategies STRATEGIC HRM Introduction Strategic HRM Models Strategy Formulation Strategy Implementation Strategic Types Directional Strategies Strategy Evaluation and Control The Role of HR in providing additional strategic competitive advantage

3. 3 WHAT IS STRATEGIC MANAGEMENT Strategic Management: Definition type of management through which the company obtains a sustainable long-term excellent fit with its environment, and the quality of this fit is reflected in superior performance concerned with long-run, fundamental and often irreversible decisions about the company’s mission, scale of operations and spread of activities

4. 4 WHAT IS STRATEGIC MANAGEMENT (Continued) Strategy: Description Determines the direction in which the organization is going in relation to its environment Is the process of defining intentions (strategic intent) and allocating or matching resources to opportunities and needs (resources based strategy) Its goal is to deploy and allocate resources (physical, human, and organizational) in a way that gives it competitive advantage Includes the ability to formulate strategic goals, to develop and implement strategic plans Is emergent and flexible – it never exists at the present time Is not only realized by formal statements but also comes about by actions and reactions Is a description of a future directed action which is always directed towards change

5. 5 WHAT IS STRATEGIC MANAGEMENT (Continued) Characteristics of Successful Strategy Time Scale: the time scale for strategic decisions is many years – concerned with the long-run nature of the company and its activities Scope: the scope of strategic decisions is company-wide – concerned with the totality of the company rather than individual parts Reversibility: strategic decisions normally will be extremely difficult if not impossible to reverse Level: strategic decisions are normally taken by the top management of companies Importance: strategic decisions are very important as an incorrect decision may ruin a company

6. 6 WHAT IS STRATEGIC MANAGEMENT (Continued) Effective Strategic Managers ought to have the knowledge, skills and vision necessary to: understand the total company, i.e. its mission, goals, objectives, culture, strategies, and the activities of the different functional areas and the resources available understand the environment in which the company is operating, with particular reference to opportunities and threats that are (or will be) present develop strategies that are appropriate to the company and its environment implement chosen strategies control, evaluate and amend as appropriate, the strategies that have been selected

7. 7 WHAT IS STRATEGIC MANAGEMENT (Continued) Analysing the Company An analysis of the elements below will be used to provide a picture of the strategic health and potential of the company Mission and goals The first step is to understand the company’s mission and goals – an examination of who the top decision-makers and stakeholders in the company are and the value systems that drive them Leadership Leadership is assessed not according to style, but according to its appropriateness and consequent effectiveness Culture Values and attitudes that pervades the company and binds organization members together Organisational Structure The formal structure of a company can have profound effects upon its performance Functional Composition A methodology for assessing the relative strengths and weaknesses in the principle functions that most companies have, i.e. finance, marketing, production, personnel, etc. is set out.

8. 8 WHAT IS STRATEGIC MANAGEMENT (Continued) Analysing the Environment Successful strategies are ones where the company adapts to its environment Companies that fail to adapt to their environment will in the long-run disappear The environment can be segmented into the forces set out below Market Forces Market forces determine whether the products or services offered by a company will be ultimately purchased, at an acceptable price by consumers Market forces include the size and affluence of the market; the number of competitors and their sizes; the growth rate of the market; the influences on buying decisions – prices, product features, methods of distribution, and methods of promotion Competitive Forces The threat of new entrants The threat from substitutes The power of buyers The power of suppliers The degree of rivalry

9. 9 WHAT IS STRATEGIC MANAGEMENT (Continued) Analysing the Environment (Continued) Economic Forces The economic context – global and national – in which the company operates is examined and its impact assessed Legal / Government Forces A company’s current and future operations are affected by legislation Social Trends Assess how social trends affect or will affect the company – e. g. social change in western countries about health and fitness provided market opportunities for industries and companies Technological Change Companies must be cognizant of technological changes and keep abreast of them Geographical Location Industry in general becomes less restricted in its choice of manufacturing location Industry’s location is increasingly determined by a whole range of factors of competitive advantage or necessity which include “human resources with particular skills, resident scientific infrastructure of appropriate types and access to sophisticated suppliers Other Forces Any other environmental forces that are not captured in any of the other categories are addressed here

10. 10 WHAT IS STRATEGIC MANAGEMENT (Continued) The Current Strategic Position (The following perspectives are considered): an overall assessment, which presents a qualitative perspective of the company’s strategic position the financial analyses are provided through income statements, cash-flow statement, balance sheets, funds flow statements, etc key strategic ratios, which show the company’s performance and its competitive position corporate portfolio position, which shows how a strategic business unit or division is performing from a corporate perspective product market portfolio (plotting the movements of products over time), which shows the balance of the portfolio of products a company has – products moving in an ideal sequence reflect a well-managed portfolio (low relative market share high market growth high relative market share, i.e. the stronger the company is in terms of these coordinates, the stronger will be its strategic competitive position)