How business strategy drives human resource practices in small and medium enterprises? Evidence from Pakistani autoparts industry

Abstract

Purpose In large enterprises, the notion is that an organization’s business strategy is a significant determinant of its human resource (HR) practices. However, there is limited evidence in the literature of such linkages for small and medium enterprises (SMEs). The purpose of this paper is to examine the nature and extent of the relationship between the types of business strategies used and HR practices, namely, staffing, training and employee relations among SMEs. Design/methodology/approach The authors have collected data from 168 SMEs manufacturing autoparts and purposively chosen three SME case studies to derive in-depth observations of business strategies and HR practices. Quantitative results from the survey indicate that these SMEs exhibit a logical relationship between the strategic posture of the SMEs and their adopted HR practices. Findings This study illustrates that SMEs operating in the risky and lesser developed labor markets of a lower-income country such as Pakistan adopt certain practices that differ considerably from firms operating in more competitive automotive markets using highly skilled labor. The findings suggest that there is a significant potential to be realized through strategically managing HR practices to achieve sustainable competitive advantage. Practical implications Education of supervisors and management and suitable skill level of labor in tandem with continuous cutting edge industrial training appear to be the most successful business strategy followed by Prospector and Analyzer SMEs. For greater efficiency they need to have dedicated HR management, and financial and auditing services. Meanwhile, public sector entities as well as representative business bodies need to provide targeted practical technical and financial training and assistance to strengthen Defender and Reactor SMEs and improve their range of outputs. Originality/value This study contributed to the SMEs’ management literature in the context of Pakistan because there are very few studies that have examined the impact of business strategy on the HR practices in SMEs manufacturing autoparts in the automotive industry of Pakistan. The case study approach captures detailed insights and identifies the areas where the SMEs in developing countries perform differently than the SMEs in developed countries.

Toward effective human resource practices

“…Ahmad and Khan (2023) expand previous research with a two-part study of SMEs operating in Pakistan’s autoparts manufacturing sector. Such companies serve major automobile assemblers, mainly in the shape of leading Japanese companies.…”

Exploring the Factors of Firm-Provided Continuing Education and Training: A Systematic Literature Review

“…Conversely, in southern Italy, companies in regions with lower employment density have lower training opportunity costs (Filippetti et al, 2019), which stimulates investment in training. Ahmad and Khan (2022) pointed out that human resource practices, including training, differ considerably between companies operating in risky and less developed market environments and competitive industries that use a more skilled workforce. A disadvantage of training incentives is the low level of support from local stakeholders, such as chambers, associations, or local authorities, concerning the training needs of companies (Fuchs et al, 2021).…”

Business Performance of MSMES in Traditional Market: an Analysis of Strategic Management Aspect

“…Furthermore, Tam & Gray (2016) found that three out of four learning levels (individual, group, organizational, and interorganizational) practiced in MSMEs varied in importance between life cycle stages. There is significant potential to be realized through the strategic management of HR practices to achieve a sustainable competitive advantage (Ahmad & Khan, 2022). Here, supervisory and management education and appropriate workforce skill levels along with continuous industry-leading training appear to be the most successful business strategies followed by MSMEs.…”