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Amity Business School

Business Policy
Strategic Management

….. Semester III

40 Contact
4 Credits
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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
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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

 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
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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
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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. If we produce it efficiently and economically, we will earn a profit, in which
you will share.”
- William Cooper Procter
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– 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, services, systems, process & technology
– Long term and continuous and is sensitive to the social responsibilities of
the enterprise
– Supporting ‘High Performance Culture through teamwork, trust &
– A program, that has a beginning & an end.
– It is a continuous journey.
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• Craftsmen… Early days, generations learning, own inspector.
• Early 20th Century… Unskilled repetitive, start of interchangeability.
• Ford Story…. Standardization, concepts for quality, Mass Mfg.
• Post War….. American Society for Quality 1944
Safety, Public interest ‘producer beware’
• Dr. Joseph Juran & Dr. 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, Learning system, Adaptability and speed of change
Environmental Sustainability, Knowledge Focus, Globalization
Customization & Differentiation, Shifting Demographics
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Some leaders of Quality

Joseph M Juran


Malcom Baldrige
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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.
• Determine the needs of those customers.
• Translate those needs into our language.
• Develop a product that can respond to those needs.
• Optimise the product features so as to meet our needs and customer needs.
• Quality Improvement
• Develop a process which is able to produce the product.
• Optimise the process.
• Quality Control
• Prove that the process can produce the product under operating conditions with minimal
• Transfer the process to Operations.
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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,
(2) strategic planning, (3) customer and
market focus,
(4) measurement, analysis and knowledge
(5) human resource focus, (6) process
management and
(7) results
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Edward Deming
• International Activities
• Statistician, Allied Mission to Observe the Greek Elections, January-April 1946; July-
October 1946 Consultant in sampling to the Government of India, January and
February 1947; December 1951; March 1971
Delegate from the A.A.A.S. to the Indian Science Congress, New Delhi, January 1947
Adviser in sampling techniques to the Supreme Command of the Allied Powers,
Tokyo, 1947 and 1950
Teacher and consultant to Japanese industry, through the Union of Japanese
Scientists and Engineers 1950, 1951, 1952, 1955, 1960, 1965
Member of the United Nations Sub-Commission on Statistical Sampling, 1947-52
Consultant to the Census of Mexico, to the Bank of Mexico, and to the Ministry of
Economy, 1954, 1955
Consultant., Statistisches Bundesamt, Wiesbaden, 1953
Consultant to the Central Statistical Office of Turkey, 1959-1962
Lecturer, London School of Economics, March 1964
Lecturer, Institut de Statistique de l'Universite de Paris, March 1964
Consultant to the China Productivity Center, Taiwan, 1970, 1971
Lecturer in Santiago, Córdoba (Argentina), and Buenos Aires, under the auspices of
the Inter American Statistical Institute, 1971.
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All Employees involved
Journey to TQM…. Empowerment
Quality Strategy

Quality Assurance
•Quality Systems ISO
•Quality Planning
Quality Control
•Quality Policy
•Quality Controls
•Quality Standards
•Problem Solving
•Statistical Controls
•Process Performance
•Treat Quality Problems


•Error Detection
•Unhappy Customer
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History of Quality ( Contd.)

• Quality awareness in U.S. manufacturing industry during

1980s: from “Little Q” to “Big Q” - Total Quality

• Malcolm Baldrige National Quality Award (1987)

• Disappointments and criticism

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History of Quality ( Contd.)

• Emergence of quality management in service industries,

government, health care, and education

• Evolution of Six Sigma

• Current and future challenge: keep progress in quality

management alive

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Contemporary Influences on Quality

• Partnering
• Learning systems
• Adaptability and speed of change
• Environmental sustainability
• Globalization
• Knowledge focus
• Customization and differentiation
• Shifting demographics
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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. price
• Manufacturing-based definition: conformance to specs

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Quality Perspectives
transcendent &
product-based user-based

value-based Design
and manufacturing-
services based

Information flow
Product flow
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Paradigm Shift

Management of Quality


Quality of Management
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Malcolm Baldrige
Criteria Weightage

• Leadership 12%
• Strategic Planning 8%
• Customer & Market Focus 8%
• Information & Analysis 8%
• Human Resources Development
& Planning
• Process Management
• Business Results
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Understanding of Criteria
1. Leadership
– Leadership System.. 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.
1. 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.
– Company Strategy.. 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.
1. Customer & Market Focus
– Customer & Market Knowledge.. How the company determines the long term
requirements and preference of target and potential customers and market and
anticipate needs to develop business opportunities .
– Customer Relationship & Satisfaction Enhancement..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.
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Understanding of Criteria (…contd.)

4. Information & Analysis
– Selection & Use of Information & Data…How the co. selects, manages and uses the
information and data needed to support key company process and improve the co’s
– Selection & use of comparative information & data.. How the company selects,
manages and uses comparative information data to improve co’s competitive position.
– Analysis & Review of Company’s Performance..How the co. analyses and reviews
overall performance to assess the progress relative to plans to identify key areas of

5. Human Resources Development & Management

– Work Systems.. 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.
– Employee Education Training & Development.. How the co’s training and education
addresses its plan and needs including building knowledge & capabilities & contribute to
improved employees’ performance and development.
– Employee Well-Being & Satisfaction..How the company maintains its work
environment and work climate to support the well-being, satisfaction and motivation of
all its employees
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Understanding of Criteria ( Contd.)

6. Process Management
– Management of Product & Service Processes..How the significantly modified and
customized products and services are designed. How the product/services delivery
systems are designed, implemented and improved.
– Management of Support Process.. How the co’s key support processes are designed,
managed and continuously improved.
– Management of Supplier and Partnering..How the co’s supplier and partnering
processes, performance and relationships are managed and improved.

7. Business Results
– Customer Satisfaction Results..How the co. performance on Customer Satisfaction
– Financial & Market Results….Co’s key financial & marketplace performance
– Human Resource Results…Co’s Human Resource results including employee well-
being, satisfaction, 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, operational
effectiveness and financial/market place and performance.
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The ability to positively influence people and

systems under one’s authority to have a meaningful
impact and achieve important results
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The Baldrige “Leadership Triad”


Leadership Operations

Customer and
Market Focus
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Executive Leadership
 Defining and communicating business directions
 Ensuring that goals and expectations are met
 Reviewing business performance and taking appropriate
 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
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Key Idea
Effective leadership requires five core
leadership skills:
• vision
• Empowerment
• Intuition
• self-understanding
• and value congruence.
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Leading Practices – Leadership

• Create a customer-focused strategic vision and clear quality
• 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
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Leadership System

• 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

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Key Idea

An Effective Leadership System respects the

capabilities and requirements of employees
and other stakeholders, and sets high
expectations for performance and
performance improvements.
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• Governance
…. The system of management and controls
exercised in the stewardship of an organization.
– Approving strategic direction
– Monitoring and evaluating CEO performance
– Succession planning
– Financial auditing
– Executive compensation
– Disclosure
– Shareholder reporting
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Leadership and Social

• Ethics
• Health, safety, and environment
• Community support
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Key Idea

Practicing good citizenship refers to

leadership and support—within the limits of
an organization’s resources—of publicly
important purposes, including improving
education, community health, environmental
excellence, resource conservation,
community service, and professional
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Leadership …..TQM relevance

• Definition
– Traditional
– Leadership for Quality … Assortment of behaviors
vision, hope, stimulation, mission, transformation dreams to
reality, stewardship, Integration, courage, communication,
consensual, conviction, empowering
deploying, motivating, motivating and tenacity.
• ‘Executive Leadership’-not the only one
– Changed Business Scenario & New Economy demanding Unit,
Team, 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.
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Leadership …..TQM relevance

• Effective Leadership
Five Core Skills– vision, empowerment, intuition, self-understanding & value
• Leadership Practices
– Customer Focus, Strategic vision, Quality value
– Creating sustainable leadership, environment, empowerment, innovate
– Setting high expectations, demonstrate substantial personal commitment and
involvement, missionary zeal and constancy of purpose
– Integrating quality values in daily values, extensive communication
– Integrate public responsibility and community support in business practices
• TQ Leadership Contrasts….. Details
• Leadership & Public Responsibilities
– Public Health, safety & environment
– Compliance
– Corporate Citizenship, Community education, welfare, conservation
– Industry Obligation to Community
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TQ Leadership Contrasts
Traditional TQ Leaders

• Plan Projects • Practice

– Make plans – Envision the future
– Organize resource – Optimize the resource
– Preach M.B.O – Participative management
• Push Products • Produce
– Lip service to quality – Exemplary quality
– Sell to customer – Service the customer
– Perform R&D – Innovate
• Control People • Motivate people
– Control through systems – Development, talent & system
– Reward conformance punish – Reward effort, skill
deviation development and empower
– Maintain status QUO – Continuous improvement
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Strategic Planning
“The process of envisioning organization’s future and
developing necessary procedures and operations to shape and
achieve that future”

• 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
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Strategic Planning …Influence of TQ culture

Leading Practices
• Top management, employees & even customers actively participate in
the planning process
• Systematic planning process for strategy development and deployment
including measurement, feedback and review.
• Gathering and analysis of variety of data external & internal factors
• Alignment of short-term action plans with long term strategic objectives.
• Derive human resource plans from strategic objectives and action plans

Strategy Development

Mission Environmental Action

Strategies Objectives
Scan Plans

Guiding Principle
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Definition of products and services, markets,
customer needs, and distinctive competencies

Solectron: “…to provide worldwide responsiveness to our

customers by offering the highest quality, lowest total
cost, customized, integrated, design, supply chain, and
manufacturing solutions through long-term partnerships
based on integrity and ethical business practices.”
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….Where the organization is headed and
what it intends to be.
– Brief and memorable - grab attention
– Inspiring and challenging - creates excitement
– Descriptive of an ideal state - provides guidance
– Appealing to all stakeholders - employees can identify with

“Be the best and continuously improve”
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Values (Guiding Principles)

Defines attitudes and policies for all employees, which
are reinforced through conscious and subconscious
behavior at all levels of the organization.

Pepsico: Integrity, Honesty, Teamwork, Balance,

Whirlpool: Respect, Integrity, Teamwork, Trust
Leadership, Customer Passion
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Environmental Assessment


• Customer and market requirements, expectations and opportunities

• Technological and other innovations
• Organizational strengths and weaknesses
• Financial, societal, ethical, regulatory and other potential risks
• Changes in global or national economy
• Factors unique to the organization, such as partner and supply
chain needs
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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.

•Action plans are things that an organization must do

to achieve its strategic objectives.
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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’

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Balance Scorecard
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Policy Deployment
(Hoshin Kanri)

• Top management vision leading to long-term

• Deployment through annual objectives and action
• Negotiation for short-term objectives and resources
• Periodic reviews

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Leadership and Organizational


Basic types of organizational structures

– Line organization
– Line and staff organization
– Matrix organization
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Key Idea
As more and more companies accept the process view of
organizations, they are structuring the quality organization
around functional or cross-functional teams.
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Caliberations …What the auditor will look for

Strategic Planning
– Customer & market driven quality ‘integrated into bloodstream’
– Integrated into the product, operations and service processes
– Operational Excellence to deliver on above
– Deployment to the right people with ‘smart’ objectives
– Organization’s ability to translate strategic objective into action plans

TQ aspects include
Customer Driven •Empowerment
Quality •Diffused Leadership
TQM way to implement strategy •Institutionalized
Operational •Innovation and
Excellence Experimentation
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Focusing on Customers
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Key Idea
To create satisfied customers, the organization
needs to identify customers’ needs, design the
production and service systems to meet those
needs, and measure the results as the basis for
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Importance of Customer
Satisfaction and Loyalty
“Satisfaction is an attitude; loyalty is a behavior”

• Loyal customers spend more, are willing to pay higher

prices, refer new clients, and are less costly to do business
• It costs five times more to find a new customer than to keep
an existing one happy.
• A firm cannot create loyal customers without first creating
satisfied customers.
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Key Idea

Customer wants and needs drive competitive

advantage, and statistics show that growth in
market share is strongly correlated with
customer satisfaction.
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Customer Satisfaction Model

Perceived Customer
quality complaints

Perceived Customer
value satisfaction

expectations Customer
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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
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Key Idea

Many organizations still focus more on

processes and products from an internal
perspective, rather than taking the
perspective of the external customer.
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Leading Practices

• Define and segment key customer groups and

• Understand the voice of the customer (VOC)
• Understand linkages between VOC and design,
production, and delivery
• Build relationships through commitments, provide
accessibility to people and information, set service
standards, and follow-up on transactions
• Effective complaint management processes
• Measure customer satisfaction for improvement
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Key Customer Groups

• Organization level
– consumers
– external customers
– employees
– society
• Process level
– internal customer units or groups
• Performer level
– individual internal customers
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Identifying Internal Customers

• What products or services are produced?

• Who uses these products and services?
• Who do employees call, write to, or answer
questions for?
• Who supplies inputs to the process?
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AT&T Customer-Supplier Model

Your Inputs Your Outputs Your

Suppliers Processes Customers

Requirements Requirements
and feedback and feedback

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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.
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Customer Segmentation
• Demographics
• Geography
• Volumes
• Profit potential
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Key Idea

Segmentation allows a company to prioritize

customer groups, for instance by considering
for each group the benefits of satisfying their
requirements and the consequences of failing to
satisfy their requirements.
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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 - amount of use before deterioration or
• Serviceability – speed, courtesy, and competence of
• Aesthetics – look, feel, sound, taste, smell
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Key Dimensions of Service Quality

• Reliability – ability to provide what was
• Assurance – knowledge and courtesy of
employees and ability to convey trust
• Tangibles – physical facilities and appearance
of personnel
• Empathy – degree of caring and individual
• Responsiveness – willingness to help customers
and provide prompt service
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Kano Model of Customer Needs

• Dissatisfiers: expected requirements
• Satisfiers: expressed requirements
• Exciters/delighters: unexpected features

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Key Idea
As customers become familiar with them,
exciters/delighters become satisfiers over
time. Eventually, satisfiers become
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Customer Listening Posts

• Comment cards and formal surveys
• Focus groups
• Direct customer contact
• Field intelligence
• Complaint analysis
• Internet monitoring

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Key Idea

Companies use a variety of methods, or

“listening posts,” to collect information about
customer needs and expectations, their
importance, and customer satisfaction with the
company’s performance on these measures.
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Tools for Classifying Customer


Affinity diagram Tree diagram

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Moments of Truth
• Every instance in which a customer comes in
contact with an employee of the company.

• Example (airline)
– Making a reservation
– Purchasing tickets
– Checking baggage
– Boarding a flight
– Ordering a beverage
– Requests a magazine
– Deplanes
– Picks up baggage
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Key Idea

An organization builds customer loyalty by

developing trust, communicating with
customers, and effectively managing the
interactions and relationships with customers
through approaches and its people. Companies
must carefully select customer contact
employees, train them well, and empower them
to meet and exceed customer expectations.
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Customer Relationship Management

• Accessibility and commitments

• Selecting and developing customer contact
• Relevant customer contact requirements
• Effective complaint management
• Strategic partnerships and alliances
• Exploiting CRM technology
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Key Idea

To improve products and processes

effectively, 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.
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Measuring Customer Satisfaction

• Discover customer perceptions of business
• Compare company’s performance relative to
• Identify areas for improvement
• Track trends to determine if changes result in

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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
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Survey Design

• Identify purpose
• Determine who should conduct the survey
• Select the appropriate survey instrument
• Design questions and response scales
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Key Idea

The types of questions to ask in a survey

must be properly worded to achieve
actionable results. By actionable, we mean
that responses are tied directly to key
business processes, so that what needs to be
improved is clear; and information can be
translated into cost/revenue implications to
support the setting of improvement
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Performance-Importance Analysis

Low High

Who cares? Overkill


Vulnerable Strengths
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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.
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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
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Customer Perceived Value

CPV measures how customers assess benefits—

such as product performance, ease of use, or
time savings—against costs, such as purchase
price,installation cost or time, and so on,in
making purchase decisions.
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Loyalty grid
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Non-competitive zone Highly competitive zone.
Regulated, Monopoly or few
Commoditization or low
substitutes. Dominant Brand
Equity. High cost of
differentiation. Consumer
switching. Powerful Loyalty Indifference. Many
Prog. substitutes. Low cost of
Proprietary Technology. Switching

→Relationship of Customer Satisfaction and Profitability

→Total Satisfaction for captive customers
→Tyranny of Averages
→Satisfying Target Segments
→Ultimate Source of Focus: affinity Groups
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Customer Loyalty Grid

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• “Organization that have not identified the customers they are targeting have a
special handicap in achieving total customer satisfaction and create many “merely
– Customer tell about only extra-ordinary experience
– Only on third of the ‘dissatisfied’ tell – but the talk alright.