In this video presentation the managing director of EngineerOnomics describes how the Five Forces analytical model, and a correct definition of your industry (ie setting appropriate industry boundaries) are necessary for performing effective industry assessments, achieving profitability for your own organization as well as for the entire industry in which you operate. He additionally introduces an innovative way for a more accurate industry definition and explains how EngineerOnomics applies the five forces model to their products.


In this informative video the Managing Director of EngineerOnomics Market Research & Publications assesses some of the major strategic management approaches as well as the key concepts, practitioners, pros and cons associated with each strategic mangement approach.


Product Managers generally associate market research directly with customer or consumer oriented analyses. However equally important for any dimensions of financial performance be it profitability, growth, or shareholder value is competitive research and analysis. Achieving sustainable competitive advantage by strategic positioning is not dependent on a single activity, such as for example pricing, customer segmentation, sales, or the subject of this blog post product development. Yet product development has increasingly become a hot topic and has gained in importance compared to other income generating business activities such as services. In this post we will be going through a step by step product development market research, competitive assessment, and market launch trajectory as it tends to be applied in practice.


Proven Market Research and Data Collection Methodologies

The first major step to take when deciding to develop a new venture is to collect commercial data. There are several research methodology best practices that you can use during the process. The first step in your research design is to devise a research hypothesis. To successfully conduct market research, you must establish what it is that you want and need to know. You need to research a hypothesis or test a product theory to gain market insight. Are you researching your pricing strategy for an existing product, or the markets' demand for a breakthrough innovation? Whatever it is that you are trying to explore, the criteria that you use for identifying your research questions and the quality as well as the quantity of the business information that you obtain will be a determining part of the direction of your research design.

Broadly speaking there are four types of main research methodologies along the two theoretical dimensions consisting of primary versus secondary research sources on the one side, and quantitative versus qualitative research tools on the other side. In general, secondary research is less targeted than primary research because the research is preexisting and can't be entirely tailored to your specific research needs, in case you would need customization. However, it still offers valuable insight especially when conducting competitor research. And it is also cheaper and less time consuming to conduct. One important caveat to note with secondary research, especially when drawn from the internet, is that the data may be out of date, unreliable, biased or based on a bad primary research methodology.



This is a disadvantage of secondary research. To alleviate such a possible concern, and before you decide to include it into your decision-making process, it is recommended that you conduct your own analysis of the methodology used, sample source, sample size, relevance, and age of the available secondary research data. Assuming you can verify you're not engaging with a poor source, secondary research is an extremely valuable research tool. Because it's drawn from industry sources, and usually from your competitor's primary research, it delivers a high-level overview of market opportunities you can exploit. It can also provide robust data pertaining to consumer demographics, emerging industry trends, competitor market share, and industry profiles, all of which represent critical contextual insights that should inform your product decisions.

In practice the distinctions between the two dimensions are not entirely clear cut, and overlap can be observed. Both qualitative- and quantitative research methods collect quantitative data, which concerns itself with facts and figures, and qualitative data, which emphasizes customer sentiment, perception, and behavior. Quantitative research takes a mathematical approach. It collects and analyzes verifiable data which can be utilized to identify emerging trends, consumer attitudes, and establish brand awareness. From this data analysis, you can navigate your way to a predictive assessment.

In other words, your quantitative research about a target demographic segmentation can be used to inform your future business or product development decisions. While quantitative data can account for the numerical extent of an occurrence, qualitative data is often needed to explain the causes of those facts and figures. By studying customer perception and behavior, qualitative data delivers a deeper insight into the market. For example, quantitative data might record the number of customers that bought your product. But qualitative data, which relies on open-ended questions like 'did you like the product?' and 'would you recommend it to a friend', delivers product managers a deeper understanding of how their products will be received and how they are likely to perform in the market. You can think of quantitative data as measuring a phenomenon, and qualitative data as observing the phenomenon.

When both data types are combined, they can guide product managers to delivering products or product updates that will resonate with their customer's needs and experiences. Those new to market research may wonder which type of research to conduct first. While there is no fixed norm as to whether qualitative or quantitative research should be done first, different stages of product development are more appropriate for different research approaches. For example, if your product is new and no prior research has been carried out, qualitative data should be conducted first. By taking a qualitative-first approach, you can identify consumer sentiment to a new product. To bring successful products to the market, you need to develop products consumers want or need, so determining sentiment to a concept through qualitative research is a good start to begin with.



Focus groups - as a qualitative research method  are sessions in which a moderator oversees a dialogue based on a scripted set of questions or subjects with consumers from identical demographic profiles. Typically lasting between one and two hours, focus group sessions should take place in neutral locations, may be filmed, or viewed from an observation room, and should be repeated using at least a few different groups to establish balanced and reliable outcomes. While expensive and time consuming, focus groups can be a great way to get current or prospective customers to share their perceptions about a product as well as providing insight on a target demographic's preferences and pain points.

To ensure your focus group delivers actionable data, it is important that your moderator keeps participants focused on the issue they are engaged to discuss. A moderator should also weed out positive or negative viewpoints from throwing the conversation off balance. Ideally, your focus group participants should have some experience with the product or concepts being discussed. And while a moderator should be knowledgeable about the topic and able to clarify participant queries, they must remain objective and avoid intervening with information or opinions that could bias the discussion.

Personal interviews are similar to focus groups, insofar as they involve unstructured, open-ended questions, can last up to an hour and are typically recorded. Both personal interviews and focus groups generate subjective data, and while neither are statistically reliable due to the small sample size, they generate valuable, detailed insight on consumer habits. The key to a successful interview lies in the choice of interviewee and the preparation of your questions. Because personal interviews will engage a small segment of the market, you need to make sure that you are talking to the people that are relevant to your research.

What problems is the interviewee still wrestling with that they would like the solution to? This will help establish areas in which the user's experience with both your product and your organization can be improved. When choosing the people that you're going to interview, you should cast your net wide to ensure you're gaining a diverse sample set of the market. If you only interview people who love your products, you're not going to develop a product that will generate sales revenue. However, a thorough market research execution also lies on secondary research, specifically in relation to your main competitors. To successfully position your product in the market, you need to map and list your primary competitors as well as other important players in your vertical. This requires collecting market reports and public domain industry data that can be included within your final market research report or other strategic planning document. For generating a restricted range of business information, a simple desk Google search or social media platforms can produce a useful overview of competitors in your industry. However, especially product managers of small- to medium sized business who are striving to obtain a comprehensive view of all the forces impacting on their ability to make a profit, either more advanced analysis and off-the-shelf reports need to be purchased or customized research needs to be assigned from specialized external market research companies.

Data Assessment and Market Analysis techniques

To help make sense of your competitive analysis, and to turn your research into a set of actionable insights, begin by looking for common themes in the data you've collated. Delineate the data into headings that explain the purpose of the research and the methodology used, who you spoke to, and their experiences at the awareness, consideration, and decision stages of the purchasing process. An executive summary should be included in your final report, along with an action plan that will leverage the research findings into a new set of business goals for your product. The nature of the content of reports can be distinguished into broadly 4 categories. A descriptive analysis only describes the situation as it is, nothing more nothing less. A normative orientation is characterized by value statements in which the merits of difference conditions are debated and assessed. Thirdly a prescriptive document is more of a blueprint for a set of course of actions as exemplified by consultancy documents or white papers. This often requires more expertise from the side of the authors as well as objectivity, hence is usually done by external parties. Finally, the most sophisticated form of analysis is predictive analytics or scenario planning about future events which requires a vast amount of quantitative data, computing power, as well as qualitative insights based on personal experiences. Unsurprisingly, this is an extremely difficult and a major intellectual effort to be able to do accurately.



The commercial data discovered allows product managers to determine industry potential, market opportunities, gain meaningful customer insights, make product decisions with more certainty, test their value propositions, and improve the usefulness and branding of their product. General market overview information including market size, segments, and trends can be identified, as well as business information relating to market structure, key players and brands in the market, and their relative share of the market.

After you have understood your market and customers, you can begin to focus on strategically positioning your product in the market. You might have a cool app or breakthrough innovation ready to launch, but that isn't always enough. As product manager, you must position your offering in the market so that it sells better than your competitor's offering. You must ensure your product is viewed positively in comparison to the other players in the market. To do this, establish who your customers are, what you're selling them, and why they should buy it. By doing so, you're combining your market and customer research and positioning your brand or product to appeal to your target audience. Competitive and market analytics lets product managers benchmark their efforts against those of their rivals to learn whose market strategies are winning the battle for customers hearts and minds.

Once your research is completed, it is usually presented in the form of a market research report containing information about historic and future market forecasts, existing market segments, product pricing strategies etc.  A SWOT analysis may be included, addressing the product or organization's strengths, weaknesses, opportunities, and threats, as well as an overview of the organization's ability to effectively market the product. Given the breadth of topics and areas that touches on, conducting market research can be a daunting prospect especially for those new to product management.


Introduction to market intelligence

Every strategic visionary or leader knows that unique value proposition and competitive advantage by and large rests on roughly three strategic differentiators: the product, the customer, or the channel. Indeed, a go-to-market plan contains many elements of such differentiators that need to be precisely defined in order to maximize its effectiveness. These include defining your market, your offering, value proposition, your partners, and distribution channels.

Product managers improve competitiveness by meeting market needs better than the competition. In a market abundant with similar products, all competing for a restricted customer pool, product managers must give their products and their companies an edge. This edge can come in many forms. It might be providing exceptional customer care, incorporating new product features to better address customer needs, or simply finding the product pricing sweet spot. Whatever angle you take, the goal is the same. Improve the competitive advantage of the product in the market and achieve better financial results for your organization.



So how do you find a competitive edge? A great place to start is by looking at what the competition is doing, and then doing it better. Competitive advantage comes from delivering a unique value proposition to customers that competitor cannot emulate or match. Product managers build competitive advantage by making sure their products are doing something better than other companies' products can do. Doing something that other products don't do that is valued by the customer or doing something that competitors' products cannot do. Although having a superior or innovative product is not necessarily a sufficient requirement to obtain market dominance - and needs to be valued within the context of your overall business strategy - a valuable product can be core asset based on which you can drive overall performance.

To judge their products' competitive advantage, product managers should determine what makes their products unique. This requires understanding what your competitors are doing in the market. A useful tool for this purpose can be benchmarking which uses relevant metrics to identify market leaders and opportunities for your organization to improve. While keeping track of every existing or theoretical competitor may not be realistic, successful product managers will create profiles of their industry and the various companies and products vying for positions within it. Think of them like consumer personas in a marketing campaign. But this time, you are profiling products and organization. When someone in the industry makes a move, you can predict and anticipate based on these profiles, how everyone is likely to react. Competitive intelligence provides a through understanding on the market and your competitors' moves within it.

Product managers must constantly monitor the market because it is always changing. They must be aware of ongoing shifts in consumer trends and demands as well as the ever-changing activities of their competitors. Think of it as a surveillance system that picks up on signals from the environment. Failure to pay sufficient attention to the external business environment, will soon see them lagging in their industry. While monitoring the marketplace demands on a product managers time and resources, it also provides an invaluable steady stream of competitive intelligence. The competitive intelligence collected can be analyzed, and input into road maps and product strategies. Gaps in the market and opportunities to gain a competitive edge will be revealed. This is the essence of competitive market analysis.

When conducting a market assessment, it is important to become aware of the institutional framework in which your business operates and to map how your organization is embedded within it. To gain this essential macroscopic view of the market, product managers use the presto or PESTEL technique, which stands for political, regulatory, economic, social, technological, legal and other. By taking a step back and examining the macro environment in which your product will live you get the bigger picture, where all the external influences that can affect the path of your product are in play. These include technological advances, changing customer needs, emerging markets, increased competition, and economic factors that may affect you and your customers. For example, legislation introduced on various level of state can have a strong spill-over effect on commercial operations and impact on a product's success in the market. For a more extensive quantitative case study on the impact of corporate tax legislation on small-and medium sized business, read our previous blog post titled "The strong link between the 2017 US TCJA corporate tax rate cuts and the deteriorating trend in the US labor market & small businesses activity", published on 03/04/2020.

An excellent meso level analytical model that will assist you in doing a market asessment is for example Michael Porter's Five Forces framework. A five forces analysis is a valuable framework for assessing the structure of a market. By assessing the power of suppliers, the power of buyers, threat of new entrants, the threat of substitutes, and the degree of rivalry in a market, a product manager can determine the drivers behind the level of profitability in the overall market. By assessing how those forces are changing over time, the product manager can gain a better understanding of how the market might become attractive or less attractive. For example, a market with low entry barriers, high intensity in rivalry and little differentiation in products might be an unattractive market from a financial point of view. The model just demonstrates very nicely how your external business environment directly impacts your ability to make a profit.



Nothing affects your company's success in the wider marketplace as much as your competitors' success or lack thereof as well as the economic attractiveness of your industry. What your competitors do well and poorly as well as how your industry is organized provides lessons and insight into how your business can position its products. Carving out a place in the market requires taking all relevant factors into consideration.

Therefore you should not only analyze existing competitors, but also possible new competitors that could emerge. In fact, anticipating tomorrow's competitors today often is the difference between being overwhelmed or being prepared to compete when a new competitor emerges. Many strategy errors derive from mistaking the relevant industry, defining it too broadly or too narrowly. Defining the industry too broadly risks ignoring differences among products, customers, or geographic regions that are important to strategic positioning, and profitability. Many product managers take an overly narrow perspective, identifying only those competitors that offer the same product to the same type of customers. Looking for competitors only within one's own industry or focusing on direct and established rivals, is often not effective. Competitors can come from unexpected directions. There is also always the looming threat of disruptive innovations coming unexpectedly from outside of your industry boundaries or among one of the five forces.  Also, product strategists should be aware of the the possibility that industry boundaries can shift and cross-disciplinary collaboration can reshape the playing field.  


How to apply competitive intelligence within the context of your go-to-market plan?



There are two common ways to use this information to carry out comparative product assessments. First is a value proposition statement. This is a comparison of important buying criteria used by potential customers, your target market when making the decision to purchase. Depending upon the product or service, it may include such factors as quality, price, customization capability and even brand identification and familiarity. Each of the criteria is looked at to compare your company's ability to provide value as compared to that of competitors, but also your ability to negotiate with your supply chain partners or your ability to form strategic alliances. It will show your strengths and weakness in relation to the other options on the market and expose any value gaps that must be addressed, whether during design, development, or launch. A feature set comparison compares use cases and features of a specific product. And with those insights, product managers can adjust and adapt their products to succeed in the marketplace, or even try to attempt to actively shape the balance of forces in the market in their favor, which for example could be achieved by creating suitable industry wide standards for their products. 


Assessing the strategic marketplace positioning

Its very rare to create a product or service so unique that it creates a new industry or stands alone in the marketplace. Even dominant players have competition whether in general or in niche categories. Competitors occupy different positions in the marketplace. Some are market leaders dominating their markets and enjoying large market share. Some are market challengers, aggressively pursuing strategies to gain market share and take over the position of a market leader.

Some are market followers content to let others lead and they simply emulate competitors' product innovations launching me-too products that require minimal R&D or marketing investment, which enables them to sell their products at lower price points, but which comes at a cost for average industry profitability. Some are market niche players who deliver specialized, or niche products developed to serve only small segments in the marketplace that competitors have ignored. Comparing and understanding competitors market positions gives product managers great insight into each competitor's product focus, and likely future product moves. A competitors' market position illuminates its SWOT, that is its strengths, weaknesses, opportunities, and threats.

Market positions often shift, which requires product managers must analyze the competitive dynamics. Which competitors are gaining and losing share in the market? Which are becoming offensive players, which are becoming defensive? Which market niches are gaining product capabilities that could help them move outside their niche? Which market followers are investing more in R&D that could indicate that they intend to become a challenger? Which market challengers are outspending the market leader to make a play for market leadership? Gaining insights about market positions helps product managers plan their own product strategies. Which market position does the firm want to occupy? What product capabilities will it have to acquire or strengthen to gain and hold the position it has staked out.




Successful product strategies that lead to profitability

All businesses need to make a profit to survive. Doing that may require expanding into new markets or increasing your resources. The product strategy will detail how this product will assist in achieving the company's overall business goals. There are many aspects to consider before launching a product on its journey, and an effective product strategy is the route map to getting it there. Are you going to diversify your product features or expand with the same product in other market? Are you going to improve the quality of your current product or are you going to simplify it to sell it at a lower price point?

Successful product strategies change and evolve using feedback from customers and the marketplace to find opportunities for improvement or opportunities for strategic alliances. Input from senior management, new technological advances, fresh competition, business partners, and opening of new markets can all further affect the day to day evolution of a product strategy. Product managers must be prepared to react quickly to internal and external factors, without losing their overall focus on making their product vision a reality.

This is why prototyping and market testing are so valuable. Using customer feedback to guide requirements and development enables product managers to keep their fingers on the customer's pulse and their focus on the market. And the marketplace is where another mistake often occurs, ignoring competitive threats. Ignoring what competitors are doing, both good and bad, makes a product strategy vulnerable to irrelevance in the marketplace. Attempting to bring a product to market without understanding the competitive landscape can be fatal.

To avoid this, it's vital to conduct thorough research on your competitors within the context of a broader industry structure. Ask yourself where you see your product fitting into the marketplace. Is it intended to appeal to the widest possible customer base? Or is it to be designed to cater to a more narrowly segmented but exclusive market? Product developers and managers should objectively verify where their company is situated to accomplish their product plans. Is the plan objective to have a broadly appealing offering, is the company prepared to scale up production and distribution? Is it capable of handling sudden demand? Is the marketing unit of the team prepared to move into new growth areas when the opportunity to so arises?

Know the market fully before launching your product into it. And finally, many product managers make the mistake of failing to prioritize must-haves versus nice-to-haves. Must-haves are the critical features a product needs to have to solve a customer's problem. The nice-to-haves are added features that aren't central to the task but are intended to make the product more attractive to the customer. Focusing on the nice-to-haves too early in the process risks losing focus and creating a shiny new product that doesn't satisfy the customer's need.



Market analysis thus provides insight into how and why the market is evolving and how your competitors impact on your ability to make a profit. A broad understanding of the market including your external business- and institutional environment allows you to predict how competitors might act and how consumers are likely to react. In the context of decade long ensuing trend characterized by business consolidation and individual specialization, it is more than ever important to think comprehensively and systematically about competition, product management and strategic planning. By obtaining contextual industry insights, market oversight, and predictive foresight you strengthen your situational awareness, strategic positioning, and bargaining power, which in turn will enable unique value propositions, sustainable competitive advantages, and ultimately organizational survival.



Systems thinking as an overarching concept derived from the multidisciplinary Systems Theory, is an invaluable tool that allows professionals and practitioners to adopt a big picture perspective and to deal with complexity. Most notably in the social- and management sciences, but foremost in beta science fields, problem solving will be the result of thoroughly understanding dilemma's, paradoxes, and causality. Going well beyond the confines of network theory - which is more the domain of the Information Communication Technologies - the ability to adopt a system thinking approach is one of thé top emerging Post-covid era competencies for Small and Medium Sized businesses to have in such practices as marketing forecasting, product portfolio management, human resource management, innovation management, and strategic planning.

The problems of today arise out of the "solutions" of yesterday

Professionals do not only operate within their own departmental system but also within the larger internal system as well as within the external business environment of their organization. Problems that were "solved" in one area of the organization, regularly reappear as new problems in another part of the organization. For example, top management are under pressure by shareholders to increase profits. Managers then tend to reduce labor costs by firing staff from mid-management. This might please shareholders, but within 3 to 4 years the company will likely be faced with a leadership crisis. Moreover, human resources will likely be confronted with training- and talent acquisition issues. Human resource professionals that are well-versed in system thinking, can point out the causality between these seemingly unrelated factors and can come up with initiatives to let go of- or redevelop staff in ways that will not lead to future leadership crises.

Cause and effect are not located in vicinity of each other by space and time

This law is especially a practical tool in order to be able to make distinctions between on the on side direct or immediate reasons and on the other side more impactful root causes, as well as between on the one side progress indicators and on the other side result indicators (indicators that show the results in retrospective versus indicators that show whether you are on the right track). For example, the influence of the human resource department on organizational performance is probably a less direct factor compared to other strategic performance enablers and critical internal processes such as customer service or manufacturing. This distance between more indirect factors however do not make their eventual impact less relevant, but it does make it more difficult to to identify their role and to measure them. Another example is that many senior managers focus predominantly on conventional financial performance indicators, which are in essence retrospective result indicators. This often leads them into attempts to solve financial problems through applying costs-cutting measures without really tackling the root causes. The most crucial processes to examine in reality are usually not the obvious value-adding critical internal processes involved in logistics, development etc. Rather, they are the enabling or background processes that support investment decisions. These include how market research is systematically conducted, how such analysis is converted into competitive- and financial projections, how HR plans and budgets are negotiated etc. These types of processes are where many organizations' most serious handicaps reside in creating innovative and market-disruptive growth ventures.


The places where
interventions have the largest impact are simultaneously the places that are the least visible

Experienced system thinkers always look for the least obvious solution to a problem. For example, lagging financial performance attract everybody's attention, but hardly anyone will come up with the idea to ask human resources for help. Nonetheless, by tweaking the way human resources are managed will eventually translate into a large impact on the successful implementation of strategy, simply because the driving internal forces of human resources lie at the root of much of the value creating process. Through strategy mapping, and measuring progress indicators or applying predictive data analytics methods, the value creation process can be identified and visualized. An example in case, is that a causality has been demonstrated between how an increase in employee satisfaction of 4% - through a series of cause-effect relationships - had eventually a considerable consequence at the opposite end of the value chain in the form of an increase of a company's shareholder value of around $250 million.

The easiest way out is also the easiest way to get back in

An important advantage of systems thinking is that it helps to see problems from another broader perspective. Much too often do we tend to fall back on overly obvious one-size-fits-all recipes that have proven their worth in the past without re-evaluating it critically within the new context. For example, innovating managers often try to start new-growth business using processes that were designed to make mainstream business run effectively. Truly operating on a strategic level entails assessing a problem from new perspectives, by using creativity to challenge any vested assumptions that you may have and visualizing different possibilities, while withstanding the temptation of automatically re-using tested formulas. Granted, not reinventing the wheel through the adoption of benchmarking and best-practices can determine to be an equally sufficient cost-effective strategy. But in the face of increasing political-economic unpredictability, underestimating and overlooking the importance of studying a problem from the correct unit of analysis e.g. micro, meso, macro, has the potential to cause greater damage.



If you cut an elephant into two pieces, you won't get two small elephants

Though you will likely get a bloody situation. In other words, if you try to decompose a system to be able to analyze the separate parts, the possibility exists of you destroying the system. Organizations are complex systems in which interaction and unstable feedback loops take place within and between various subsystems, components, and parts. Therefore, it is best to understand an organization holistically. However, most managers consider subsystems of their organization as separate functions and limit their attentions to their own field. Sometimes this is born out of miscalculated policies or simply out of sheer lack of resources to operate cross-disciplinary. Large companies have put a lot of effort into creating inter-disciplinary collaboration, but Small and Medium Sized business (SMBs) don't always have capabilities to do the same. As a result, leadership of the functions may very well be able to uncover the root causes of their unit, but they will hardly see the dynamic interplay between their policies and that of others. Exactly those interfaces where different systems and parts of a system meet, are simultaneously the places that cause problems and where change interventions will have the greatest impact, by factoring in the time, locational, as well as human contextual dimensions. The lack of resources to create cross-functional teams can be effectively overcome by adopting a systems thinking approach to problem solving and decision-making.


For at least a couple of decades now, we have been going through an era characterized by strong trends towards the reward of meticulous specialization, short-termism, and lack of situational awareness. The devaluation of- and sometimes an outright assault on deviations from this norm, have now become immensely problematic and risky as complexity, consolidation, and uncertainy are becoming the new norm. Hence taking a critical reflective mindset, and embracing a historical approach, represent the modern requirements and competencies for the development of creative problem solving and effective decision making processes. In short, we advocate that Small- and Medium Sizes Businesses problems solvers and decision-makers in various strategic management realms increase their systems solutions capabilities to achieve higher levels of successful policy-, strategy-, and planning implementation performances.

The critical role of Human Resources professionals in designing and upholding high standards in labour relationships, policies and practices is now more important than ever. As the uncertainty in the labor market has increased, the risk of employee relations practices and the psychological contract becoming more unbalanced is also on the rise. In many cases therefore, achieving a sufficient degree of institutional embeddedness is what is needed within the area of employee-employer relationships.

What are employer-employee relationships?

Employee relations refers to activities between the employer organization and its employees. Specifically, the activities would cover the terms and conditions of employment. Examples of area's are discrimination, harassment, slander, privacy, and increasingly gaining in importance is environment, health and safety (EHS) in the worplace. It is the responsibility of HR professionals to ensure that the appropriate processes, programs, policies, and practices are pursued to create constructive employer-employee relationships. Examples of such HR programs are collective bargaining frameworks, arbitration, mediation, conflict resolution etc. The ensuing outcome of more engaged employees will generally lead to a more productive workforce which leads to greater long-term value for the organization. The opposite situation of poor relationships between the employees and the employers may cause financial costs, damage to the company's public image and often reduce productivity. Hence is it one of the prominent components of corporate social responsibility.

The critical role of regulatory compliance

One of the many important and strategic roles of HR professionals is ensuring regulatory compliance. However, the complexity and diversity of today's labour market poses a number of regulatory compliance risks. An example is the common practice of using independent contractors, which employers may utilize for reasons of workplace flexibility or to cope with uncertainties related to entering a new market. Making sure the individual is truly an independent contractor and not an employee as specified in certain employment and tax laws may lead to the reclamation of salaries, taxes, and benefits, besides potential fines. To mitigate against such risks, HR ought to come up with- and clearly communicate programs and guidelines, including harmonized definitions, for the use of independent contractors. An example of a guideline that ensures the independent relationship, is that the contractor should maintain control over when, where, and how the work is conducted.



What role can HR play in solving the dilemma associated with institutional alignment?

Reconscilling workforce rights and procedures with organizational values and your business strategy is relatively more straightforward when your company is based in one jurisdiction. The other side of the equation is to ensure environmental fitness between on the one hand your company policies and on the other hand the local laws and regulations when you operate in multiple jurisdictions. Common dilemma's facing HR departments in such situations are questions surrounding to what extent to pursue the path of convergence or divergense from headquartes or HR centres of excellence? How does our product strategy impact that trade-off? Do we pay more attention to the relevant society at large and it's stakeholders, or do we emphasize shareholder interested? How well does our approach to controversial societal topics correspond to what they teach students in the host country's educational system? Human Resources Department with the right expertise of relevant multidisciplinary disciplines such as Institutional Economics, Socio-Economics or Business History will be best positioned to most effectively address those kind of dilemma's and general matters of employee-employer relationships.


Although throughout the world there are are common rights and duties covered by statutes and regulations related to equal treatment and opportunity, there can be considerable differences between countries and localities, impacting upon HR's role within the workforce relationship strategy implementation process. Varieties of labour market contingencies requires you to have the right set of competencies to achieve the right amount of embeddedness between your internal HR architecture and external institutions.

US Corporate tax rate reduction (TCJA) impact on the US labor market

According to our quantitative and qualitative research into the US labor market, the introduction of the US TCJA 2017 Corporate Tax rate cuts from 35% to 21% has had a strong correlation with recent developments in the US labor market economy and the business activity of small enterprises, all taking a hit since 2017 and 2019 onward. The sudden deep dive in the overall amount of job offers made, number of vacancies created (Figure 1), as well as the negative impact of the TCJA 2017 on the amount of freelancers and start-ups operating within the US economy (Charts 1 & 3) can be observed by looking at the three charts and the outcomes of mour correlation analyses. The associated positive coefficients range from 0.4 to 0.45 for the correlations between the forecasted corporate tax rate and the amount of job offers & vacancies, to 0.93 for the correlation between the effective corporate tax rate and the start-up rate. The analysis was corrected for possible moderating effects such as trade disputes and geopolitical events.

Figure 1


Forecasted impact of the TCJA on the US labor market

The tax rate reduction really came into effect only recently in 2019, and therefore it is still too premature to determine whether the decline in the above mentioned labor market indicators amounts to a structural break. Neither do the findings necessarily determine a causal relationship. But based on historical data, my future forecast calculations (Figure 2), and making inferences across different geographical units, it is already clear that a drastic policy measure such as the TCJA has disproportionately benefited large corporations at the expense of small enterprises. The only market area where job growth continues in an upward trend is at large employers with 5000+ employees, although close to flattening out. The latter development is much more likely to improve working conditions of large company employees eg salary increases, whereas positive spill-over effects to the external business environment will hardly occur.

Figure 2



(Effective) corporate tax rate correlation with the start-up rate

If a natural rebound does not take place or a more balanced re-distributive fiscal policy is not implemented through corrective measures, the declines in the growth of small business service providers have the potential to seriously hamper entrepreneurship and innovation, as illustrated by the decline of the start-up rate (Figure 3). Against conventional wisdom, the fact that the tax cut reductions simultaneously applied to small businesses does little too mitigate the negative effect for smaller business especially for service providers that rely on larger organizations for business generation. Tax breaks have not proven to improve productivity, most breakthrough innovations take place at small enterprises, and SMEs create most of the jobs by far. Only insiders with the right background and extensive know-how about the inner workings of the labor market can detect such developments, generating insights at the juncture of macro-economics, politics and human resources.

Figure 3


https://www.researchgate.net/publication/227470312_Start-up_rates_and_innovation. A cross country examination.

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