Chapter 2

The Relationship Between

Quality and Competitiveness

At each successive level of competition,

the quality of the competitors has
increased.
In business, the competition is now
moved from local, regional or national
level to International level, which is
making it tougher day by day.

The Relationship Between Quality

and Competitiveness

Now only those companies who

are able to produce world-class
quality can compete at
international level.
It is extremely important for a
countrys business to be able to
compete globally. When they
cant, jobs are lost and the quality
of life in that country declines.

The relationship between quality and

competitiveness can be summarized as
follows:

In a modern global marketplace,

quality is the key to
competitiveness.

Cost of Poor Quality (1)

COPQ was popularized by IBM quality

expert H. James Harrington in his 1987
book Poor Quality Costs
COPQ are defined as costs that would
disappear if systems, processes, and
products were perfect.
Cost of not doing it right the first
time.

Cost of Poor Quality (1)

The costs of poor quality account

for 15 to 30% of a companys
overall costs.
Reducing the costs associated
with poor quality is essential for
companies that hope to compete
in the global marketplace

Factors to consider when qualifying

the costs of poor quality
Traditional Costs

Hidden Costs

Steps to measure the costs of

poor quality

Identify all activities that exist only or

primarily because of poor quality.
Decide how to estimate the costs of these
activities.
Collect data on these activities and make the
cost estimates.
Analyze the results and take necessary
corrective actions in the proper order of
priority.

Impact of Competitiveness on
Quality of Life

The United States came out of World War II

as the only major industrialized nation with
its manufacturing sector completely not
suffering any harm . Germany and Japan
were Destroyed
They rebuilt their manufacturing bases on
the assumption that to compete globally,
they would have to produce goods of
world-class quality.

Factors Inhibiting
Competitiveness (1)
Business/GovernmentRelated Factors:

Emphasis on short-term profits
fed by fear of unfriendly
takeover attempts and
pressure from lenders or
shareholders.

Factors Inhibiting
Competitiveness (2)
Family-Related Factors:

Human resources are a critical part of
the competitive equation. The more
knowledgeable, skilled, motivated, and able to
learn members, the better the labor force will
be.

Family background play an important role in
basic education of the kids. The countries with
strong family values are found to be better in
educating their kids and hence producing
knowledgeable and smart workers.

Factors Inhibiting
Competitiveness (2)
Education-Related Factors:
The quality of a countrys education
system is a major determinant of the
quality of its labor force. The higher the
quality of the labor force, the higher the
quality of entry-level employees.

Comparisons of International
Competitors (1)

Most competitive countries in

the world (2005):
Japan
Germany
Switzerland
Demark
United States

Critical indicators of National

Competitive Status

Comparisons of International
Competitors (2)
The assessment is based on:
Nations domestic economic strength,
Internationalization,
Government infrastructure,
Finance management,
Science and technology,
Work force.

Comparisons of International
Competitors (2)
How the Government can help?


Provide incentives that encourage
business to behave in ways that
promote competitiveness.


Remove barriers that work against
competitiveness.

Part Two

Technology and Competitiveness

Human Resources and
Competitiveness
Characteristics of World-Class
Organizations

Technology and Competitiveness

Technology is the physical
manifestation of knowledge.

In a competitive environment
where knowledge is King, welldesigned technology can enhance
an organizations competitiveness

Human Resources and

Competitiveness

The most valuable resources

for enhancing competitiveness
are human resources.
Germany and Japan are the
best examples of effective
human resources utilization.

Strategies for human resources

competitiveness in Japan and
Germany (1/6)

Strategies for human resources

competitiveness in Japan and
Germany (2/6)

Cooperation among business,

labor, and government (social
partners) is used in Japan just as it
is in Germany believed that business
must join with the other major
economic actors in the task of
rebuilding the society it became the
cornerstone of the competitiveness
of both countries.

Strategies for human resources

competitiveness in Japan and
Germany (3/6)

High-quality education and training:

Germany: uses a highly structured
education program that emphasizes
both skills development and academic
achievement.

Japan: relies on excellent primary and
secondary education supplemented by
industry-based training to prepare
front-line employees.

Strategies for human resources

competitiveness in Japan and
Germany (4/6)

Employee involvement and

empowerment: employees are involved
in management functions which include:

setting working hours,

introducing new technologies,
establishing compensation levels,
human-resource planning,
work design,
and the provision of training.

Strategies for human resources

competitiveness in Japan and
Germany (5/6)

Leadership at all levels: In

both Germany and Japan,
leadership occurs at all levels
and leadership training is
provided not just for managers
but also for front-line employees

Strategies for human resources

competitiveness in Japan and
Germany (6/6)

Teamwork: In Germany and

Japan, work done by teams of
employees and they also do:

the planning and designing of
work,

introduction of new
technologies,

Characteristics of World-Class
Organizations

Customer service.
Quality control and assurance.
Research and development/ new
product development
Acquiring new technologies
Team-based approach (adopting and
using effectively)

Characteristics of World-Class
Organizations ( continue)

Environmentally sound practices

Business partnerships and
alliances (Sony Ericsson)
Mergers (DaimlerChrysler)
Reengineering of processes
Outsourcing and contracting

How to be World-class
manufacturing

Competitive analysis strategies

(cost efficiencies in operations, speed
to market, research and development,
zero defects )
Production and supply chain
(collaborative planning, forecasting
and renewing)

World-class manufacturing:
What it takes?

Customization strategies (building

to order, customized mass production,
global sourcing and manufacturing,
etc.)
Electronic commerce strategies
(supply management, Internet
ordering, availability tracking by
Internet)

E-Commerce, Information Quality,

and Competitiveness

The use of E-Commerce as a business

strategy clearly has its advantages
Organizations that hope to gain the
benefit of e-commerce must make a full
commitment to information quality.
Poor information quality can be
costly.

Steps in establishing an effective

information quality program 1/2

Assessment All key business

processes should be systematically
reviewed to identify potential
information quality problems.
Prioritizing Change Once
potential problems have been
identified, they should be prioritized.
Those that have the greatest potential
payoff should be given the highest
priority.

Steps in establishing an effective

information quality program 2/2

Redesign and reeducation

Information systems and
processes should be
redesigned and personnel
should be trained.

Management by Accounting

Management by accounting
Managing an organizations
financial results instead of
managing the people and process
that produce those results.
Also called managing by the
numbers

Disadvantages of
Management by Accounting

It creates an analytically
detached approach to
decision making in which
managers study financial
printouts instead of gaining
the insight that comes from
first hand knowledge of the
situation.

Disadvantages of Management
by Accounting

It promotes a focus on shortterm cost reduction.

It makes for narrowly focused
managers who review every
problem from a finance and
accounting perspective.