The Role of Strategy Flashcards
Value Chain
coined by Michael Porter, the process by which a business receives materials and adds value to the materials through processes that create which product or service and then sold to customers
- Businesses will conduct value-chain analysis by looking at steps in production and finding areas of improvement to increase production in value chain
- HR’s role: need to know which activities in organization are considered central to its mission, reflecting its core activities, and which ones are the most profitable activities or could be outsourced profitably
Stakeholder Concept
coined by R. Edward Freeman, recognizes the different types of value an organization creates
- Understanding the various perceptions from the view of each stakeholder is important and more challenging for a global organization
- Customer’s expectations may vary, employees in other countries have differing opinions based on social norms
The Strategic Planning Process
Always involves 4 basic stages
- Formation of strategy, gathering critical and necessary data
- Development of strategy, considering the competitive advantage and the markets it competes in
- Implementation stage, creating the specific objectives and initiatives that produce outcomes associated with goals
- Evaluation stage, final stage where metrics and achievements are assess and reported to stakeholders
Strategy Formulation
the process an organization chooses the most appropriate courses of actions to achieve defined goals
Information Gathering and Analysis
process of gathering data. Should be done before and during the creation of the strategic plan and continue through the implementation stage and to the monitoring process of the strategic plan. Data can be primary or secondary and through internal and external means.
Environmental Scanning
seeing what is happening in the environment around you is important. Identifying the important information among the unimportant information is key
PESTEL Analysis
Technique for sorting out important from unimportant information. PESTEL stands for Political, Economic, Social, Technological, Environmental and Legal.
- Political factors: how and to what degree a government interferes with the economy, can include government policy, political stability or instability in overseas markets, foreign trade policy, tax policy, labor law, environmental law, trade restrictions, etc.
o Companies must be able to respond to current regulations and anticipate future legislation and adjust accordingly
- Environmental factors: impact how organizations do business and their profitability. Factors include economic growth, interest rates, exchange rates, inflation, disposable income of consumers and businesses, and so on.
o Can be broken down into macro and micro factors.
o Macro: governments use interest rate control, taxation policy and government expenditure as main mechanisms to influence these demand factors
o Micro: all about the way people spend their incomes. Has large impact on business-to-consumer organizations in particular
- Social factors: aka, sociocultural factors, areas that involve the shared belief and attitudes of population. Includes population growth, age distribution, health consciousness, career attitudes, and so on. These factors have a direct effect on how marketers understand customers and what drives them.
- Technological factors: affect marketing of our products and our HR services in three ways:
o New ways of producing goods and services – using remote access for employee updates directly to the human resource information system (HRIS)
o New ways of distributing goods and services – providing employee online access to their employee records so they can request changes to correct errors
o New ways of communicating with target markets – using email, text messages, and a company emergency messaging system to notify employees of critical changes in the work environment
- Environmental factors: factors that have came to the forefront in the past 15 years. Important due to increasing scarcity of raw materials, pollution targets, doing business as an ethical and sustainable company, and carbon footprint targets set my governments.
o HR can reduce carbon footprint by reducing or eliminating use of paper products
- Legal factors: include health and safety, equal opportunity, advertising standards, consumer rights and laws, product labeling, and product safety.
o HR need to know what is and is not legal to avoid embarrassment and bad PR or worse
SWOT Analysis
used after PESTEL (identifying important and unimportant information)
- Strengths: What are the strengths of your HR organization? What do you do really well? What do you want to continue doing into the future? Could be onboarding, HRIS, sexual harassment prevention, etc.
- Weaknesses: Areas of improvement.
- Opportunities: Opportunities that are open to the business. Opportunities to take advantage. New reporting requirements from government can be seen as opportunities.
- Threats: The challenges we face as HR professionals. Properly managed threats, can sometimes be converted into opportunities.
Industry Analysis
Understanding what other HR professionals at other organizations are doing. This allows HR professionals to identify threats and opportunities facing their organization and to focus resources on developing unique capabilities to gain competitive advantage.
Industry Lifecycle: 4 phases to lifecycle of a business or industry
- Introduction: beginning of organization, very entrepreneurial phase where everything is new. Policies and systems are being created as needed
- Growth: after new organization has gotten its footing in its marketplace, it starts growth phase. Influenced by all factors we have explored in SWOT and PESTEL analyses.
- Maturity: time when organization is comfortable with its size, its influence and its income
- Decline: phase when systems have gotten surpassed by technological advances and products and services have become dated. Without updates to core reasons for existing, organization will no longer exist (innovation is necessary)
Porter’s Five Forces
organizations have pressures from both internal and external sources. These pressures impact the competitiveness an organization will be able to apply to the world in which it operates
Five forces are:
- Threat to new entrants – when a company does so well that their success attracts new competitors who want to get in on that success can drive down profits
- Threat of substitutes – the “knock-off” products that may even be legal if the original product patents have expired. Other people use different products or services to address the same need that the original product or service solved. Ex. Digital watches vs. analog watches and cell phones vs. landlines
- Bargaining power of customers – when customer orders are large, they can force the lowering of price. Consider wholesale pricing
- Bargaining power of suppliers – if there are few options for sourcing component parts, raw materials or other supplies, the supplier can have a strong influence on the cost of end products
- Industry rivalry – industry competitors greatly influence our ability to succeed in the marketplace. Often drive price to end users and force them to clearly differentiate between competitors. Ex. Apple vs android
Strategic Investment Decisions
consider 3 techniques to see how the investment decisions are evaluated: accounting rate of return, payback and discount cashflow techniques
- HR example: investments should be evaluated based on the period of time it takes to reclaim the investment (using new applicant tracking system), what the payback amount will be (savings in HR payroll expense from new software system) and what impact there will be on cashflow (reduction in HR budget that can put cash back into the organization P&L statement)
Growth Share Matrix
aka Boston Box or Boston matrix. X-axis is relative market share, Y-axis is market growth.
- When market share increases and market growth does too, the companies are “stars”
- When market growth is high but market share is low, companies are questionable for investments
- When market share is high but market growth is low, companies can be good cash cows
- When both market share is low and growth is low, companies can be described as investment dogs
The GE-McKinsey Nine-Box Matrix
offers systematic approach for decentralized corporations to determine where to invest its money. Judged based on two factors: the attractiveness of the relevant industry and the unit’s competitive strength within that industry
Mission
concise explanation of the organization’s reason for existence. Describes the organization’s purpose and its overall intention. It supports the vision and serves to communicate purpose and direction to employees, customers, vendors and other stakeholders
Vision
looks forward and creates a mental image of the ideal state the org wants to achieve. It’s inspirational and aspirational and should challenge employees
