Contemporary Services Management Issues

List of Contributors

Dr. Burak Özdemir and Dr. Akansel Yalçinkaya

A Theoretical Evaluation of Relationship between Strategic Choices and Human Resources Management Models

1 Strategic Management Process

Von Neumann and Morgenstern (1947) are the first modern scientists to associate the concept of strategy with business in the game theory they developed. They defined “strategy” as a series of actions designed by the company in response to a specific situation (Bracker, 1980: 219). On the other hand, Mintzberg et al. (1998) view strategy as an undermining factor in strategic management because deterministic and mechanistic approaches constrain will and choice. With Chandler (1962) and Ansoff (1965) among its founders (Herrman, 2005: 114), strategic management is a young discipline with about 50 years of history (Guerras-Martin et al., 2014: 69). The main question in the field of strategic management concerns how organizations achieve sustainable competitive advantage and success (Teece et al., 1997: 509).

Strategic management also refers to a certain process that has been described in various ways by different authors in the literature. Hill et al. (2015: 43) describe the process in two phases as strategic formulation and strategy implementation. Determining the mission, vision, values and targets in the strategic formulation phase is the first step, followed by internal and external environment analyses and SWOT analysis. The next stage is the strategic choice phase. Strategic choice stages include functional strategies, business strategies, global strategies and corporate strategies. The strategy implementation phase includes the organizational structure, organizational culture and organizational control design. Alkhafaji (2011:7) lists the phases of the strategic management framework as analysis, strategic formulation, strategy implementation, evaluation and control, respectively. Based on the literature, Mazur (1991:4) defines the stages in the strategic management model as the determination of corporate mission, organization profile and environmental analysis, determination of long-term and short-term strategic choices, implementation of strategy and evaluation of strategy. (Hitt et al., 2011:5) state that the strategic inputs, strategic actions and strategic outcomes of the strategic management process follow each other. Strategic inputs include an analysis of the internal and external environment through the determination of the vision and mission of the business. Strategic actions phase includes the sub-phases of formulation of strategy and strategy implementation. The strategic formulation phase includes business-level strategies, competitive dynamics, organization-level strategies, merger and acquisition strategies, internationalization strategies and ←11 | 12→cooperation strategies. In the strategy implementation phase, corporate governance, strategic leadership, strategic entrepreneurship and organizational structure and control are highlighted. Strategic output refers to the results of strategic competitiveness. David (1988:91) describes the strategic management process as strategic formulation, strategy implementation and strategic evaluation stages. The strategic formulation step includes the processes of mission, vision, analysis of internal and external environment, and selection of strategies, which are followed by the strategy implementation and strategy evaluation (monitoring of the strategy) steps. Rothaermel (2013:79) states that the steps of strategic analysis (internal and external environment analysis), strategic formulation (business-level strategies, corporate strategies), strategy implementation, corporate governance, ethics, and organizational design are the successive steps in the acquisition and maintenance of competitive advantage. In addition, all these analytical steps are supported by continuous feedback.

2 Strategic Formulation and Competitive Strategies

Strategic formulation is generally defined as the stage in which strategic choices are determined. Swayne et al. (2006:230) describe the strategies of this stage as the orientation strategies (mission, vision, values and objectives), alignment strategies (growth, downsizing and balance protection strategies), market entry strategies (purchasing, cooperation and development strategies), strategic position and generic strategies), and implementation strategies (service, support and unit action plans).

Competitive strategy refers to a business organization’s competition analysis of the sector in which it operates, its efforts to gain competitive advantage over its competitors in the sector, and everything it does to achieve its objectives. It is possible to examine the competition strategies in the strategic position as prospectors, defenders, analyzers and reactors (Miles and Snow, 1978), in terms of generic strategies as cost leadership and differentiation in the marketplace, and focused cost leadership and focused differentiation in the market segment (Porter, 1980:487; Wan, 2004:5).

2.1 Miles and Snow Strategy Typology

The initial questions of Miles and Snow are how organizations adapt to the changing environment and why adaptive failures occur (Ghoshal, 2003:109). Miles et al. (1978:550) state that the four main strategic positions, namely, the prospector, defender, analyzer and reactor, can solve the three persistent problems in the entrepreneurial, engineering and managerial areas of the adaptation process (adaptation cycle). Entrepreneurial problems are problems in the product-market area, engineering problems are related to the selection of the technologies used for production and distribution, and managerial problems are related to the organizational structure and processes (Gnjidic, 2014:96).

The entrepreneurial problem of defender type organizations is how to close a part of the total market to form a fixed product and customer group. The engineering problem is how to produce and distribute goods or services as efficiently as possible. The managerial problem is how to achieve strict organizational control to ensure productivity (Miles et al. 1978:550). Defender type organizations are mostly active in stable environments (Yeloglu, 2008:160). The defender type has a limited product line that focuses on increasing the efficiency of its existing activities. This cost orientation removes the possibility of innovation in new fields (Wheelen and Hunger, 2012:117). The characteristics of the defender type are a limited product line, capital-intensive technology use, functional structure, cost control, process engineering and efficiency skills in production (Raghuram and Arvey, 1994:56).

The entrepreneurial problem of the prospector type organizations is the way new products and market opportunities are found and used. The engineering problem involves a long-term commitment to a single technological process. The managerial problem concerns how to coordinate numerous and various transactions (Miles et al. 1978:554). Prospector type organizations are usually located in environments where fast and unpredictable changes are experienced (Yeloglu, 2008: 160). Prospector type organizations focus on product innovation and market opportunities and have a wide range of product groups. This sales orientation can make them somewhat inefficient. They also tend to emphasize creativity over productivity (Wheelen and Hunger, 2012:117). Prospector type features include diversified product lines, multi-technology, product-specific or geographically segmented structure, market research, product research and development, and product engineering skills (Raghuram and Arvey, 1994: 57).

The challenge for analyzer type organizations is how to find new product and market opportunities simultaneously while creating a solid foundation for traditional products and customers. The engineering problem is how to be efficient in fixed segments, and flexible in dynamic segments. The managerial problem is the difficulty that organizational structures and processes face in adapting to both dynamic and fixed operational areas (Miles et al. 1978:556). Analyzer type organizations operate in at least two different product markets, one unstable and the other stable. They tend to demonstrate productivity in stable areas and creativity in variable areas (Wheelen and Hunger, 2012:117). Analyzer type features include a limited base product line, researching few product/market opportunities, cost-effective technology for fixed products, project technology for new products, efficiency in production, process engineering and marketing (Raghuram and Arvey, 1994:57).

Reactors are the weakest strategic type. There is no consistent product/market harmonization. They react to competitive conditions if it is compulsory (Irk and Döven, 2018:143). It is not possible for such organizations to continue their reactor behavior as long as they are not in a protected environment, such as a monopolistic or highly regulated marketplace (Swayne et al., 2006:260).

Porter (1980) suggests that a competitive strategy is a search for an appropriate competitive position that can be improved depending on the choice of strategy for a company in the industry. Competitive strategy is expressed in terms of competitiveness and status according to competitors in the sector in which a business organization operates. That is, factors such as market share and profitability of a business determine the position according to the competitors, and in turn this position guides the decision on the competition strategy.

The ultimate goal of Porter’s competitive strategy is to distinguish successful and unsuccessful businesses according to their strategic preferences. From this point of view, a business can use the competitive advantages of cost leadership, differentiation and focus. These generic strategies explained by Porter (1985) are competitive strategies that are based on total cost leadership, differentiation on the basis of product and/or service, and focus on a specific buyer group, location or product basis, which can help an enterprise to cope with competitive forces and outperform other businesses operating in the sector.

The reason for using the term “generic” for such competition strategies is that they are not specific to any business field, and it is possible to apply them at the strategic business unit level for any business (Yılmaz, 2012:30). Generic strategies are used alone or in combination to create an effective position in the long run and to leave behind the competitors in the sector. According to Porter, companies should analyze the elements that affect competition (new competitors’ barriers to entry, buyers’ power, suppliers’ power, threat of replacement products, severity of competition) and identify generic strategies in the face of opportunities and threats presented by those forces. Termed as Porter’s generic strategies, these strategies are presented in terms of competition scope and competitive advantage in Fig. 1.