Responses to Competitive Pressures, Changes in Employment Practices

Companies clash to get competitive advantages not only in the product sphere, but also in the customer sphere. New rivals come to the market right with the customers, right with the suppliers. Through their know-how, especially in technologies, better technical facilities, new knowledge from research and staff professionalism, they are able to roll out a competitive clash.

It has to be said today even small companies are able to knock out bigger firms which frequently boast of their renown, yet they are often striken by the syndrome of routinism, outdated opinions on product research and development, limited perception only focused on themselves and their own satisfaction. Potential new competitors take advantage of this situation and, through their agility, outdo the “dinosaurs“ while profiting in such spheres where nobody would expect it before.

Another serious force active in competitive clashes is called the genesis of substitutes which add utility value to integrated products that we would formerly purchase as separate products. Let us give an example: ten years ago, in the former eastern bloc countries, we were surprised at the arrival of mobile phone. This particular utility has been vigorously outdone by the emergence of substitutes. Embedded in your mobile phone today, you have a dictation tape recorder, an mp3 player, a gps device, a radio, games, e-mail, the Internet, an image or even video clip transmission.

If we come back to the complexity of competition, we will find out through a rational analysis we are able to assess about five forces which have to be evaluated as part of the analysis and taken pretty seriously. This was done for us, very wittingly, by Mr.Porter, who created his famous model of competitive forces.

Yet he failed to notify us clearly enough of the necessity to include their synergic mutual interactions. Indeed, leaving out one of those synergic interactions while analyzing competition threats can cause severe collapses of even big corporations as they may lose their position on the market or goodwill. 

Changing employment patterns and practices

Corporate organizations are changing rapidly and in apparently contradictory ways. It is recognized that the most important asset of any organization is its people. This is because value is added to goods and services by the quality of the individuals producing or supplying them. Excellent employees are aware of the need to respond to customer needs. Well developed human capital is recognized to be as important as up-to-date capital plant.

However, increasingly firms are looking at ways to reduce their human resource cost base to remain competitive, especially with the rise of lower cost firms in the developing world particularly from Asia. Since the 1990s, some of the following trends have taken place in an attempt to reduce and rationalise human resources in an organization:

  • Downsizing
  • Disposal of peripheral activities, perhaps through management buyouts (MBOs)
  • Outsourcing of support activities to allow concentration on primary (core) activities concerned with the creation or delivery of a product or service.
  • Project based management and team working
  • The creation of a more flexible workforce

(1) Flexible workforces

In recent years there has been a changing pattern to employment and this has helped employers to develop a more flexible working pattern among their employees. These trends are:

  • Increasing self-employment – this area is increasing in many countries
  • Reduction in full-time employment – firms now use fewer full time employees and tend to offer more short-term contracts
  • Part-time working – there has been a growth in the level of part-time employment. This may be a lifestyle choice on the part of many, but firms have encouraged this trend as part-time employment offers more flexibility
  • Contractors – many firms now use contractors and consultants for a wide range of task. This has led to many previous employees setting up as self-employed contractors.
  • Temporary employment – increasing numbers of employees have been on temporary working contracts. Again these are used by firms to ensure flexibility – we look at this in more detail below.

Firms like flexible workforces as it enables them to adapt their employee levels to meet fluctuations in demand and to try to maintain their competitive advantage in the face of external changes. To achieve greater flexibility, firms are using more part-time, temporary and external contractors, which allow them to increase or decrease their work teams as required. It may also provide more flexibility to the employees themselves who may work from home, select their own working hours and days.

(2) Part-time employment

Part-time employment provides flexibility benefits for both firms and for employees. For firms part-time employees are cheaper to hire and often do not have additional responsibility allowances and benefits that are awarded to full-time staff. They may not have the same level of job security (although the law has been updated in many countries to improve the situation) and tend to be easier to replace when they leave.

However, part-time employees may be less motivated and loyal to the business and are probably less willing to volunteer to work additional time when required to cope with unexpected demand patterns. Part-time staff do not tend to stay with employees for as long as full-time staff.

(3) Temporary employment

A job may be considered temporary if employer and employee agree that its end is determined by objective conditions such as a specific date, the completion of a task or the return of another employee who has been temporarily replaced (usually stated in a work contract of limited duration).

Typical cases are people:

  • with seasonal employment.
  • engaged by an agency or employment exchange and hired to a third party to perform a specific task (unless there is a written work contract of unlimited duration).
  • with specific training contracts.

(4) Flexi time arrangements

Flexi time covers any variations in working hours from the standard 9.00 a.m. to 5.00 p.m. working day, in the form of:

  • Flexible working hours
  • Term-time working
  • Job sharing
  • Employments breaks and sabbaticals
  • Annualized hours

Staff will have some say in the selection of their hours which allows them more freedom to concentrate on their out of work commitments, such as child care.

Advantages:

  • Recruitment and retention of qualified staff who may not be able to work traditional hours
  • Equality of opportunity for people who would otherwise be prevented from entering the workforce
  • Work patterns which can accommodate variations in customer demand patterns
  • Success in tackling skills shortages
  • Reduces absenteeism and lateness
  • Creates a better sense of personal responsibility
  • Improves efficiency in core time and reduces overtime levels

Disadvantages:

  • Scheduling work rotas is more time consuming for managers
  • Can encourage time watching
  • Full time employees may be resentful
  • Possible communications difficulties when staff are not there or sharing roles

(5) Portfolio working

Portfolio working will contribute more to a better work/life balance. It is to a method of employment that is not dependant on any one client or company where individuals are paid for a number of different skills, products or services that they offer, often from their own home office using the internet.

So a freelance or self-employed person could be called a portfolio worker if they have a variety of clients to whom they offer different services, or a person who works part time at two, three or more different organizations. The term portfolio working also includes people who work for an organisation part-time, but have their own business as well.

Portfolio working increases the flexibility and mobility of a firm’s human resources, but may cause problems for the worker who may not be able to rely on a constant source of income resulting in cash flow crises. Indeed, portfolio worker may find it difficult to access dome financial services, such as applying for mortgages, because they cannot guarantee that they can make regular payments.

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