Quality Management And Strategic Success Essay

1006 words - 5 pages

Quality management and strategic success – by John Currie

Quality management and strategic success By John Currie – Examiner in Professional 1 Strategic Management Accounting

Quality management: Theory and practice It seems to be part of the “conventional wisdom” of management accounting that the implementation of total quality management (TQM) is essential for business success. For example, calculation-type questions on examination papers often involve calculating the opportunity cost of using scarce production capacity to repair defective output, and the discussion parts of the same questions often require candidates to elaborate on the highly negative consequences for a company’s ...view middle of the document...

For example, a discount supermarket chain first identifies products which customers perceive as largely generic, so that the customers have no real loyalty to any one manufacturer’s product. Then, the discount supermarket chain limits itself to stocking typically just one brand of that product (i.e., one brand of orange juice, one brand of paper towel, etc.) This approach significantly reduces a significant number of non-value-adding costs which would arise from stocking multiple brands of the same product. For example, sourcing all units of a product from a single manufacturer reduces costs of delivery and inventory handling, and also enables the supermarket chain to drive a hard bargain in price negotiations with the manufacturer. It is by eliminating something which is not important to the quality of the customer’s experience – namely, a spurious choice between several brands of an essentially generic product – that a discount supermarket reduces its cost base and can thus afford to offer its customers high quality products at lower prices than competitors (Currie, 2008). Thus, the growing market share and profitability of discount supermarkets has been achieved by strategies which involve careful attention to product quality coupled with the elimination of non-value-adding costs in the manner described here.

The concept of relative quality Another way in which the success of budget brands helps to demonstrate the importance of quality management is in the management of customer expectations. In managing quality for

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Quality management and strategic success – by John Currie

business success, the most useful concept of quality is “relative quality” which is defined as follows: Performance Relative quality = Customer expectations

Thus, while a customer’s assessment of the quality of a product is positively correlated with the product’s performance, it is also true that the higher the customer’s expectations then the more difficult it is for the product’s actual performance to meet those expectations. An obvious example of relative quality is that (in commercial...

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