Strategic Types & HRM Needs Michael Porter has identifiedtwo primary ways that companies compete within an industry: on costand on differentiation. Companies' profit margins are calculated asthe difference between the price they charge for an item and thecosts they incur to produce that product. All else equal, thehigher the price charged or the lower the costs incurred, thehigher the profit. The two "generic strategies" focus on eachrespective aspect of profitability. Companies with adifferentiation strategy attempt to convince consumers that theirproduct is unique in some way or ways that justifies paying ahigher price. Companies with a cost leadership strategy attempt tofind ways to lower the costs incurred per unit below competitors'.In this exercise, you will gain a better understanding of the twogeneric strategies as well as the HRM needs for the two strategytypes. Read the case below and answer the questions that follow.Pam is an entrepreneur who loves animals and is interested instarting a company that makes clothing—hats, sweaters, boots,etc.—for household pets. Even though there is a good deal ofcompetition in this market, Pam believes that many of the companiesin this industry are positioned with differentiation strategies atthe premium end of the market, creating the opportunity for acompany to do well with a cost leadership strategy. Pam is weighingseveral options for her business, both strategic issues and issuesspecific to HRM. Help her make the decisions that best fit with hercost leadership strategy
1). What should Pam's production strategy be?
A). She should hand-make the clothing at home to ensurequality.
B). She should have a number of production facilities around thecountry to be closer to her customers.
C). She should have one centrally located facility to achieveeconomies of scale.
2). What attitude toward risk should her employees have?
A). Risk seeking
B). Risk averse
c). Risk neutral
3).What attributes should her compensation system have?
A). High pay differentials between superiors andsubordinates
B). Medium pay differentials between superiors andsubordinates
C). Low pay differentials between superiors and subordinates
4). Pam should emphasize rewards for employees who come up withideas for __________.
A). new product lines
B). cutting costs
C).better customer service
