BM1708

QUALITY AND GLOBAL COMPETITIVENESS

Competitiveness and the Marketing Factors that Affect Competitiveness
Competitiveness is the measure of how effective an organization meets the wants and needs of the
customers relative to other organizations that offer similar goods or services. The following are the ways
marketing influences competitiveness:
• Identifying consumer wants and/or needs is a basic input in an organization’s decision-making
process, and central to competitiveness. The idea is to achieve a perfect match between those wants
and needs and the organization’s goods and/or services.
• Price and quality are the key factors in consumer buying decisions. It is important to understand the
trade-off decision consumers make between price and quality.
• Advertising and promotion are ways organizations can attract buyers and inform potential
customers about the features of their products or services.

The Relationship Between Quality and Competitiveness

Companies that used to compete only on a local, regional, or national level may find the competition to
be more intense once they compete globally. This means that companies must elevate the quality of their
products if they wish to survive and become competitive on a higher level of market.

Cost of Poor Quality

• The costs of poor quality would disappear if systems, processes, and products were improved.
• It includes the cost involved in fulfilling the gap between the desired and actual product/service quality.
It also includes the cost of lost opportunity due to the loss of resources used in rectifying the defect.
• These costs include wastes, rejects, testing, reworks, customer returns, inspections, and recalls.

Factors of Operations that Affect Competitiveness

The following are some of the factors of operations that affect competitiveness of an organization:
• Product and Service Design. It is a key factor in consumer buying decisions. Consumers would often
criticize the product based on innovative presentation and timeliness of service delivery.
• Cost of an Organization’s Output. Costs affect pricing decisions and profits. The higher the cost of
operations for producing a product, the higher the price of the product to the market. Higher price
of the product may also affect the profits of the company since consumers would often consider
price in their buying decisions. Therefore, organizations must practice cost-reduction efforts in
terms of eliminating wastes and improving processes in business operations. Organizations that
maintain a lower cost of operations than their competitors have competitive advantage.
• Location. It is important in terms of cost and convenience for customers. Location near inputs can
result in lower input costs. Location near markets can result in lower transportation costs and
quicker delivery times. Convenience experienced by consumers and suppliers is important in all
business sectors.
• Quality. It refers to materials, workmanship, design, and service. Consumers judge quality in terms
of how well they think a product or service will satisfy its intended purpose. Customers are generally
willing to pay more if they perceive that the product or service has a higher quality than that of a
competitor.
• Quick Response. It is the ability of the organization to quickly deliver existing products and services
to a customer after they are ordered, and being able to quickly handle customer complaints.

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• Flexibility. It is the ability to respond to changes. Changes might relate to alterations in design
features of a product or service, to the volume demanded by customers, or the mix of products or
services offered by an organization. High flexibility can be a competitive advantage in a changeable
environment.
• Inventory Management. It is a competitive advantage by effectively matching supplies of goods
with demand.
• Supply Chain Management. It involves coordinating internal and external operations (buyers and
suppliers) to achieve timely and cost-effective delivery of goods throughout the system.
• Service. It involves after-sale activities which customers perceive as value-added such as delivery,
setup, warranty work, and technical support.
• Managers and Workers. They are the people at the heart and soul of an organization. Their
competency and motivation can provide a distinct competitive edge in terms of the ideas they
create.

Factors that Determine Global Competitiveness

• Relative Inflation. It refers to the rise in prices relative to available money. It means that you can get
less for your money than you used to be able to get. If the inflation rate (general increase in prices and
fall in purchasing value of money) is relatively lower than other countries, then over time, your country
will become more competitive due to higher demand for a cheaper product which will result to
increase in production of goods.
• Productivity. It is a measure of output per input. Through improved technology and education, a
country can enjoy higher labor productivity and therefore produce goods at a lower cost. Higher labor
productivity is the key to increase competitiveness and living standards at the same time.
• Exchange Rate. It refers to the value of one country’s currency in relation to another currency. The
movements in the exchange rate will determine competitiveness. A significant depreciation in
exchange rate will make exports cheaper and more competitive. An increase (appreciation) in the
exchange rate makes the foreign currency price more expensive.
• Tax Rates. It refers to the percentage at which an individual or corporation is being taxed. The tax rates
on labor and corporations will be a factor in determining competitiveness. Higher labor taxes will
increase the unit cost of labor faced by firms, resulting to increase in the price of goods and services
which will eventually lead to lower competitiveness.
• Cost of Doing Business. It refers to the expenses that a potential investor will incur for setting up a
business. The countries with more labor market regulations are less competitive since investors often
avoid huge amount of expenses in setting up a business.
• Infrastructure. It refers to the physical structures like building and roads that connect distance
between regions and integrates market to nearby locations. A key factor in determining
competitiveness is lower transportation expense incurred by the company in terms of product
distribution and delivery of raw materials because of efficient transport system. The advanced facilities
and infrastructure that give convenience to consumers and suppliers also indicate global
competitiveness.

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Quality Management Practices in Asian Countries

• 1980s – companies in Asia began to form Quality Control Circles (QCC) to establish better interaction
among employees and encourage people involvement as a way to gain input for continually improving
processes and products. By 1981, the National Productivity Board launched the productivity movement
to promote QCC at national level. This was successful with 2,534 circles and 18,525 members recorded
in 1984. For instance, Hewlett Packard (HP Computers) Malaysia introduced quality improvement
programs that had more than 44 circles by 1983. In Singapore, Bridgestone (S) Pte Ltd, an automobile
company, became the first to start QCC which was then followed by other companies. In South Korea,
a QCC convention was organized in support of the Korean Standards Association promotion of quality.
• 1990s – companies were able to adopt effective application of the principles of Total Quality
Management (TQM) and techniques to promote product and service quality. Many TQM activities in
Asia were started in private Japanese manufacturing companies as Total Quality Control (TQC). TQM
was later called Service Quality Management (SQM) by Asian management consultants. In Singapore,
the republic civil service embraced the service quality concept early in the 1990s. In Malaysia, the first
Civil Service Excellence Work Culture was launched in 1989 that introduced the concept of service
quality in the country. In Brunei, Indonesia, and Philippines, civil service was modified to include service
quality techniques.
• 2000s – Asian countries have adopted international standards as a way to ensure effective
environmental management. National quality awards similar to the Malcom Baldrige Award in the
United States and the Deming Prize in Japan were adopted by several of these Asian countries. The
Philippine Quality Award in the Philippines and the Prime Minister’s Award in Malaysia were
established based on the criteria for quality of Malcom Baldrige. The Singapore Quality Award was
started in 1993 and is supported by eight (8) founder members which include IBM, Motorola, Sony,
Texas Instrument, DHL, Development Bank of Singapore, Keppel Corporation, and NatSteel. In South
Korea, the Korea Quality Award was established for development of quality control cicles. As of now,
the leading companies throughout Asia are applying global best practices to maximize performance,
value, and quality.

References:
Chan, T., & Hesan, Q. (2000). Quality management practices in selected Asian countries: A comparative
study. Retrieved from https://pomsmeetings.org/meeting2000/sc8f1.doc
Momoh, O. (2017, September 15). Tax rate. Retrieved from
https://www.investopedia.com/terms/t/taxrate.asp
Paul Steel Baldrige Award and other national quality and excellence award programs experience. (n.d.).
Retrieved from http://www.baldrige21.com/Paul_Steel_-
_Quality_and_Excellence_Award_Programs_Experience.html
Pettinger, T. (2012). Factors that determine international competitiveness. Retrieved from
http://econ.economicshelp.org/2007/06/what-determines-international.html
Stevenson, J. (2015). Operations management: Twelfth edition. New York: McGraw-Hill Education
Schroeder, R. & Goldstein, S. (2018). Operations management in the supply chain: Seventh edition. New
York: McGraw-Hill Education

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