Business Strategy emphasizes how it intends to succeed in its chosen market place. It mainly focuses on competitive advantage. Business Strategy helps to establish the direction in which the organization is going in relation to its environment. The Business Strategy of an organization must reflect the intentions of managers about what they expect to achieve over a stated period of time. Business Strategy is therefore, about beating competitors in meeting customers needs, but this does not mean that a Business Strategy is the same thing as a marketing strategy. Business Strategies should take into account the changing needs and critical resources needed to carry out the strategic aims. Thus, organizations must unavoidably make choices about how they would pursue competitive advantage.
Business plans are prepared to work on three to five years cycle and annual business plans are formed within this. These plans consist of strategies like innovation, cost reduction, quality leadership, cost leadership, value added, customer focus, growth through acquisition, joint venturing etc. Business strategy answers three basic question: what (vision, mission, goals), how (organization design, functional strategies, resource and cost allocation, budget requirements, planning) and who (workforce planning, performance management, development). The components that make up Business Strategy are business scope, distinctive competencies and governance. Business scope is referred to as environmental factors that influence business. This included markets, products, services, customers and the location of the business, buyers, suppliers, competitors, and potential competitors. The distinctive competencies referred to all the things that make a business successful in the market place. This included the core competencies of the business that allowed it to compete with others. This would include the brand, product and new product development, cost and pricing, and sales and distribution channels. The business governance referred to the relationships that existed between the stockholders and board of the directors, government regulations and relationship with other business partners.
A competitive strategy identifies how to build and strengthen the business long-term competitive position in the marketplace. Competitive advantage is any factor that allows an organization to differentiate its product or services from those of its competitors to increase market share. Competitive advantage could be attained if organization creates value for its buyer along with profit maximization of the organization. To attain competitive success organizations must possess a competitive advantage in the form of either low costs or differentiated products that command premium prices or by providing higher quality products and services or by producing more efficiently.
Organizations today have capital and technology but, it is its human resource and its capability that act as a major source of its unique competitive advantage. Even though the most technologically automated facilities are available, employees skills and commitment help to create competitive advantage. Thus, to attain competitive advantage organizational resources must: add positive value to the organization; be unique; be imperfectly imitable; and not be substituted with another resource by the competing organizations.
Human Resource Strategies seek to manage the human resource in order to achieve the organizational goals. It focuses on what the organization intends to do in relation to its Human Resource policies and practices. Hence, the way human resource is deployed, motivated, managed and retained will impact upon the Business Strategy implementation. Human Resource Strategy serves Human Resource professionals who want to add value to their business. These are devised in respect of recruitment, employee deployment, and engagement by considering the mission and objectives of organizations. By doing this organizations put itself in the position of being able to achieve its goals through its human resources. Human Resource Strategies play an implementation role and are valuable means of obtaining path, uniformity and consistency in human resources efforts. The process of linking Human Resource Strategies with Business Strategies serves investors, customers and employees of the organization who want the business to deliver results.
Thus, main focus of Human Resource Strategy is to have operational linkages to fit Human Resource Management with the strategic thrust of the organization. Interaction between Business Strategy and Human Resource Strategy of organizations also need to particularly take care of uncontrollable factors which exist in external environment. External environmental factors impact needs to be understood and Human Resource professionals should try to minimize their adverse impact during implementation process of strategies. External environmental factors could be controlled or minimized with the help of leadership and direction provided by departmental managers, training and instructions given to employees, key implementation tasks and activities which must be defined with enough details, and information systems used for monitoring the process of implementation which also should be adequate enough.
Organizations must focus on its Human Resource Strategies as these are less likely to be imitated by competitors as these are not visible to competitors. Even if visible, it might not be favorable as different organizations setting requires different strategies. The use of Human Resource Strategies to build employees commitment and morale would result into providing excellent customer services by employees. This would in turn generate profits and would help in obtaining sustainable competitive advantage with high quality workforce.
The role of organizations cycle in the formulation of strategies is significant. To achieve successful interaction between Business Strategy and Human Resource Strategy, Human Resource professionals need to consider the lifecycle stages of their organization and each stage to be linked with Human Resource Strategies such as: starting phase needs to attract the best technical and professional talent with attractive compensation. Human Resource professionals in this phase need to define future skill requirements and design career ladder map for their employees. Organizations in starting phase need to set basic employee relations philosophies as well; growing phase needs to recruit adequate number of employees with multi-skills so as to build up talent pool. In this stage organization has to meet external market status and need to provide compensation and benefits to their employees according to that. In this stage professionals need to mould an effective employee training and development programme as well; maturity phase needs to encourage sufficient turnover to minimize redundancies and provide new openings along with mobility of employees by shifting of jobs. In this phase organization needs to control compensation structure and control labor costs with improved productivity; and decline phase needs to plan and implement redundancies and reallocations with tight cost control measures. In this phase employees need to be retrained and career counselling need to be provided.
It is necessary for organizations to choose appropriate strategy to encounter challenges and convert them into opportunities to survive and flourish in todays hyper competitive business environment. Human Resource Strategies must be matched to the Business Strategy with the same care as the financial control systems or marketing plans are implemented.
Developing and implementing Human Resource Strategy ensures that actions in managing human resource are aligned with competitive demands which need to be reflected in the strategic planning. The integration between Business Strategy and Human Resource Strategy and planning is very closely linked. As organizations human resources are utilized more frequently as a source of competitive advantage, Human Resource Planning has become important to the successful formulation and implementation of strategies. Through planning, organizations prepare to match resources with the requirements needed for the implementations of strategies.
Human Resource Planning needed to be carried in sequential manner which include environmental scanning and an interface with strategic planning, forecasting human resource demand and inventory, examining external supplies of labor, and developing plans to deal with shortage and surplus of manpower. Human Resource Planning signal the need for change and serves to guide the activities within Human Resource Management towards better compatibility with the business. One of the ways in which recruiting can be more strongly linked to Business Strategy is to focus on those sources that provide the greatest number of desirable employees. Thus, this would require Human Resource executives to be able to forecast the future availability of manpower having knowledge. Human Resource Planning requires Human Resource professionals to communicate with other managers, senior executives and staff members about the future human resource environment and other associated staffing issues. This will help to have complete integration of every Business Strategy with Human Resource Strategy.
Even board level management must treat Human Resource as an important contributor. Senior managements support need to be ongoing and visible towards Human Resource Departments. The active leadership from top management is considered to be a critical source to maximize the returns from human resource. A visible involvement of senior management sends message to other employees that top levels are committed to strategy and strategic objectives. Alignment of Human Resource Strategy and Business Strategy required not only occasional verbal acknowledgements but it also required active participation to ensure progress. Board level involvement in the process of alignment would ensure sensitivity to issues and help to minimize potential resistance to share mutual information.
The extent to which the Human Resource functions are involved in both organizational and Human Resource Strategy development would be dependent on whether the most senior Human Resource person was a member of the board of directors or not . But at the same time the board membership of Human Resource professionals would not guarantee the involvement of specialists in strategy as it is not necessary that they would act as active members. Perhaps, that is why currently attention has been paid by organizations to assess the percentage of Human Resource Directors and professionals as policy makers. Aligning board level challenges and Human Resource goals provide great opportunities for Human Resource professionals to put their hands into it. This would transform Human Resource role from a business partner to business leader. The designing and deployment of Business Strategies are done by top managerial people within the organization and Human Resource managers act as champions for Human Resource excellence. Human Resource managers are tasked with the primary responsibility of leading and strategizing to support Business Strategies. Human Resource professionals need to become strategic partners who focus on strategy and processes of an organization.
As leaders Human Resource managers need to be visionaries and a relists. For instance professionals might forecast human resource needs and labour supplies, both within and outside the organization and side by side integrate these with the organizations capacity to perform effectively over a period of time. It is essential that Human Resource Practices to have the potential to make a difference to organizational performance and specialists needs to organize people management arrangements to secure consistency and support.
Therefore, Business Strategy is seen as an essential to any organization, but any strategy will be worthy of it if good Human Resource Strategies also exist. Business Strategy and Human Resource Strategy are inseparably linked with each other and they both are mutually supportive. For instance, organization strategy may require employees to be reorganized or redeployed and in this case Human Resource Professionals will have to be involved closely to ensure involved workforce. Without Human Resource Strategies linked with business objective, high level of organizational performance is not likely to place. Thus, Business Strategy lays the route that the organization will take in the future and Human Resource Management acts as an instrument to almost every aspect of strategy implementation.