Ford Motor Company, facing huge losses and hemorrhaging market share to Toyota and Nissan, knew it needed a new strategic plan. Competition was fierce, Ford’s costs were higher than competitors’, and Ford’s unused plant capacity was draining profits. Ford’s managers devised “The Way Forward.” This new strategic plan entailed closing a dozen plants and terminating 20,000 employees. As at Ford, a strategic plan is 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. The essence of strategic planning is to ask, “Where are we now as a business, where do we want to be, and how should we get there?” The manager then formulates specific (human resources and other) strategies to take the company from where it is now to where he or she wants it to be. A strategy is a course of action. Ford’s strategies included closing plants and terminating employees. We discuss various standard strategies shortly. First, we look more closely at the strategic management process.
Steps in Strategic Management
Strategic planning is part of the strategic management process. Strategic management entails both strategic planning and implementation, and is “the process of identifying and executing the organization’s strategic plan, by matching the company’s capabilities with
CHAPTER 3 • STRATEGIC HUMAN RESOURCE MANAGEMENT AND THE HR SCORECARD 79 the demands of its environment.” Strategic planning comprises (see Figure 3-1) the first 5 of 7 strategic management tasks: (1) defining the business and developing a mission, (2) evaluating the firm’s internal and external strengths, weaknesses, opportunities, and threats, (3) formulating a new business statement, (4) translating the mission into strategic goals, and (5) formulating strategies or courses of action. In its simplest sense, however, strategic planning is remarkably simple: Decide what business you’re in now and which ones you want to be in, formulate a strategy for getting there, and execute your plan. The entire 7-step strategic management process follows:
Step 1: Define the Current Business Every company must choose the terrain on which it will compete—in particular, what products it will sell, where it will sell them, and how its products or services will differ from its competitors’. Rolex and Seiko are both in the watch business, but Rolex sells a limited product line of high-priced quality watches. Seiko sells a wide variety of relatively inexpensive but innovative specialty watches with features like compasses and altimeters. Therefore, the most basic strategic decisions managers make involve deciding “what business” their firms should be in: For instance, in terms of the products or services they’ll sell, the geographic locales in which they’ll sell them, and how they’ll distinguish their products or services from competitors’. They ask, “Where are we now in terms of the business we’re in, and what business do we want to be in, given our company’s opportunities and threats, and its strengths and weaknesses?” Managers then choose strategies—courses of action such as buying competitors or expanding overseas—to get the company from where it is today to where it wants to be tomorrow.
Managers sometimes use a vision statement as a sort of shorthand to summarize how they see the business down the road. The company’s vision is a general statement of its intended direction that shows, in broad terms, “what we want to become.”2 Rupert Murdoch, chairman of News Corporation (which owns MySpace.com, the Fox network, and many newspapers and satellite TV operations), has a vision of an integrated, global satellite-based news-gathering, entertainment, and multimedia firm. WebMD launched its business based a vision of a Web site supplying everything one might want to know about medical-related issues. One eye care company says, “our vision is caring for...