With the globalisation, integration of the markets is increasing worldwide. The international system is becoming multilayered and multidimensional and major powers are supporting the new international economic order. Organizations are increasingly looking at human resources as a unique asset that can provide a sustained competitive advantage. The changes in business environment with increasing globalization, changing demographics of the workforce, increased focus on profitability through growth, technological changes, intellectual capital and never ending changes that organizations are undergoing, have led to the increased importance of managing human resources. In this scenario, the human resource that is highly administrative and lacks strategic integration fails to provide the required competitive advantage for survival and thus losing its relevance. Organisations that have achieved operational excellence and are aligned with business strategic goals had noticeable financial returns. Firms employing HR practices according to the strategy are regarded to have better conceptual performance. Five key factors, the external environment, and the business strategy that affects and is affected by the strategic HRM (SHRM) process, the internal environment-the organizational context within with the strategic HRM operates, SHRM comprising the HR strategy and the individual HRM practices, and the outcomes of the process of SHRM. The strategy formulation process is influenced by a number of external and internal factors. The strategic formulation of the organizations has an impact of the interrelated factors like technological, economical, socio-cultural and political environment. Competitive strategy is influenced by economic conditions, industry structure, competitive advantage, product/market scope and the distinct competence. The labour market, skills, and values, economic conditions and the cultures at large influence the human resource strategy formulation. The key external stakes holders like the government, media, environmentalists, local community organizations and consumer advocates who can influence the strategy formulation. The internal factors include organizational culture, dominant coalition, internal stakeholders like the employees and the management, HR department and its expertise. Competition, government regulations, technology, market trends and economic conditions are key external environmental variables and culture, structure, politics, employee skills and past strategy are key internal variables. External factors like technology changes, political, social and economic climate influence the HR strategy formulation in organizations. Internal factors like the structure, culture, internal politics, business direction and business outcomes interact with the external environment in the process of HRM. A number of organizational factors influence the SHRM process. A few general factors are identified to be barriers to the effective SHRM. The major one is that the top management does not perceive it important to include HR department in the decision making process.
The three significant barriers to HR playing a more proactive role are the lack of basic economic literacy among the HR professionals, lack of comfort among the HR professionals to take risks and HR professionals who do not demonstrate courage of conviction about their principles. As most of the HR interventions or practices have long-term implications, short-term oriented actions can hamper effective HRM. The inability of the HR managers to think strategically is another factor. Lack of appreciation for HRM as a function, lack of cooperation from the line managers and their unreliability in handling HR function in their respective departments, increasing focus on quantifying results, the feeling of risk on investing heavily on the human resource, complementing organizational performance, inability of the HR practices to change according to the business needs and the disincentives related to the changes associated with the SHRM. Implementation of SHRM may involve drastic changes in the work practices and other HR processes and hence may affect lot of employees. Bringing about change is a difficult process and people who have faced negative consequences of an unsuccessful effort to change may obstruct the change processes of the future. The model proposes to divide the process of SHRM into three stages. The first stage is that of formulating of business strategy and translating it into HRM strategic objectives. HR strategy evolves from the HRM strategic objectives. The second stage is that of implementing HRM systems based on the HR strategy. The final stage is that of evaluating the effectiveness and strategic integration of the HRM systems. The process of SHRM is dynamic and the three stages are closely interlinked. Wal-Mart is the biggest company in the world. Wal-Mart’s culture was characterised by an orientation towards best value at lowest prices and consumer care. According to analysts, the most important factor for company’s success is culture. The success of Wal-Mart has been attributed to its strong cultural base, a kind of cult- like culture that is shared by all great companies, to the extent that people working at Wal-mart are referred to as Wal-Martians. Americans were not offered with health insurance, the policies are among the fastest growing health-insurance offerings in the work place. Wal-mart is one major company that offers insurance to its employees. Importance was stressed on the welfare of the employee to project the image of social responsibility.