Introduction
A compensation strategy is one of the most important administrative duties of the human resource management that needs to be conducted with precision.
The management must ensure that as they strive to offer attractive remunerations, the firm should be able to meet the wage bill without affecting its normal operations. In this paper, the researcher will use four-market analysis to analyze the compensatory strategy that Target and McDonald’s use in their respective industries.
Target
Compensation strategy using four-market analysis
Target is one of the leading retail stores in the United States. The firm has been considered one of the best employers in the market. In order to understand the compensatory landscape of this firm it is necessary to apply the framework of the four-market analysis at this stage.
External labor markets
According to Greer and Kolbe (2003), external labor markets refers to “A situation where workers move somewhat fluidly between firms, and wages are determined by some aggregate process where firms do not have significant discretion over wage setting” (p. 78).
This means that Target do not have the sole discretion of setting the wages of the employees they hire. In case the employees consider the remuneration offered to be unattractive, they can easily shift to other better paying companies like Wal-Mart. For this reason, Target will have to use the market aggregate.
Internal labor markets
Internal labor market refers to a situation where a firm considers filling the vacant positions with its current employees by just transferring them or offering them promotions (Iman, 2006).
In this strategy, the firm may have a better chance of defining the wage that is to be offered to the promoted or transferred employee. Target Stores has been using this strategy for various reasons. It offers the management a higher control over its employees and the compensatory approach taken by the firm.
Capital markets
The capital market may also influence the compensatory strategy that a firm uses. The capital market in the United States is one of the most attractive ones in the world. The firm can access capital market without any complication.
This means that it has the capacity finance to fund its short-term financial obligations such as paying the employees. The management can also get additional finances from the capital market to support its operations in case it is financially strained. This increases its ability to offer its employees attractive remunerations.
Customer markets
The market for Target Corporation is very lucrative. The market in the United States forms a very attractive market because of the high population and purchasing power. Most Americans spend a good part of their income, unlike what happens in the developing nations.
This means that Target can be very profitable if the management employs effective strategies to tap into this market. The increased profitability will enhance the financial power of the firm. This will make it easy for the management to set attractive remunerations to its employees.
Highly influential, large population job in the organization
At Target, the highly influential, large population job is the marketing team. What Target offers is not very different from what Wal-Mart or any other retail stores in the country offer. It is the work of the marketing team to convince the market that this firm has some unique features that make it better than other market competitors.
There will be a huge economic difference based on the performance of this team. When the performance of the marketing team is poor, then there will be no customers visiting the stores regularly because of the stiff competition.
When their work is mediocre, then the customer stream may not be attractive enough to sustain the operations of the firm. If their work is outstanding, the firm will be able to sustain the market competition through increased sales in the market.
McDonald’s
Compensation strategy using four-market analysis
McDonald’s is one of the leading fast food stores in the world. Although its primary market still remains the United States, the firm has made successful entry into the European, Asian, and part of the Middle East and African markets.
External labor markets
Given the fact that McDonald’s operates in the global market, the firm has relied on the external labor markets, especially outside the United States. In this industry, the employees’ movement from one company to another has remained high not only in the United States but also in other world markets. This has forced this firm to base their compensatory strategies on the market aggregates.
McDonald’s pays most of its employees based on the market rates. This has worked well for the firm in the developing economies where the cost of labor in the market remains low. However, it has been costly to compensate its employees in the United States and Europe.
Internal labor markets
McDonald’s has always strived to use the internal labor markets strategy in its outlets within the United States. Although it has proven difficult to retain the employees in this industry, the management unit has always made an effort to ensure that most of its valuable staff such as the top chefs and marketing officers are retained.
This has enabled the management to have a compensatory power over this group of employees. However, this power must be exercised having in mind the fact that these valuable employees can shift to other firms if offered better packages.
Capital markets
The capital markets in the countries where McDonald’s operates are varied. In the United States and other developed countries, the capital market is well developed, and this means that the management can access additional funds easily through the sale of its shares.
However, this is not the case in some of the developing countries. This sometimes forces the firm to get extra funding from its headquarters in case this is necessary (Alexander, 2008). This limited access to extra sources of funds makes it difficult to meet short-term costs.
Customer markets
The consumer market has remained very attractive for this firm. According to Munizzo and Virruso (2009), fast food industry has experienced impressive growth over the past few years. The decision of this firm to expand to the emerging markets such as China, India and Brazil has proven beneficial to this firm.
The increasing population of the middle class in these countries has helped the firm to remain profitable. This has offered it a greater financial power to offer attractive remunerations to its employees.
Highly influential large population job in the organization
In this firm, the highly influential large population job is the team of chefs. Given that this is a fast food outlet, consumers will only visit the facility if they are assured of good products.
There will be a massive economic difference to the organization based on the performance of the organization. If these employees’ performance is poor, then the firm may be forced to close. When their performance is outstanding, then the firm will remain highly profitable.
References
Alexander, C. (2008). Market Risk Analysis, 1: Quantitative Methods in Finance. Chichester: John Wiley & Sons.
Greer, G. & Kolbe, P. (2003). Investment analysis for real estate decisions. Chicago: Dearborn Real Estate Education.
Iman, A. (2006). Basic aspects of property market research. Mumbai: McMillan.
Munizzo, M. & Virruso, M. (2009). General market analysis and highest and best use. Mason: Cengage Learning.