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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.

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.

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.

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.

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.

This paper aims to review the latest management developments across the globe and pinpoint practical implications from cutting-edge research and case studies.

This briefing is prepared by an independent writer who adds their own impartial comments and places the articles in context.

Firms operating in developing economies can take measures to manage risk and increase their competitiveness. Particularly important is the need to adopt key human resource practices that best align with their strategic approach in order to enhance overall efficiency.

The briefing saves busy executives and researchers hours of reading time by selecting only the very best, most pertinent information and presenting it in a condensed and easy-to-digest format.