strategic plan The company s plan for how it will match its internal strengths and weaknesses with

external opportunities and threats in order to maintain a competitive advantage.

strategy A course of action the company can pursue to achieve its strategic aims.

strategic management The process of identifying and executing the organization s strategic plan, by
matching the company s capabilities with the demands of its environment.

The Strategic Management Process involves a series of steps to ensure a company aligns its
internal capabilities with external opportunities and threats to gain a competitive advantage.
Here's an overview:

1. Goal-Setting and Planning: Managers set goals and create plans to achieve them, often
using a hierarchy of goals that cascade from top management to frontline employees.
This involves defining objectives, forecasting, evaluating alternatives, and implementing
a plan.
2. Strategic Planning: This is the process of determining how a company will match its
internal strengths and weaknesses with external opportunities and threats. Managers ask
key questions like, "Where are we now?" and "Where do we want to be?"
3. Steps in the Strategic Management Process:
o Step 1: Define the Business: Start by clarifying the current business, including
the products/services offered, markets served, and how it differentiates from
competitors.
o Step 2: External and Internal Audits: Managers conduct an environmental scan
and SWOT analysis to understand the company's strengths, weaknesses,
opportunities, and threats.
o Step 3: Formulate a New Direction: Based on the analysis, managers decide on
the business's future direction, often summarized in a vision statement.
o Step 4: Translate Mission into Strategic Goals: The company’s mission is
broken down into specific, measurable strategic goals.
o Step 5: Formulate Strategies: Managers create strategies to achieve these goals,
considering options like expanding or focusing on certain product lines,
improving employee selection, and refining operations.
o Step 6: Implement Strategies: The strategies are executed through actions like
hiring, firing, opening, or closing facilities, and launching new products.
o Step 7: Evaluate Performance: Managers assess the results and make
adjustments if necessary, ensuring the company stays on course or shifts strategies
when needed.

This process is cyclical, and businesses, like Ford in the case mentioned, continually reassess
their strategies to stay competitive in dynamic markets.

Strategic management is important because it helps companies match their strengths and
weaknesses with opportunities and challenges in the market, keeping them competitive. It gives
clear guidance for making smart decisions, carrying out plans efficiently, and reaching long-term
goals in an organized way. This process also helps use resources better and allows businesses to
adjust to changes in the market.

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Step 1: Define the Current Business

 Example: Imagine you own a café that sells coffee, pastries, and sandwiches. Your café
is known for its cozy atmosphere, but sales have been declining because a new café
opened nearby.
 Action: You define your business as selling coffee and food to locals who enjoy a
comfortable, homey environment.

Step 2: Perform External and Internal Audits (SWOT Analysis)

 Example: You look at the external factors (e.g., new café competition) and internal
factors (e.g., your café’s loyal customer base and friendly staff).
 SWOT:
o Strengths: Great customer service, cozy space.
o Weaknesses: Limited menu.
o Opportunities: Introducing new healthier menu items.
o Threats: Competition from the new café.
 Action: You assess your environment to understand where you stand and where
improvements can be made.

Step 3: Formulate a New Direction

 Example: Based on your SWOT analysis, you decide your new direction will be to stand
out with unique, health-focused menu options.
 Action: You create a vision for your café: "To be the best spot for health-conscious
food and great coffee in the neighborhood."

Step 4: Translate Mission into Strategic Goals

 Example: Now, you translate your mission into specific goals. One of your goals could
be to introduce 5 new healthy menu items within the next 3 months.
  Action: Break down the vision into smaller goals like menu changes, attracting new
customers, and retaining regulars.

Step 5: Formulate Strategies to Achieve the Goals

 Example: To achieve the goal of offering healthier menu items, you decide on strategies
like:
o Partnering with local suppliers for fresh ingredients.
o Creating a new marketing campaign around "healthy living."
 Action: Decide how you will execute your plans, like running social media ads and
updating the menu.

Step 6: Implement the Strategies

 Example: You start hiring new staff to help with the expanded menu, launch a social
media campaign, and start sourcing ingredients from local farms.
 Action: Put the strategies into action by making the changes in your café, menu, and
customer service.

Step 7: Evaluate Performance

 Example: After 3 months, you evaluate your performance by tracking:

o How many new customers you’ve attracted.
o Whether the new menu items are popular.
o If sales have increased.
 Action: If the new menu items are working well, you continue; if not, you adjust by
perhaps introducing seasonal items or new promotions.
1. Corporate Strategy

This strategy focuses on the overall direction of the company and what businesses it should be
involved in.

 Example: Think of PepsiCo. It doesn’t just sell Pepsi; it also owns Frito-Lay (snacks)
and Quaker Oats (cereals). PepsiCo’s corporate strategy is about managing all these
businesses together.
 Types:
o Concentration: Focusing on one product or market (like WD-40, which only
sells one kind of spray lubricant).
o Diversification: Expanding into new product lines or markets. PepsiCo added
chips and oats to its drinks.
 Related Diversification: Adding new products that are connected to the
existing ones (Pepsi adding snacks).
 Conglomerate Diversification: Expanding into unrelated products (like a
company selling both food and electronics).
o Vertical Integration: Taking control of more stages in the supply chain. Apple
did this by opening its own stores.
o Consolidation: Shrinking the company to become more efficient.
o Geographic Expansion: Expanding into new locations, like Pepsi selling its
products worldwide.

2. Competitive (Business Unit) Strategy

This strategy is about how each individual business competes in its market. For example, how
Frito-Lay competes against other snack brands.

 Example: How Pizza Hut competes with Papa John’s in the pizza market.
 Types:
o Cost Leadership: Becoming the cheapest provider in the market, like Walmart.
o Differentiation: Making your product unique, so customers prefer it even if it
costs more. For example, Volvo is known for safety.
o Focus: Targeting a specific niche or customer group, like Ferrari, which focuses
on luxury sports cars.

Human Resources as a Competitive Advantage

People are the key to gaining a competitive advantage. Companies like GE and Apple thrive
because their employees are skilled, motivated, and innovative. When workers perform well, it
makes the whole company better, just like how a well-trained team at an airline ensures smooth
operations.
3. Functional (Departmental) Strategy

This strategy deals with how each department (like sales, HR, or manufacturing) will support the
competitive strategy of the business.

 Example: If PepsiCo’s Frito-Lay division wants to be the leader in healthy snacks, its
HR department may focus on hiring nutrition experts, while the marketing department
runs ads that promote healthy eating.
 Strategic Fit: Each department’s strategy should fit the company’s overall strategy. For
instance, Southwest Airlines aims to be the low-cost leader, so its departments (like
ground crew, purchasing, and marketing) focus on efficiency and cost-cutting measures.

Top Managers' Role:

Top managers are responsible for setting the company's overall direction. They decide which
businesses to enter and how to compete. For example, Southwest Airlines' focus on being a low-
cost airline is a decision made by top management.

Department Managers' Role:

Department managers contribute to the strategy by:

1. Helping to Create the Plan: They provide insights on competitive pressures and
employee strengths, helping top managers make informed decisions.
2. Formulating Department Strategies: After the plan is set, they create specific strategies
for their departments to support the overall goal. For example, Walmart's purchasing
department focuses on buying low-cost goods to support its cost leadership strategy.
3. Executing the Plan: They organize resources and manage tasks to ensure the plan is
carried out.

HR in Mergers and Acquisitions (M&A):

HR managers play a key role in mergers by:

 Reviewing employee compensation and policies (due diligence).

 Helping to retain key talent and manage employee communication during the merger
(integration).

In short, HR helps ensure mergers succeed by addressing employee-related issues.

Strategic Human Resource Management (SHRM) refers to aligning HR policies and practices
with a company's overall strategic goals to ensure that the workforce has the necessary skills and
behaviors for success.

Defining SHRM:

SHRM involves creating and implementing HR strategies that help the company achieve its
strategic objectives. It ensures that the right employee skills and behaviors are in place to meet
the company’s needs.

HOW THE SHRM WORKS:

In SHRM, first, the company’s leaders decide on the long-term goals and create a clear direction
for the business. Then, they make a plan on how to achieve these goals, which includes
allocating resources like equipment and hiring the right people with the necessary skills. Finally,
they implement the plan through effective HR strategies like hiring, training, and managing
employees to ensure everyone contributes to the company’s success.

Example:

The Shanghai Portman hotel wanted to improve service quality, so it adopted the Ritz-Carlton
HR system, focusing on hiring employees who showed care and respect, directly supporting their
service-oriented strategy.
Strategic Human Resource Management Tools Simplified:

1. Strategy Map: This tool shows how each department’s work helps achieve the
company’s big goals. For example, at Southwest Airlines, flying fewer planes and
keeping costs down requires efficient and motivated crews. A strategy map links all these
steps, making it easier for managers to see how they contribute to success.
2. HR Scorecard: The HR scorecard helps track progress by attaching measurable goals
(like training hours, employee productivity, etc.) to activities. It quantifies how HR
efforts, like training or testing, lead to employee behaviors that support company goals
like customer satisfaction or profitability.
3. Digital Dashboard: This tool uses charts and graphs to give managers a quick view of
how their teams are performing. For example, a Southwest Airlines manager might check
if the ground crew is turning planes around quickly, allowing time for adjustments to
avoid future losses.

HR Metrics and Benchmarking:

 Metrics: HR managers track performance using measurable factors, like employee

turnover, training hours, or customer satisfaction.
 Benchmarking: This involves comparing a company’s performance with others in the
industry to see where improvements can be made.

Example: HR metrics could track which recruitment sources bring in the best candidates,
helping a company improve hiring practices. Benchmarking allows businesses to compare
results, like employee turnover, to industry standards.

The text you shared discusses various HR practices and metrics that are essential for improving a
company's human resource management (HRM) and aligning it with strategic goals. Here's a
breakdown of the key concepts:

1. Strategy-Based Metrics

 These metrics are tied to a company’s strategic goals, focusing on the HR activities that directly
contribute to achieving these objectives.
 Example: If a hotel wants to rank among the top 10 hotels in France by improving customer
service, HR can track metrics like training hours per employee, incentive pay tied to customer
service ratings, and guest satisfaction rates. These strategy-driven HR metrics ensure that HR
practices align with broader business goals.

2. Workforce/Talent Analytics and Data Mining

 Workforce Analytics: Software applications analyze employee data to provide insights, such as
factors that influence turnover or attributes that define successful managers.
  Data Mining: Identifies patterns and correlations in large datasets to predict employee behavior,
improve hiring practices, and enhance decision-making. For instance, companies like Google and
Microsoft use data mining to refine recruitment, identify high performers, and prevent turnover.

3. HR Audits

 HR Audits: These are comprehensive reviews of an organization’s HR functions (recruiting,

training, compliance, etc.) to determine areas for improvement.
 Examples of Audit Areas: Headcount, legal compliance, recruitment and selection,
compensation, benefits, payroll, employee relations, and training.

4. Evidence-Based HR

 Decision-making in HR should be based on an objective analysis of data and evidence, ensuring

decisions are scientifically sound.
 How to Be Scientific: Collect objective data, use control groups for experiments, and base
decisions on measurable outcomes rather than intuition. For instance, testing the impact of an
incentive plan on sales through a controlled experiment.

5. High-Performance Work Systems (HPWS)

 HPWS: A combination of HR policies that lead to superior employee performance, including

advanced recruitment methods, validated selection tests, extensive training, and self-managing
teams.
 Metrics for High-Performance Companies: These companies typically hire more qualified
applicants, train employees more extensively, and have measurable performance improvements
compared to low-performing firms.

In summary, companies can improve their performance by aligning HR strategies with business
goals, using data-driven insights from workforce analytics, conducting thorough HR audits, and
adopting high-performance work systems. These practices lead to better employee performance,
increased profitability, and overall organizational success.

1. Strategy-Based Metrics: These are directly linked to the company's strategic goals and
measure HR activities that contribute to those goals.
2. Workforce/Talent Analytics and Data Mining: This involves using data and analytics
to identify patterns, trends, and insights in the workforce to improve decision-making and
predict outcomes.
3. HR Audits: These involve reviewing HR functions to ensure compliance and
effectiveness in areas like recruiting, training, and compensation.
4. Evidence-Based HR: This focuses on making HR decisions based on data and evidence
rather than intuition, using scientific methods to analyze the impact of HR practices.
 5. High-Performance Work Systems (HPWS): These are a set of HR policies aimed at
achieving higher employee performance and organizational success through advanced
recruitment, training, and self-managing teams.

All these are ways of measuring HR effectiveness, ensuring that the organization's HR practices
align with its strategic goals, and improving overall perfsormance.