Linkedin’s Revenue Challenges Essay Assignment
LinkedIn’s revenue challenges are relevant to the work of its HR professionals. In particu- lar, research and development (R&D) costs and sales and marketing costs are likely to rise. R&D costs increase when a company is enhancing current services or developing new ones. In addition, sales and marketing costs stand to increase when a company is expanding its reach to prospective customers. These activities are likely to translate into stepped up recruitment efforts for software engineers and sales professionals. As well, establishing competitive compensation and benefits programs stand to represent a significant challenge.
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In the following Watch It video, learn about iRobot, which is best known for the iRobot Roomba® vacuum cleaning robot. This product helped to change how people view robots. iRobot continues to develop robotic products to change the way customers include robots in their daily life. This video will provide an appreciation of SWOT analysis.
Watch It 1 If your instructor has assigned this, go to MyManagementLab to watch a video titled iRobot: Competitive Strategy of Home Robots and respond to questions.
Objective Setting Objectives are the desired end results of any activity. Objectives should have four basic character- istics: (1) They should be expressed in writing, (2) they should be measurable, (3) they should be specific as to time, and (4) they should be challenging but attainable. Strategic objectives might be directed at factors such as profitability, customer satisfaction, financial returns, technological leadership, and operating efficiency. Objectives should be developed only after a cost–benefit analysis of each alternative is considered. Because HR professionals are in the people business, it is difficult to imagine any strategic objective that would not involve them in some manner, and the LinkedIn example illustrates this point.
Strategy Setting Strategies can now be developed for accomplishing those objectives. Strategies should be devel- oped to take advantage of the company’s strengths and minimize its weaknesses to grasp oppor- tunities and avoid threats. HR professionals should be highly involved in these activities because the composition of the workforce will certainly influence the strategies chosen. For the sake of illustration, let’s consider two fundamental strategies: lowest cost and differentiation.
Lowest-cost strategy focuses on gaining competitive advantage by being the lowest-cost producer of a product or service within the marketplace, while selling the product or service at a price advantage relative to the industry average. Lowest-cost strategies require aggressive construction of efficient-scale facilities and vigorous pursuit of cost minimization in such areas as operations, marketing, and HR.
Ryanair, a low-cost commercial airline based in Ireland, is an excellent illustration of an organization that pursues a lowest-cost strategy because its management successfully reduced operations costs. At least four noteworthy decisions have contributed to Ryanair’s goals. First, Ryanair’s training and aircraft maintenance costs are lower than similar competitors’ costs because the airline uses only Boeing 737 aircraft. Ryanair enjoys substantial cost savings because it does not need to buy different curricula for training flight attendants, mechanics, and pilots to learn about procedures specific to different aircraft makes (e.g., Boeing) and models (e.g., Boeing 747). Second, newer aircraft sport spartan seats that do not recline, have seat-back pockets, or have life jackets stowed under the seat (life jackets are stowed elsewhere on Ryanair planes). Not only does such seating cost less, but it also allows service personnel to clean aircraft more quickly, saving on labor costs. Third, Ryanair airplanes have one toilet to make room for additional passenger seats. Fourth, Ryanair passengers are required to carry their luggage to the plane, reducing the costs of baggage handling.
Companies adopt differentiation strategies to develop products or services that are unique from those of their competitors. Differentiation strategy can take many forms, including design or brand image, technology, features, customer service, and price. Differentiation strategies lead to competitive advantage through building brand loyalty among devoted consumers. Brand-loyal consumers are less sensitive to price increases, which enables companies to invest in R&D initia- tives to further differentiate themselves from competing companies.
P&G Corporation manufactures, markets, and distributes a variety of consumer goods prod- ucts, including dog food. This company successfully pursues a differentiation strategy based on brand image and price premiums. The company offers two separate dog food lines—Iams, a super-premium line that is nutritionally well balanced for dogs and that uses high-quality ingre- dients, and Eukanuba, an ultra-premium line that contains more chicken and vital nutrients than
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the Iams line, as well as OmegaCOAT Nutritional Science (fatty acids), which promotes shiny and healthy coats. Together, the Iams and Eukanuba brands appeal to a substantial set of dog owners. The Iams Company distinguishes Eukanuba from Iams by claiming that Eukanuba deliv- ers “Extraordinary Nutrition.” The Eukanuba slogan is the company’s basis for brand image. In addition to brand image, P&G also differentiates its Eukanuba line by charging a price premium. This price premium has enabled the Iams Company to be an innovator in canine nutrition by investing heavily in product R&D. Eukanuba was one of the first brands to offer several formulas to meet the needs of small, medium, and large breeds of dogs according to life stage, activity level, and particular health conditions.
In the following Watch It video, learn about the online retailer Zappos’ competitive strat- egy. In many retail sectors, the goal is product differentiation to create brand-loyal customers and generate pricing power. Companies achieve differentiation through formulating and imple- menting competitive strategies that define how organizations will compete in their businesses. Zappo’s strategy is to “be about the very best customer service.”
Employee Roles Associated with Competitive Strategies Common wisdom and experience tell us that HR professionals must decide which employee roles are instrumental to the attainment of competitive strategies. Knowledge of these required roles should enable HR professionals to implement HR tactics that encourage their enactment of these roles. Of course, HR professionals are responsible for designing and implementing com- pensation tactics that elicit strategy-consistent employee roles. As we’ve noted in the introduc- tion, job analysis is a critical tool used by HR professionals to define employee jobs; thus, the role behavior that is expected of them.
For the lowest-cost strategy, the imperative is to reduce output costs per employee. The desired employee roles for attaining a lowest-cost strategy include repetitive and predictable behaviors, a relatively short-term focus, primarily autonomous or individual activity, high con- cern for quantity of output, and a primary concern for results.
The key employees’ roles for differentiation strategies include highly creative behavior, a relatively long-term focus, cooperative and interdependent behavior, and a greater degree of risk taking. Compared with lowest-cost strategies, successful attainment of differentiation strategies depends on employee creativity, openness to novel work approaches, and willingness to take risks. In addition, differentiation strategies require longer time frames to provide sufficient opportunity to yield the benefits of these behaviors.
Strategy Implementation Once the strategic planning process is complete, the strategy must be implemented. Some people argue that strategy implementation is the most difficult and important part of strategic manage- ment. No matter how creative and well formulated the strategic plan, the organization will not benefit if it is incorrectly implemented. Strategy implementation requires changes in the organiza- tion’s behavior, which can be brought about by changing one or more organizational dimensions, including management’s leadership ability, organizational structure, information and control systems, production technology, and HR.5
LeaderShiP A leader is able to get others to do what he or she wants them to do. Managers must influence organization members to adopt the behaviors needed for strategy implementation. Top-level managers seeking to implement a new strategy may find it useful to build coalitions and persuade others to go along with the strategic plan and its implementation. HR must take the leadership role in dealing with HR matters. Basically, leadership is used to encourage employees to adopt supportive behaviors, and when necessary, to accept the required new values and attitudes.
Watch It 2 If your instructor has assigned this, go to MyManagementLab to watch a video titled Zappos: Competitive Strategy and respond to questions.
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