SHRM FIELD

Why does knowledge of different generic approaches to strategy matter? What implications does this have for our understanding of the SHRM field?



Why does knowledge of different generic approaches to strategy matter? What implications does this have for our understanding of the SHRM field?

Why does knowledge of different generic approaches to strategy matter? What implications does this have for our understanding of the SHRM field?

The idea that human resources in the company are a source of sustainable competitive advantage has led a research study on the integration of HRM with strategic theory. This paper presents an exploration model systems human resources management based on the recent contributions of the strategic management of human resources in the company (Jones & Wright 2002: 271). The study explores patterns of human resource management in the banking and insurance in Spain, and the relationship they have with other elements such as the organizational context of the institution and the financial performance of companies.

Three Generic Strategies

Michael Porter (1982) identified three generic strategies that could be used individually or together, to create long-term defensible position that exceeded the performance of competitors in an industry. These three generic strategies were:

overall cost leadership

Differentiation

The approach

Generic strategies are tactics to outperform competitors in an industry, in some industrial structures will mean that all companies can produce high yields, while in others, the success in implementing a generic strategies can be strictly needed to obtain acceptable yields in an absolute sense.

Cost Leadership Strategy

The cost leadership is where the company intends to be the lowest cost producer in its industry. The company has a broad overview and serves many industry segments, and can even operate in related industries (Barney 2001:99). The breadth of the company is often important to its cost advantage. The sources of cost advantage are varied and depend on the industry structure. May include the pursuit of economies of scale proprietary technology, preferential access to raw materials.

A successful strategy of cost leadership is spread across the enterprise, as evidenced by high efficiency, low overhead, limited benefits, intolerance to waste, careful review of budget requests, the broad elements of control, rewards related to the concentration of costs and extensive employee involvement in attempts to control costs.

Differentiation Strategy

The differentiation strategy is to create for the product or service something that is perceived industrywide as unique. The differentiation strategy should be followed only after careful study of the needs and preferences of buyers, in order to determine the feasibility of incorporating a different characteristic or several at a unique product that includes the desired attributes (Bailey 2003: 65).

A risk taken to follow a differentiation strategy is that customers may not value the product unique enough to justify its high price. When this happens, a cost leadership strategy easily overcomes a differentiation strategy. Another risk of using a differentiation strategy is that competitors could develop ways to copy the features of differentiation rapidly and in this way, companies must find sustainable sources of exclusivity that rival firms ...