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Business Policy & Strategic Management
Semester III 40 Contact 4 Credits
Amity Business School
Transition from Old to New age Policies
Philosophy of integrating market driven focus elements for continuous improvement in all work processes of the enterprise becomes necessary due to: Customer driven market revolution Fierce global competition Unpredictable market, changing expectations & moving targets Need to develop a customer focused culture Integrate market driven culture Focus on quality, cost, productivity Customer loyalty & Change Management
Amity Business School
Evaluation of Competitive Capabilities
Not only how much better than you own history but how much
better than your competitors What is that you do that the customers value better than the competition Evaluation of your resources is of no value unless done in respect to your competitors If you are not the best in a critical activity, you are sacrificing the competitive advantage by continuing to do what you are doing with old practices Only the firms that are able to continually build new strategic assets faster and cheaper than the competition will earn superior customer value and returns over long period
Amity Business School
Focus Elements of a Market Driven Enterprise
Commitment to customer satisfaction Human Resource Development Total Quality Culture Error Prevention Philosophy Zero Error Solutions Design & Product Quality Quality Services Quality of Management & Services People Development Productivity, efficiency and effectiveness Process & Technologies for continuous improvement
we will earn a profit.William Cooper Procter . If we produce it efficiently and economically.Amity Business School Total Quality Management ……concepts & understanding “TQM is a philosophy that represents a set of guiding principles that lays the foundation of a continuously improving and customer driven organization” “The first job we have is to turn out quality merchandise that consumers will buy and keep on buying. in which you will share.” .
systems. process & technology Long term and continuous and is sensitive to the social responsibilities of the enterprise – Supporting ‘High Performance Culture through teamwork.Amity Business School TQM – – – – – IS Encompassing and mobilizing entire organization to satisfy the customer Improving each individual and groups within the organization Integrating the philosophy and practices in day to day approach to work Influencing all product. that has a beginning & an end. – It is a continuous journey. trust & leadership IT IS NOT – A program. services. .
generations learning. concepts for quality. Shifting Demographics . Globalization Customization & Differentiation.Amity Business School History… • • • • • Craftsmen… Early days. Public interest ‘producer beware’ Dr. American Society for Quality 1944 Safety. Early 20th Century… Unskilled repetitive. Knowledge Focus. Standardization.. Post War…. Learning system. Joseph Juran & Dr. start of interchangeability. Mass Mfg. Ford Story…. own inspector. Edward Demming story Pioneering work in Total Quality ( in Japan ) Demming returns to US (1980-1993) • • Product Quality to Performance Excellence ‘Quality of Management’ as important as ‘Management of Quality’ American Society for Quality identifies future challenges Partnering. Adaptability and speed of change Environmental Sustainability.
Amity Business School Some leaders of Quality Joseph M Juran Deming Malcom Baldrige .
Optimise the product features so as to meet our needs and customer needs. Develop a product that can respond to those needs. . Translate those needs into our language. Quality Improvement Develop a process which is able to produce the product.Amity Business School Juran’s Quality management Ideas • • • • • • • • • • • • • . The following table outlines the major points of Dr. Juran's quality management ideas: Quality Trilogy: Quality Planning Identify who are the customers. Transfer the process to Operations. Optimise the process. Determine the needs of those customers. Quality Control Prove that the process can produce the product under operating conditions with minimal inspection.
(2) strategic planning.Amity Business School The Baldrige Award is given by the US President to businesses (manufacturing as well as service) and to education and healthcare organisations that apply and are judged to be outstanding in seven areas: (1) leadership. (3) customer and market focus. (6) process management and (7) results . (4) measurement. analysis and knowledge management. (5) human resource focus.
1955. January 1947 Adviser in sampling techniques to the Supreme Command of the Allied Powers. London School of Economics. New Delhi. December 1951. Institut de Statistique de l'Universite de Paris. March 1971 Delegate from the A. . Allied Mission to Observe the Greek Elections. January and February 1947. 1953 Consultant to the Central Statistical Office of Turkey. March 1964 Consultant to the China Productivity Center. Statistisches Bundesamt. Tokyo. Taiwan. 1971 Lecturer in Santiago. 1951.. 1959-1962 Lecturer. 1965 Member of the United Nations Sub-Commission on Statistical Sampling. and Buenos Aires. 1947 and 1950 Teacher and consultant to Japanese industry. 1954.A. and to the Ministry of Economy. to the Indian Science Congress. to the Bank of Mexico. 1970. through the Union of Japanese Scientists and Engineers 1950. January-April 1946. 1971.Amity Business School Edward Deming • • International Activities Statistician. 1952. 1955 Consultant. March 1964 Lecturer. 1960. Córdoba (Argentina). 1947-52 Consultant to the Census of Mexico.A.S. under the auspices of the Inter American Statistical Institute. Wiesbaden. JulyOctober 1946 Consultant in sampling to the Government of India.
TQM All Employees involved Empowerment Teamwork Quality Strategy Quality Assurance •Quality Systems ISO •Quality Planning •Quality Policy •Quality Controls •Problem Solving Quality Control •Quality Standards •Statistical Controls •Process Performance •Treat Quality Problems Inspection •Error Detection •Rectification •Unhappy Customer .Amity Business School Journey to TQM….
) • Quality awareness in U.Amity Business School History of Quality ( Contd. manufacturing industry during 1980s: from “Little Q” to “Big Q” .S.Total Quality Management • Malcolm Baldrige National Quality Award (1987) • Disappointments and criticism 13 .
health care.) • Emergence of quality management in service industries. and education • Evolution of Six Sigma • Current and future challenge: keep progress in quality management alive 14 .Amity Business School History of Quality ( Contd. government.
Amity Business School Contemporary Influences on Quality • • • • • • • • Partnering Learning systems Adaptability and speed of change Environmental sustainability Globalization Knowledge focus Customization and differentiation Shifting demographics .
price • Manufacturing-based definition: conformance to specs 16 .Amity Business School Definitions of Quality • Transcendent definition: excellence • Product-based definition: quantities of product attributes • User-based definition: fitness for intended use • Value-based definition: quality vs.
Amity Business School Quality Perspectives transcendent & product-based user-based Customer products and services needs Marketing value-based Design manufacturingbased Manufacturing Distribution Information flow Product flow 17 .
Amity Business School Paradigm Shift From…. Management of Quality to Quality of Management .
Amity Business School Malcolm Baldrige Criteria • • • • • Leadership Strategic Planning Customer & Market Focus Information & Analysis Human Resources Development & Planning • Process Management • Business Results Weightage 12% 8% 8% 8% 10% 10% 44% .
Strategic Planning – Strategy Development Process.. How the company sets strategic directions to better define and strengthen its competitive position and how the development process leads to action plan for deploying and aligning key plan and performance requirements. Leadership – Leadership System. 1. How the company determines the long term requirements and preference of target and potential customers and market and anticipate needs to develop business opportunities .How the company determines and enhances the satisfaction of customers to strengthen relationships to improve current offerings and to support customer and market related planning. 1... How the senior leaders guide the company in setting directions and in developing and sustaining an effective leadership system.. – Company Responsibility & Citizenship… How the company addresses the its responsibility to the public and how it practices good citizenship. .Amity Business School Understanding of Criteria 1. – Company Strategy. – Customer Relationship & Satisfaction Enhancement. How the performance requirements and measures align with the human resource plan and how the plans project the co’s future as compared to the competitors and key benchmarks.. Customer & Market Focus – Customer & Market Knowledge.
– Analysis & Review of Company’s Performance.How the company maintains its work environment and work climate to support the well-being.How the co. 5.. Information & Analysis – Selection & Use of Information & Data…How the co.Amity Business School Understanding of Criteria (…contd.) 4. – Employee Education Training & Development. – Employee Well-Being & Satisfaction. analyses and reviews overall performance to assess the progress relative to plans to identify key areas of improvement.. How the co’s training and education addresses its plan and needs including building knowledge & capabilities & contribute to improved employees’ performance and development.. What is the company’s work & job design and its compensation and recognition approaches to enable and encourage all employees to contribute effectively to achieve the co’s performance and learning objective... selects. How the company selects. – Selection & use of comparative information & data. satisfaction and motivation of all its employees . manages and uses comparative information data to improve co’s competitive position. Human Resources Development & Management – Work Systems. manages and uses the information and data needed to support key company process and improve the co’s performance.
development and work system performance – Supplier & Partner Results…Co’s supplier and partner results – Company-Specific Results…How the company’s key operational performance and results significantly contribute to key company goals.customer satisfaction. Process Management – Management of Product & Service Processes. How the product/services delivery systems are designed.Co’s key financial & marketplace performance – Human Resource Results…Co’s Human Resource results including employee wellbeing. How the co’s key support processes are designed.How the significantly modified and customized products and services are designed.How the co. 7. managed and continuously improved.Amity Business School Understanding of Criteria ( Contd.. . – Management of Support Process. – Management of Supplier and Partnering.. satisfaction.How the co’s supplier and partnering processes.) 6.. performance and relationships are managed and improved.. operational effectiveness and financial/market place and performance. performance on Customer Satisfaction – Financial & Market Results…. Business Results – Customer Satisfaction Results. implemented and improved.
Amity Business School Leadership The ability to positively influence people and systems under one’s authority to have a meaningful impact and achieve important results .
Amity Business School The Baldrige “Leadership Triad” Strategic Planning Leadership Operations Customer and Market Focus .
Amity Business School
Defining and communicating business directions Ensuring that goals and expectations are met Reviewing business performance and taking appropriate action Creating an enjoyable work environment Soliciting input and feedback from customers Ensuring that employees are effective contributors Motivating, inspiring, and energizing employees Recognizing employee contributions Providing honest feedback
Amity Business School
Effective leadership requires five core leadership skills:
• vision • Empowerment • Intuition • self-understanding • and value congruence.
Amity Business School
Leading Practices – Leadership
• Create a customer-focused strategic vision and clear quality values • Create and sustain leadership system and environment for empowerment, innovation, and organizational learning • Set high expectations and demonstrate personal commitment and involvement in quality • Integrate quality values into daily leadership and management and communicate extensively • Review organizational performance • Create an environment and governance system that fosters legal and ethical behavior • Integrate public responsibilities and community support into business practices 27
Amity Business School
• Leadership System ….. how decisions are made, communicated, and carried out at all levels; mechanisms for leadership development, self-examination, and improvement • Effectiveness of Leadership System ……depends in part on its organizational structure
. and sets high expectations for performance and performance improvements.Amity Business School Key Idea An Effective Leadership System respects the capabilities and requirements of employees and other stakeholders.
– – – – – – – Approving strategic direction Monitoring and evaluating CEO performance Succession planning Financial auditing Executive compensation Disclosure Shareholder reporting . The system of management and controls exercised in the stewardship of an organization.Amity Business School Governance • Governance ….
safety. and environment • Community support .Amity Business School Leadership and Social Responsibilities • Ethics • Health.
and professional practices. including improving education. resource conservation.Amity Business School Key Idea Practicing good citizenship refers to leadership and support—within the limits of an organization’s resources—of publicly important purposes. community service. environmental excellence. community health. .
conviction. hope. stewardship. motivating and tenacity. ‘Executive Leadership’-not the only one – Changed Business Scenario & New Economy demanding Unit. communication. Integration. transformation dreams to reality. consensual. empowering deploying. courage. motivating. Team. mission.TQM relevance • • – Traditional – Leadership for Quality … Assortment of behaviors vision. . stimulation.. Project and Transformational Leadership ‘No more the one or few men show’ Strategic Plan Integration – Quality is the key element to strategic planning for ‘ Quality management’ and ‘Performance Excellence’ under the current business environment – Identification of such competitive advantages that is driven by customer and market.Amity Business School Leadership • Definition ….
missionary zeal and constancy of purpose – Integrating quality values in daily values. conservation Industry Obligation to Community . environment. intuition.Amity Business School Leadership • • Effective Leadership ….TQM relevance Five Core Skills– vision. Strategic vision. innovate – Setting high expectations. Details Leadership & Public Responsibilities – – – – Public Health. self-understanding & value congruence Leadership Practices – Customer Focus.. Quality value – Creating sustainable leadership. empowerment. welfare.. Community education. safety & environment Compliance Corporate Citizenship. empowerment. demonstrate substantial personal commitment and involvement. extensive communication – Integrate public responsibility and community support in business practices • • TQ Leadership Contrasts….
skill development and empower – Continuous improvement • • • • .Amity Business School TQ Leadership Contrasts Traditional • Plan Projects – Make plans – Organize resource – Preach M. talent & system – Reward effort.B.O Push Products – Lip service to quality – Sell to customer – Perform R&D Control People – Control through systems – Reward conformance punish deviation – Maintain status QUO TQ Leaders • Practice – Envision the future – Optimize the resource – Participative management Produce – Exemplary quality – Service the customer – Innovate Motivate people – Development.
Amity Business School Strategic Planning “The process of envisioning organization’s future and developing necessary procedures and operations to shape and achieve that future” Concept • Plan that integrates an organization’s major goals • Policies and actions sequences in alignment and supporting the goals • Marshalling and allocating organization’s resources into an unique and viable posture • Based on one’s relative strengths and competencies and anticipated changes in the environment • Counter measures and actions anticipating contingent moves by intelligent opponents .
employees & even customers actively participate in the planning process • Systematic planning process for strategy development and deployment including measurement. • Derive human resource plans from strategic objectives and action plans Vision Mission Guiding Principle Strategy Development Environmental Scan Action Plans Strategies Objectives . • Gathering and analysis of variety of data external & internal factors • Alignment of short-term action plans with long term strategic objectives.Amity Business School Strategic Planning …Influence of TQ culture Leading Practices • Top management. feedback and review.
and distinctive competencies Solectron: “…to provide worldwide responsiveness to our customers by offering the highest quality. design.” .Amity Business School Mission Definition of products and services. integrated. customer needs. and manufacturing solutions through long-term partnerships based on integrity and ethical business practices. customized. markets. supply chain. lowest total cost.
Amity Business School Vision ….employees can identify with Solectron: “Be the best and continuously improve” .Where the organization is headed and what it intends to be.grab attention Inspiring and challenging .creates excitement Descriptive of an ideal state .provides guidance Appealing to all stakeholders . – – – – Brief and memorable .
Teamwork. Pepsico: Integrity. Honesty.Amity Business School Values (Guiding Principles) Defines attitudes and policies for all employees. Customer Passion . which are reinforced through conscious and subconscious behavior at all levels of the organization. Teamwork. Integrity. Balance. Trust Leadership. Accountability Whirlpool: Respect.
societal. regulatory and other potential risks Changes in global or national economy • Factors unique to the organization.Amity Business School Environmental Assessment TEMPLES or PESTLE • • • • • Customer and market requirements. such as partner and supply chain needs . ethical. expectations and opportunities Technological and other innovations Organizational strengths and weaknesses Financial.
•Action plans are things that an organization must do to achieve its strategic objectives.Amity Business School Key Idea •Strategies are broad statements that set the direction for the organization to take in realizing its mission and vision. . •Strategic objectives are what an organization must change or improve to remain or become competitive.
Amity Business School Strategic Deployment …TQ way “Converting the strategies into small doable goals and then ultimately deployed to the right teams & people in form of SMART objectives” • Balance Scorecard • Hoshin Kanri or Hoshin Planning or Policy Deployment • Management by Planning ‘Team based deployment is most suited to TQ environment’ .
Amity Business School Balance Scorecard .
Amity Business School .
Amity Business School Policy Deployment (Hoshin Kanri) • Top management vision leading to long-term objectives • Deployment through annual objectives and action plans • Negotiation for short-term objectives and resources (catchball) • Periodic reviews 46 .
Amity Business School Leadership and Organizational Structure Basic types of organizational structures – Line organization – Line and staff organization – Matrix organization .
they are structuring the quality organization around functional or cross-functional teams.Amity Business School Key Idea As more and more companies accept the process view of organizations. .
Amity Business School Caliberations Strategic Planning …What the auditor will look for – Customer & market driven quality ‘integrated into bloodstream’ – Integrated into the product. operations and service processes – Operational Excellence to deliver on above Deployment – Deployment to the right people with ‘smart’ objectives – Organization’s ability to translate strategic objective into action plans TQ aspects include •Empowerment •Diffused Leadership •Institutionalized Learning •Innovation and Experimentation Customer Driven Quality TQM way to implement strategy Operational Excellence .
Amity Business School Focusing on Customers 50 .
. the organization needs to identify customers’ needs.Amity Business School Key Idea To create satisfied customers. design the production and service systems to meet those needs. and measure the results as the basis for improvement.
• It costs five times more to find a new customer than to keep an existing one happy. loyalty is a behavior” • Loyal customers spend more. • A firm cannot create loyal customers without first creating satisfied customers. refer new clients. and are less costly to do business with. 52 .Amity Business School Importance of Customer Satisfaction and Loyalty “Satisfaction is an attitude. are willing to pay higher prices.
Amity Business School Key Idea Customer wants and needs drive competitive advantage. and statistics show that growth in market share is strongly correlated with customer satisfaction. .
Amity Business School Customer Satisfaction Model Perceived quality Perceived value Customer expectations Customer complaints Customer satisfaction Customer loyalty .
Amity Business School Customer-Driven Quality Cycle Customer needs and expectations (expected quality) Identification of customer needs Translation into product/service specifications (design quality) Output (actual quality) Customer perceptions (perceived quality) measurement and feedback PERCEIVED QUALITY is a comparison of ACTUAL QUALITY to EXPECTED QUALITY 55 .
rather than taking the perspective of the external customer. .Amity Business School Key Idea Many organizations still focus more on processes and products from an internal perspective.
set service standards.Amity Business School Leading Practices • Define and segment key customer groups and markets • Understand the voice of the customer (VOC) • Understand linkages between VOC and design. and follow-up on transactions • Effective complaint management processes • Measure customer satisfaction for improvement . provide accessibility to people and information. and delivery • Build relationships through commitments. production.
Amity Business School Key Customer Groups • Organization level – – – – consumers external customers employees society • Process level – internal customer units or groups • Performer level – individual internal customers .
or answer questions for? • Who supplies inputs to the process? . write to.Amity Business School Identifying Internal Customers • • • What products or services are produced? Who uses these products and services? Who do employees call.
Amity Business School AT&T Customer-Supplier Model Your Suppliers Inputs Your Processes Outputs Your Customers Requirements and feedback Requirements and feedback 60 .
Amity Business School Key Idea The natural customer-supplier linkages among individuals. . departments. and functions build up the “chain of customers” throughout an organization that connect every individual and function to the external customers and consumers. thus characterizing the organization’s value chain.
Amity Business School Customer Segmentation • • • • Demographics Geography Volumes Profit potential .
for instance by considering for each group the benefits of satisfying their requirements and the consequences of failing to satisfy their requirements.Amity Business School Key Idea Segmentation allows a company to prioritize customer groups. .
feel.Amity Business School Key Dimensions of Quality • Performance – primary operating characteristics • Features – “bells and whistles” • Reliability – probability of operating for specific time and conditions of use • Conformance – degree to which characteristics match standards • Durability . and competence of repair • Aesthetics – look. courtesy.amount of use before deterioration or replacement • Serviceability – speed. taste. smell . sound.
Amity Business School Key Dimensions of Service Quality • Reliability – ability to provide what was promised • Assurance – knowledge and courtesy of employees and ability to convey trust • Tangibles – physical facilities and appearance of personnel • Empathy – degree of caring and individual attention • Responsiveness – willingness to help customers and provide prompt service 65 .
Amity Business School Kano Model of Customer Needs • Dissatisfiers: expected requirements • Satisfiers: expressed requirements • Exciters/delighters: unexpected features 66 .
exciters/delighters become satisfiers over time.Amity Business School Key Idea As customers become familiar with them. satisfiers become dissatisfiers. . Eventually.
Amity Business School Customer Listening Posts • • • • • • Comment cards and formal surveys Focus groups Direct customer contact Field intelligence Complaint analysis Internet monitoring 68 .
Amity Business School Key Idea Companies use a variety of methods. and customer satisfaction with the company’s performance on these measures. their importance.” to collect information about customer needs and expectations. . or “listening posts.
Amity Business School Tools for Classifying Customer Requirements Affinity diagram Tree diagram .
• Example (airline) – – – – – – – – Making a reservation Purchasing tickets Checking baggage Boarding a flight Ordering a beverage Requests a magazine Deplanes Picks up baggage .Amity Business School Moments of Truth • Every instance in which a customer comes in contact with an employee of the company.
communicating with customers.Amity Business School Key Idea An organization builds customer loyalty by developing trust. and empower them to meet and exceed customer expectations. Companies must carefully select customer contact employees. train them well. and effectively managing the interactions and relationships with customers through approaches and its people. .
Amity Business School Customer Relationship Management • Accessibility and commitments • Selecting and developing customer contact employees • Relevant customer contact requirements • Effective complaint management • Strategic partnerships and alliances • Exploiting CRM technology .
. companies must do more than simply fix the immediate problem. They need a systematic process for collecting and analyzing complaint data and then using that information for improvements.Amity Business School Key Idea To improve products and processes effectively.
Amity Business School Measuring Customer Satisfaction • Discover customer perceptions of business effectiveness • Compare company’s performance relative to competitors • Identify areas for improvement • Track trends to determine if changes result in improvements 75 .
.Amity Business School Key Idea An effective customer satisfaction measurement system results in reliable information about customer ratings of specific product and service features and about the relationship between these ratings and the customer’s likely future market behavior.
Amity Business School Survey Design • • • • Identify purpose Determine who should conduct the survey Select the appropriate survey instrument Design questions and response scales .
By actionable. and information can be translated into cost/revenue implications to support the setting of improvement priorities. we mean that responses are tied directly to key business processes.Amity Business School Key Idea The types of questions to ask in a survey must be properly worded to achieve actionable results. so that what needs to be improved is clear. .
Amity Business School Performance-Importance Analysis Performance Low High Who cares? Overkill Low High Importance Vulnerable Strengths .
Amity Business School Key Idea Appropriate customer satisfaction measurement identifies processes that have high impact on satisfaction and distinguishes between low performing processes low performance and those that are performing well. .
Amity Business School Difficulties with Customer Satisfaction Measurement • • • • • • Poor measurement schemes Failure to identify appropriate quality dimensions Failure to weight dimensions appropriately Lack of comparison with leading competitors Failure to measure potential and former customers Confusing loyalty with satisfaction .
or time savings—against costs.in making purchase decisions. ease of use.installation cost or time. such as purchase price. and so on. .Amity Business School Customer Perceived Value CPV measures how customers assess benefits— such as product performance.
Amity Business School Loyalty grid .
Commoditization or low differentiation. Monopoly or few substitutes. Dominant Brand Equity. Powerful Loyalty Prog. Proprietary Technology.Amity Business School CUSTOMER LOYALTY RELATIONSHIPS Non-competitive zone Regulated. Low cost of Switching →Relationship of Customer Satisfaction and Profitability →Total Satisfaction for captive customers →Tyranny of Averages →Satisfying Target Segments →Ultimate Source of Focus: affinity Groups . High cost of switching. Many substitutes. Consumer Indifference. Highly competitive zone.
Amity Business School Customer Loyalty Grid .
Amity Business School THE IMPORTANCE OF FOCUS • “Organization that have not identified the customers they are targeting have a special handicap in achieving total customer satisfaction and create many “merely satisfied’s”. . – Customer tell about only extra-ordinary experience – Only on third of the ‘dissatisfied’ tell – but the talk alright.
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