Question

Discuss the various factors that influence a company’s competitive strategies and compensation practices. Assess how a company can mitigate these factors using effective compensation practices.

Answer 1

Factors that influence the company competitive strategies and the compensation practices are determined by factors like the macroeconomic factor exteranl as well as the micro factor i.e acting inside the firm. macro 'factor include government regulation like labor laws and new policy, rules and regulation, etc e.g the government revises the minimum wages to be compensated so taking into account it has to cut some costs in other areas so as to provide more to the employee's similarly if the international business laws were altered, tariff and protectionist policy is followed by the country then the business has to change it international business strategy. Micro factor also influence the company competitive strategy like change in the organization structure and moving to the new technology this will affect the competitive strategy as a company through the restructuring and new technology is moving towards cost-effectiveness this can also influence the compensation to some employees as the company has acquired the new technology which can lead to some of the process being removed.

The company can mitigate these factors by using the compensation practices which are of the new type they don't fall in the traditional annual compensation mechanism company can use the stock as the option to compensate the employees this will reduce the risk for the company. due to macro and micro factor. The company can also use the benefits plans as compensation mechanisms like giving holiday trips restaurant , gifts coupons, etc to their employees. The company can also follow the policy of pay as per skill upgrade as this will provide an employee to be in learning mode in order to counter this dynamic environment of frequent structural change in the company. other options can be deferred income plan which is compensating the employee in the future date for greater tax benefit etc. so all these methods can make the company risk free to some extent due to abave factors.