How Do Business Strategies Affect HR Strategies?


Various organizations use different strategies in their administration to achieve their goals and objectives. This is because different organizations are organized and operate differently, and have different forms of administration because they have different goals and targets. In this assignment, we will look at two of these strategies, and how they affect the human relations departments in their respective organizations. These are the differentiation and the cost leadership strategies.

Differentiation strategy

Differentiation is a form of strategy whereby a customer gets value of the organization’s product through the unique features that the product has, rather than by the price of the product (Armstrong and Mitchell 146). In this strategy therefore, the price of the product is not put into consideration when determining the product’s probability to be chosen by the customer.

When pricing the product, producers ensure that the selling value is not above the differentiation. Therefore, the price of the product must be higher than its production cost. Companies that apply this method do not dwell so much on maintaining lower prices than their competitors so as to remain the consumers’ favorite. Rather, they concentrate more on producing products of high and unique quality. Secondly, they look forward to developing and improving their product. This is because their goal is offering the consumer with quality products, because they know that by producing goods of high quality will be a guarantee to maintaining their customers’ loyalty, as compared to simply lowering the prices just to lure the consumer. This is proof that in their production, they target a particular segment of a large market. Selling low-quality goods for low prices doesn’t attract consumers anyway. They emphasize on new skills and technology, features and quality. The decision is therefore left to the consumer, to determine whether the product has value for his money.

Cost leadership strategy

On the other hand, cost leadership strategy is a method of pricing products whereby the producers maintain a competitive price of goods and make sure that they maintain the advantage. Michael Porter came up with this theory and in this method, the producers supply top the market average or slightly above average goods that seem appealing to the consumer. The goods have characteristics that are acceptable to the consumers (Porter 129). They have been able to successfully define their customers and when producing goods, they make them according to the prices that consumers can comfortably afford. When producers employ this strategy, consumers get value for their money in most cases. Cost leadership appliers typically operate within their competitors’ prices, rising when the competitors’ price rise and decreasing when theirs too, decrease. This is to keep cautious and make sure that they don’t lose their customer base. They keep themselves updated on the competitors’ prices, use the newest technologies and minimize on research, and consequently on the product’s price.

Therefore, cost leadership strategists concentrate on simplifying production methods, reduction of prices and observing their competitors’ prices.

In these two methods, there is one common similarity. Both methods seek to maintain a better position in a massive market, but they are rarely applied in most markets and industries. It is a method common with large-scale production of products.

Differentiation and HR

HR is said to be the backbone of any organizations’ operation, because it is involved with the employees’ affair for example, payments. Differentiation is one method of strategic pricing of goods that affects HR. This is the only department that determines an employee’s behavior; recognize their skills, talent and capabilities. In a working setting, staff members can be differentiated. This is where they become they become fully and genuinely committed to their work. It is a method that employers encourage because genuine attachment to work will lead to high productivity. When staff is differentiated they work diligently in all areas from staff selection, recruitment, training to working levels. Differentiation of work leads to better working conditions, and this results to higher production, which will in turn have a positive impact on the staff’s salary because with higher production, the employer will be compelled to increase their wages, since a good employer never lets good effort go unrewarded.

Differentiation of work also provides a better opportunity for research to be done within an organization. Research assists in identification of the problems facing it, and corrective measures taken. With mistakes corrected within the employees, this will lead to higher productivity and better staff satisfaction. In differentiation, staff is trained to emphasize on the particular feature that a consumer wants in a good. This being done, the consumer will tend to undermine the not so good traits in the product if any, and concentrate more on what the member of staff is emphasizing a lot. Staff members generally tend to portray the genuinely positive side of a product, and effective communication with customers will lead to higher sales. Again, when HR is recruiting and training new staff members, it will tend to focus on the special strengths in the candidate and let him specialize majorly in that area. This will lead to higher productions because even the worker at the same time enjoys what he is doing.

Differentiation has one unique feature in that it presents its competition by producing differently distinctive and unique products compared to their competitors. Their HR offers a broad range of job levels, and insists and emphasizes on people’s skills. For this reason, they hire highly-skilled risk takers. Their HR concentrates a lot on employees’ skill acquisition, and therefore pays particular attention during selection and recruitment of now employees. They rely on hiring the needed skill, unlike cost leadership strategies who concentrating on training skill for themselves.

When it comes to development, their HR requires little planning time in order for them to be ready for the unpredictable changes. They also use appraisals to develop the employees’ attitude towards work and zeal. Unlike other strategies, differentiation’s HR rely much on the external trainers because there is minimal on-the-job training once a member of staff has been hired.

When it comes to employees’ payments, wages and compensation, differentiation strategy emphasizes on individual-based form of payment. There is also high managers’ incentives and flexible benefits strategies in this method, which in a way play a role in motivating them to work even harder in their managerial roles.

Differentiation, if well applied, can be very applicable especially in organizations that deal with diverse products.

Cost leadership and HR

Cost leadership strategy on the other hand can be viewed as a strategic form of delegation, and is also used a lot in human resource management. In this form, employers make sure that their employees are kept updated and at par with their competitors’ counterparts. They get updated every time a new way of going about something emerges. The employers through HR keep on rating their employees as compared to their competitors for example through seminar. They also encourage internal forums whereby employees share their view about work in general, what areas they find difficult or challenging through team building. When recruiting, Human Resource ensures that they train and hire employees that meet the consumers or clients’ expectations (Dessler 67). This being achieved, it creates loyalty by the consumers, since they feel appreciated and served according to their expectations.

This method of administration sets to achieve that they meet the customers’ expectations, satisfy them to the maximum and that is the strategy they use to maintain a customer base.

In cost leadership, competition is based on producing high quality goods, but trying their best to reduce on the factor of production. This will imply that resources are utilized and exhausted to the maximum, and ensuring that no available resource is lost.

During employment, Human Resource departments of organizations applying this form of leadership set extremely high standards and tight job description. The reason is because they want to maximize on their staff members to the maximum. They also concentrate and emphasize on technical knowledge, because they want to keep at par with their competitors. They also look at specific personality traits in the candidates they hope to employ. In particular, they look out for goal-oriented, self-inspired, motivated and high-performing individuals with a strong personality. These are the people capable of moving an organization forward. Since they are more into specialization, their job description is narrow and clearly defined. Cost leadership strategy does not entertain miscellaneous spending. Therefore, their human resource managers try as much as possible to reduce on recruiting practices, and this minimizes cost of production, and the organization’s expenditure.

In matters of development, cost leadership strategy ensures reduced training and management, to reduce on cost. They rely on “customizing” their employed staff to make them fit in given tasks, and by doing this; they reduce on production cost and make their staff jacks-of-all-trade, and it takes a strong and well organized human resource to achieve this. They also apply the appraisal strategy, and this encourages staff members to try and be the best they can be. This also plays a role in changing and molding an employee’s attitude towards job. Ni this strategy also, HR concentrates more on internal and even in some cases, on-the-job training.

When it comes to payment of wages, salary and compensation, employees are legible for incentives proportional to the work that they and their groups have done, and thus, payment is job-based. There is a system of incentives that encourages both competition and team work, and critical observation on how money is spent even at the managerial level, and in fact there is little or no benefits at all linked to performance.

Some organizations have a well defined cost leadership strategy, and it has worked so well for them, over the years.


Applying both of these methods in Human resource management has proven to be effective and both methods can maximize on production, customer, and employer and employee satisfaction, if well applied and under the right conditions.


Armstrong, Sharon and Barbara Mitchell. The Essential HR Handbook: A Quick and Handy Resource for Any Manager or HR Professional. West Parkway: Career Press, 2008. Print.

Dessler, Gary. Human Resource Management (12th Edition). New York: Prentice Hall, 2010. Print.

Porter, Michael E. Competitive Advantage. New York: Free Press, 1985. Print.

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