2.1 Introduction
Saudi Arabian Airlines was founded in 1945. At the time, there was only one dual-engine DC-3 (Dakota) HZ-AAX aircraft presented to Abdul Aziz as a gift by President Franklin Delano Roosevelt. In a matter of several months, Saudi Arabian Airlines continued to procure two DC-3s and then, in the years to come, these aircrafts built up a good basis of the airline as a cornerstone and helped the Saudi Arabian Airlines to become one of the largest airlines in the world for six decades (Saudia.com, 2017). However, accompanied by competition from other major international airlines and the rise of local airlines, the Saudi Arabian Airlines has been surpassed by Emirates, Qatar Airways and Etihad Airways in terms of revenue and it also has been reduced to the Middle East's fourth-largest airline (Worldairlineawards.com, 2017).
HRM always plays a significant role in an organization or business in a competitive environment. A good HRM and HR policy can enhance the company's competitive advantages and help the company to achieve long-term strategic aims. Therefore, making or creating suitable HR strategies, which can be perfectly integrated with business strategies, becomes one of the most important key point for strategic human resource management (Ed van Sluijs & Frits Kluytmans, 1994). Hence, this article is focused on how does the SHRM, business strategy and HR policy influence the case study organization.
The objectives are:
-To identify the overall purpose of the organization and analyze the business context by using the tools of PESTLE and SWOT (See the Appendix).
– Based on the case study organization, creating an HR Strategy that is integrated with the business strategy.
Researching on the theories of competitive business strategy and providing a recommendation to the Saudi Arabian Airlines’ future business strategy. Then, doing assessment on resulting HR issues and challenges.
Making a Human Resource strategy for the case study organization.
Justify how the main features of this HR strategy will enable the case study organization’s competitive business strategy and address the main HR issues and challenges.
-Why the employer branding is important for the organization to address HR policy/practice.
-To identify and provide recommended actions that the organization should implement.
2.1.1 The purpose and business context
To identify & analyzing the purpose and business context of the organization.
The purpose of the organization is that: the organization's competitiveness will be improved in international and local markets by providing safe flights, better service and lower ticket prices. As a result, the reputation of the SAUDIA and customer experience would be enhanced, at the same time, organizations can also attract more customers or tourists through relatively lower ticket prices and good services. In addition, the long-term prospects of the SAUDIA in the future is to rejuvenate its own brand and consider on providing better services for a multicultural market environment.
The business context is analyzed by using the tool of SWOT:
Internal of the organization
Strengths（Internal）
-Government fund support.
-Passengers loyalty toward the airline.
-Advanced airline system and strong brand image locally.
-SkyTeam: share resource (facilities).
Weakness（Internal）
-Limited flight network.
-High operating costs for domestic flights.
-Unexpected flight interruptions.
-The aging of facilities for airplane.
-Management problems.
Opportunities（External）
-Privatization.
-Increasing potential customers (multicultural).
-Technology: enhancing IT service.
-Strengthen cooperation with other multinational corporations such as Huawei. Threats（External）
-An increased competition globally.
-The threat of new entrants such as Emirates.
– A multicultural market environment: need to be training staffs to face and adapt this environment.
(Table 3)
2.2 Competitive business strategy
A competitive business strategies are strategies or actions which can help the company to obtain a long-term sustainable competitive advantage in a competitive environment. The profitability of an organization or company depends on the strength of the company's competitive advantage in the industry. Therefore, it becomes very important to formulate a business strategy to raise the level of profit and ensure the company's sustainable competitive advantage (Porter, 1985).
2.2.1 Porter
Based on Michael Porter’s theories and opinions (Porter, 1985), providing that the competitive advantage of enterprises can be mainly achieved through the formulation of suitable strategies at low cost, differentiation and focus, at the same time, depending on the situation, the focus strategy can be combined with differentiation and cost: cost focus and differentiation focus (See the table 4 below).
(Table 4)
-Cost Leadership Strategy
Getting the cost advantage is the core of this strategy. The strength of cost advantage depends on the type, size of the organization and its position in the industry. To get this cost advantage, companies need offer low-cost, high-quality services or products to customers. Then, a price advantage can attract more customers base which guarantees the company's profit. Moreover，companies also need to choose suppliers, who can offer low prices and high quality raw material, to save cost. For example, Saudi Arabian Airlines plans to complete the acquisition and privatization of low-cost Flyadeal by 2020 (Arab News, 2017), which reduces costs and increases strategic agility. After Saudia saved money, they could gain a greater competitive advantage by adjusting ticket prices and providing good service.
-Differentiation Strategy
Unique products or services are created for different customer groups which is not available in most of other competitors. In other words, by providing these unique services or products to attract more consumers, the company's visibility and attention rate can be increased. At the same time, the cost of the products or services will also be reflected accordingly (Michael, 2006). For example, in 2011, Saudia began providing SMS services to passengers, providing them with the latest news on flights and the necessary guidelines to facilitate their travel. This gives airlines a sustainable competitive advantage in today's marketplace (Mishra, 2013).
-Differentiation Focus Strategy
Through further analysis for the customers who has specific needs in market segments, custom products or custom VIP services which are tailored to the specific groups or customers. The purpose of this strategy is to provide specific products or custom services to the specific customers to meet the needs of customers, thereby showing the customer the difference from the other competitors. For instance, In October 2010, Saudia began providing paid mobile and internet services on Airbus 330 (Saudia.com, 2017). In this way, some of the needs of customers who need to use network services on flyways are met.
-Cost Focus Strategy
This strategy is considered on using low cost materials to create low-cost products which have same functionality with high-cost products in a market segments.
2.2.2 Miles & Snow
Miles and Snow (1984) summarized organizations and strategies into four models: defenders, prospectors, analyzers and reactors. The Saudia (Saudi Arabian Airlines) should be classified as defenders through the investigation and analysis of global Market and its business types.
-Defenders
Defenders are cost-oriented, with the goal of improving the efficiency of existing businesses in a predictable and stable environment and it also make a long-term planning of the organization. At the same time, it is generally coordinated throu
gh formalization, centralization and specialization. However, companies may not choose and develop a new area (Miles & Snow, 1984).
A recommendation for future business strategy
Through an analysis of Saudia (Saudi Arabian Airlines) and a series of corporate strategies, I decided to recommend the cost leadership strategy to the case study organization. Because the Saudi Arabian Airlines, is a state-owned airline and has a strong relationship with the government. With the support of the government, there is very large resources available to get greater advantage on cost side, whether in the choice of suppliers or financial support from government.
2.2.3 HR issues & challenges
1. Retention
The Saudi Arabian market relies heavily on foreign workers. In the past, the average income of expatriates has always been higher than that of local staff. (Companies need to attract more foreign talent by spending more cost.) However, most expatriate employees consider that they tend to stay three to five years temporarily rather than a permanent career (Israwi, 2017). So that, the mobility of foreign workers is relatively large in the Saudi Arabian market. In addition, the company has put a huge cost on salaries and training for foreign staffs. Therefore, how to retain talent in the cost savings case has become a major challenge.
3. Recruitment
Firstly, the Arab government has introduced a policy for state-owned and private enterprises which is
to increase the employment rate of local people by reducing the foreign workers. In addition, women not allowed to work in Saudi Arabia. Therefore, under a more stringent policy environment, the number of applicants can be relatively reduced. At the same time, female foreign workers are essential for companies like Saudia (Saudi Arabian Airlines) such as flight attendants
4. Motivation & Payroll
Due to the different salaries of expatriates and local staff, dissatisfaction (could cause low work efficiency) of local staff may result. Therefore, how to ensure the motivation and enthusiasm of local staff will be a challenge.
2.3 Strategic Human Resource Management and Discuss how HR Strategies address main HR issues and challenges
Strategic human resource management generally refers to the integration and management of people and business systems. By integrating elements such as human resources systems, HR policies and practices, the sustainable competitive values and benefits will be created for the business (goals).
The main purpose of Strategic Human Resource Management is to help companies gain greater long-term competitive advantage in the marketplace by improving employee professional skills, enhancing employee motivation, and building employee loyalty to the company. At the same time, human resources management should be integrated with business strategy. Every HR policy will penetrate each level of the company and be adapted and implemented by employees from all levels of the company (Schuler, 1992).
In this section, Strategic HRM will be explained and analyzed in detail by using strategic fit models.
Approaches to SHRM have 3 main models: Universalist approach-best practice, Contingency/BestFit- Strategic configuration and Resource Based View. Then, the universalist approach and the best fit approach will be chosen to show what is Strategic Human Resource Management and how the human resource strategy influences the case study organization.
2.3.1 Universalism: Best Practice
This ‘Best Practice’ refers to: There is always a human resource management practice (with great coverage) under any circumstances that can enhance organizational performance. It can be called: one size fits all.
Pfeffer (2005) has given a list to show the direction and area of human resource management practices:
1. Employment security.
2. Screening and recruitment of the right people.
3. Choosing and use self-management team.
4. Providing high quality staff through training.
5. Reduce the state difference.
6. Through mutual communication to achieve information sharing.
7. Performance appraisal linked to wages.
However, Cappelli and Crocker-Hefter (1996) consider that best practice model is an idealized model. Because if companies want to survive in today's competitive environment, they must have their own core competencies, and the core competitiveness of an enterprise is always determined by the specific human resources practices.
From Saudia 's report on the company's level of satisfaction with its staff, we can see that Saudi Arabian Airlines provided free training, health insurance, free accommodation, high discount airfare, tax-free salary and good work environment and so on (Airlines et al., 2017). The company provides employees with continuous and different levels of training to enable them to continually improve their skills and working abilities, thereby the efficiency of the overall team is enhanced and an efficient group contribute to the long-term competitive advantage of the company. By collecting information about Saudi Arabian Airlines's employment on the Internet, Saudia's HR always look for nearly three to five years of work experience people in almost every required qualification for each position. At the same time, each job posting describes very carefully the specific work involved in the job.
Although the list proposed by Pfeffer (2005) cannot be completely applied to every type of companies in the real world, the practices he proposes do indeed be accepted and implemented by every type of companies to improve the effectiveness of the organization.
HR hires the right people for the job and increases the value of new staffs through effective and scientific training. As a result, new employees can work more effectively for the organization. Furthermore，As can be seen from the above cases, the organization ensures employee loyalty and motivation through friendly and effective management, various allowances and free accommodation and so on. The loss of talent will be reduced and the company's training costs has been ensured.
Therefore, the company through several HR practices to attract talent people and solve the problem of retention in some extent. In this way, HR helps companies build stronger and more efficient talent teams through those practices, which enhances the company's long-term competitive advantage.
2.3.2 Contingency: Best Fit
For contingency, the best fit model is a good way to go with it. The main purpose of best fit model is to develop a human resource strategy that is aligned with these factors of the type of organization, industry, context, and market environment. Then, by analyzing the consistency/ alignment of the company's business and human resources strategy, the most appropriate model (best fit) will be decided. As Baird and Meshoulam (1988) said, the degree of fit between organizations' development strategies / directions and human resource management can improve the effectiveness of human resource management. At the same time, human resource management practices and processes should be consistent with the directions and strategies of the organization which allows the organization to gain long-term competitive advantage in the marketplace.
Schuler and Jackson (1987) analyzed and used three Porter's (1985) competitive models like the analysis in section 2.2.
1. Innovation: Companies innovate to increase their competitiveness in the marketplace, such as developing new products or offering new service models which most competitors do not have.
HR should explore innovative talent with a strong technical background for the purchasing department. In today's information age, purchasing staff with strong technical background can analyze and decide which kind of management system is suitable for the organization or customers and the system can greatly improve the management efficiency of the company as well. For example, On
April 11, 2010, Saudi Arabian Airlines successfully upgraded to Amadeus Passenger Management System (Saudia.com, 2017). The tourism distribution system, combined with traditional good services, forms a new service model (a combination of IT and traditional manpower) which greatly enhances the customer experience and enhances the company's competitive advantage in the marketplace.
2. Cost leadership-cost reduction: Reducing costs with all available resources around, such as government and supplier resources.
If a company wants to reduce costs by choosing cheaper, higher-quality suppliers, HR can identify potential resources by looking at a candidate's work experience. For instance, an employee who previously worked on the supplier's side able to recommend suppliers that the organization did not know before to address the needs of company's cost-leadership strategy.
3. Quality: Enhancing service quality to improve customer satisfaction.
HR should set up a performance appraisal ecosystem in which everyone’s salary and bonuses are determined based on each person's rating in the system. Employees can earn higher scores through their own efforts and earn more salary income. In addition, each employee salary can be open within the department, and set up a ranking mechanism. In a quarter, the higher the ranks of employees can get more bonuses. In this way, employees are encouraged to have a sense of competition within the department, and their motivation will be enhanced. Employees can get higher income by getting qualifying bonuses. After local staff have a sufficiently high income, staff motivation will be improved and they will provide better service and attitude to customers. The effectiveness of the team has been enhanced, thus enhancing the sustainability of organizational competitiveness and advantages. Therefore, the customer satisfaction will be improved and the HR challenge of Motivation & Payroll will be solved: dissatisfaction of local staff is eased.
2.3.2.1 Configuration of strategy
By combining the strategic configuration with the ideas of Miles and Snow (1978), the company's operations are more efficient (Delery and Doty, 1996). Like the analysis in section 2.2.2: the defenders will be chosen to the case study organization.
Defender: Defender's practices and strategies can be divided into: strict recruitment requirements, professional skills training, experts team culture, training high-quality human resources staffs. Those practices and strategies has been involved in the analysis of section 2.3.1.
3. Question 2
In question 2, the employer branding will be chosen to discuss and analyse.
3.1 Employer Brand
Employer Branding combines the feelings and experiences of employees in the workplace with the goals and values of the business, a common brand experience that benefits businesses both internally and externally. The company should give the candidate a good impression: (great place to work). Therefore, the establishment of employer brand is to promote a relationship, the company provides employees with a good working environment, salary system and learning or development, its target market is considered on the talent who is suitable for needs of business development needs (Minchington, 2010).
When a company's employer brand is promoted, the company will attract more talent. The loss of internal talent will be reduced and employee loyalty will be increased (Mosley, 2009).
An employer brand strategy for a suitable company can help companies improve their competitive advantage, employee loyalty and brand influence. For example, in the analysis of strategic human resource management in section 2.3 above，HR recruit the right people to increase the value of new employees through effective and scientific training. As a result, new employees can work more effectively for the organization. In addition, according to the report of employee's satisfaction with Saudia, most employees are satisfied with the company's environment, allowances, etc… The organization ensures loyalty and motivation through friendly and effective management, various allowances and free accommodation. So that, when Saudi Arabian Airlines’ employees expressed their satisfaction to the company on a public platform, external talent people will be attracted and interest in the company. At the same time, a high level of employee satisfaction reflects the high level of loyalty of the company's employees. A good employer brand means that businesses are more likely to gather more talented people. When a company has talented employees, the company's product / service brand image will be elevated. Next, the brand of the entire enterprise is promoted. As a result, the competitive advantage of enterprises has been increased for a long-term.
First, companies analyze their own strategic goals. Through these needs to find the talents who match the needs. Then, HR analyze needs from talent and formulate strategies such as salary, benefits system, opportunities for development and promotion and work environment. Then, HR can help companies to attract and retain talent. In the end, the employer brand will be raised.
HR policy / practice can help companies build a good employer brand and attract talent. Numerous high-quality people can help companies build a good product / service brand for Saudi Arabian Airlines. In the end, the company's brand was significantly enhanced by both employer brands and service brands (Gain a competitive advantage).
HR plays a very important role in building an employer brand and ultimately in the competitive advantage.
3.2 Further Actions Recommendations
In the section 3.1, the importance of HR in building an employer brand has been showed.
In establishing a company's employer brand, the primary purpose of HR is to help companies to attract and retain talents which is to ensure the quality of the organization's team. A good employer brand can help organizations attract more talent and create a virtuous circle. A high-quality team will be gathered by this virtuous circle. After that, this high-quality team will provide better products and services to customers (creating a product / service brand effect). Then, the corporate brand effect will be improved as well. Thus, organizations can gain greater competitive advantage in the marketplace. Therefore, HR's practices and actions potentially help the company enhance the corporate brand and the competitiveness of the company.
There are several actions that should be implemented to be able to attract and retain all types of talent:
Firstly, from a survey from Randstadt, it shows that Most candidates are very concerned about a long-term job security (Randstadt, 2013). Therefore, new employees should be provided with a professional and different level of training so that they can continuously improve their skills, working ability and the quality of employment (The strength of one's own ability is the core of employment security, in today's competitive environment). In the meantime, when HR is doing an interview with candidates, HR should also explain to the candidates about the company's welfare, salary, training, employee insurance and promotion direction. Through those benefits which is better than most competitors to attract more talent and build an employer Brand.
Secondly, If HR want to develop a company's employer brand, each HR practice needs to be integrated with the company's strategies. company's strategy. HR need to know clearly the company's future direction of development (long-term or short-term strategic goals). Then, they should analyze which kind of key factors can achieve the goals. After that, they decide which kind of talent the company needs. Therefore, hiring the right people is one of the most crucial elements in developing a company's employer brand. The absorption of suitable person has greatly improved the efficiency of the work of the
organization.
Thirdly, A talented person with more work experience and talent needs a continuous, planned and multi-level training. This allows people to integrate into the company's culture.
At the technical level, new employees need to accept and learn how to use technical knowledge within the company and external mainstream software. For example, as mentioned earlier in section 2.3.2, on April 11, 2010, Saudi Aramco successfully upgraded to Amadeus Passenger Management System. New employees need to be familiar with all the company-related systems. This gives a professional impression to any clients who comes in contact.
At the service level, each company has its own unique brand positioning, such as 'Customer First', 'Nothing Is Impossible' and 'Technology Creating the Future'. Employees need professional training to understand the company's culture, brand positioning, and values. In this way, new employees have a clear direction to provide customers with more professional, high-quality services. Then, customers will also impress the company. Specialized training also represents the company's professionalism. The company demonstrates its culture and values through specialized training and potentially established the company's employer brand. Professional training is an essential element of building a psychological contract with employees.
Fourthly, after recruiting talent, HR needs to communicate regularly with each employee and track each employee's satisfaction of the company, at the same time, HR also needs to understand the future needs of employees. Next, HR should analyze the feedback from all employees. This will help HR to develop new plans and strategies which can meet the needs of all employees. Regular surveys of employee needs can be considered as maintaining the psychological contract. A healthy psychological contract can maintain employee loyalty and motivation.
Finally, HR needs to establish a performance management system that is linked to the employee's salary. In this way, HR can more effectively track and monitor the performance of each employee. When employees make their own personal needs, the performance appraisal report will be a reference to HR's acceptance of employee needs. At the same time, staff salaries will be adjusted according to the results of performance appraisal. Through the performance appraisal system, it gives employees some pressure on performance, so that the negative attitude can be prevented. Then, to some extent, the motivation of employees has been raised. The performance appraisal system oversees the performance of employees at work, which motivates staffs to provide better services to their clients. Product / service brand has been enhanced.
Human resource management plays a very important role in the establishment of employer brand. HR attracts and retains talent (healthy psychological contract) by providing professional staff training (Technology, Services and Culture), salary, self-development, employee benefits, performance management, and so on.
The company's company brand is created by both the product / service brand and employer brand. Building of product / service brand needs an effective team to complete. However, an effective team is established by a perfect employer brand. HR is the most important factor in building a good employer brand.
4. Conclusions
In conclusion, this article uses Saudi Arabian Airlines as an example to analyze the importance of HRM in the enterprise. Firstly, any one of today's enterprises need to develop several strategies (long-term strategy or short-term strategy) to ensure that enterprises gain a competitive advantage in the market. The article analyzes what competitive business strategies are by combining the case of Saudi Arabian Airlines and the strategic model proposed by Porter, Miles & Snow. Secondly, strategic HRM can help organizations achieve their goals and gain a competitive edge in the market by creating HR strategies which are suitable for their business strategies. At the same time, the article takes Saudi Arabian Airlines as an example to analyze the HR challenges and problems and these problems have been solved by designing a suitable HR strategy. An HR strategy that is aligned with business strategies can increase the effectiveness of the organization, indirectly and directly helping companies to save costs and improving the quality of their products / services. Fourthly, the article also analyzes how the employer brand can help the company gain market competitive advantage. HR develops suitable practices to attract and retain talent (high-quality team will be built). A high-quality team can help a company build a good product / service brand and improve the company's corporate brand. One of the company's most important resources is a company employee, and HRM is a major factor that directly affects the quality of the company's internal team. It can provide companies with a sustainable competitive advantage.
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