Chapter

32 Improving quality

service may be as important as the product itself. The way

Linked with: Setting operational objectives, Chapter
the product is sold, even where it is sold, all contribute to
26; Managing supply chains, Chapter 33.
the customer’s feelings about the quality of the product.
Quality is a moving target. A quality standard that is
Definition acceptable today may not be in the future. Customer
Quality means providing what the customer wants, at the
expectations of quality are constantly changing. As
right time, to the right standard of product and service, quality improves, customer demands also increase.
and therefore yielding high customer satisfaction. Quality:
● is satisfying (preferably beating) customer expectations
● applies to services as well as products

32.1 The importance of quality ● involves the whole business process, not just the

W. Edwards Deming, the American quality guru, said that manufacturing of the product
‘quality is defined by the customer’. The customer may ● is an ever-rising target.
insist on certain specifications, or demand exceptional
levels of customer comfort. Another definition of quality is ‘Quality has to be caused, not controlled.’ Philip
‘fit for use’. Although hard to define, there is no doubt that Crosby, American quality guru
customers are very aware of quality. Their perception of
quality is an important part of the buying decision.
Real business
Customers will accept some trade-off between price and
quality. There is, however, a minimum level of quality that Ryanair
is acceptable. The customer wants the product to work Between 1991 and 2013 Ryanair boss Michael
(be fit for use), regardless of the price. If the customers O’Leary built up the airline from almost nothing to
think that the quality is below a minimum level they will become Europe’s largest carrier. In all that time
not buy. Above the minimum level of acceptable quality, O’Leary focused on three things: low costs to make
customers will expect to get more as they pay more. low prices possible, plus two aspects of quality: on-
time arrivals and fewest bags lost. By 2005 Ryanair
The importance of quality is related to the level of was the best in Europe on both these measures of
competitiveness in the market. When competition is customer quality. Yet in 2013 O’Leary announced
fierce, the quality of the product can tip the balance that in future Ryanair would be more sensitive to other
Copyright © 2015. Hodder Education Group. All rights reserved.

in the customer’s decision-making. Yet the consumers’ aspects of customer quality – above all else being
perception of quality can change. For many years friendlier, smilier and keener to give customers a more
computer manufacturer Dell was hugely successful selling pleasant flying experience. Customers’ quality needs
had changed, and quality had become more important
directly to customers through the internet or newspaper
in customers’ purchasing decisions.
advertising. Yet when the stunningly successful launch of
the iPad turned people back towards Apple computers,
Dell’s famously high quality manufacture became
irrelevant in the face of Apple’s high quality design. ‘Reducing the cost of quality is in fact an opportunity
to increase profits without raising sales, buying new
For all customers, quality is about satisfying their equipment, or hiring new people.’ Philip Crosby,
expectations. The customer will take into account the American quality guru
total buying experience. Customer service and after-sales

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 32.2 The consequences 32.3 Methods of improving
of poor quality quality
Where the consumer has choice, quality is vital. A As the importance of quality for both marketing and
reputation for good quality brings marketing cost control has been recognised, there has been a
advantages. A good quality product will: growth in initiatives to control and improve quality.
● generate a high level of repeat purchase, and Techniques for quality control, such as inspection and
therefore a longer product life cycle statistical control, continue. They have been
supplemented by other policies aimed at controlling
● allow brand building and cross marketing
and improving quality. These include total quality
● allow a price premium (this is often greater than any
management, quality control and quality assurance.
added costs of quality improvements; in other words, The pros and cons of each of these policies are set out
quality adds value and additional profit) in Table 32.2.
● make products easier to place (retailers are more
likely to stock products with a good reputation). Total quality management
Total quality management (TQM) was introduced by
The consequences of a poor product or poor service for
American business guru W. Edwards Deming. He
the business are shown in Table 32.1.
worked with Japanese firms, and his techniques are
Table 32.1 Implications of poor product or service quality said to be one of the reasons for the success of
businesses such as Honda and Toyota. TQM is not a
Marketing costs Business costs management tool: it is a philosophy. It is a way of
Loss of sales Scrapping of unsuitable goods looking at quality issues. It requires commitment from
Loss of reputation Reworking of unsatisfactory the whole organisation, not just the quality control
goods – costs of labour and department. The business considers quality in every
materials
part of the business process – from design right
May have to price-discount Lower prices for ‘seconds’
through to sales. TQM is about building-in rather than
May impact on other Handling complaints/warranty
inspecting-out. For it to be successful, it should be
products in range claims
woven into the organisational culture.
Retailers may be unwilling Loss of consumer goodwill and
to stock goods repeat purchase
Quality control
Quality control (QC) is the traditional way to manage
‘Quality is remembered long after the price is quality, and is based on inspection. Workers get on
forgotten.’ Gucci slogan with producing as many units as possible, and quality
control inspectors check that the output meets
minimum acceptable standards. This might be done
Quality means by checking every product; for example, starting up
different things every newly built car and driving it from the factory
to a storage area. Or it might be done by checking
Outstanding every two hundredth Kit Kat coming off the end of the
Speedy, nofrills
products and
service service factory’s production line. If one Kit Kat is faulty,
inspectors will check others from the same batch and
Copyright © 2015. Hodder Education Group. All rights reserved.

– if concerned – may scrap the whole batch. The

Super-efficient Superbly problem with this system is that faulty products can
systems trained staff
slip through, and it stops staff from producing the
best quality: they just focus on products ‘good
enough’ to pass the checks. TQM is therefore a
Customer Customer
satisfaction delight
superior approach.
Quality assurance
Repeat Quality assurance (QA) is a system that assures
purchase
customers that detailed systems are in place to govern
Figure 32.1 Logic chain: quality is different things to different quality at every stage in production. It will start with
people the quality-checking process for newly arrived raw

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 Table 32.2 Pros and cons of TQM, QC and QA

Chapter 32  Improving quality

TQM QC QA
Should become deeply rooted in the company Can be used to guarantee that no Makes sure the company has a
culture (e.g. product safety at a producer of defective item will leave the factory quality system for every stage in the
baby car seats) production process
Once all staff think about quality, it should Requires little staff training, Some customers like the reassurance
Pros show through from design to manufacture and therefore suits a business with provided by keeping records about
after-sales service (e.g. at Lexus or BMW) unskilled or temporary staff (as quality checks at every stage in
ordinary workers needn’t worry production; they believe they will
about quality) get a higher-quality service and may
therefore be willing to pay more
Especially at first, staff sceptical of Leaving quality for the inspectors QA does not promise a high-quality
management initiatives may treat TQM to sort out may mean poor quality product, only a high-quality, reliable
as ‘hot air’; it lacks the clear, concrete is built into the product (e.g. clothes process; this process may churn out
programme of QC or QA with seams that soon unpick) ‘OK’ products reliably
Cons To get TQM into the culture of a business QC can be trusted when 100 per cent QA may encourage complacency; it
may be expensive, as it will require extensive of output is tested, but not when it suggests quality has been sorted,
training among all staff (e.g. all British is based on sampling; Ford used to whereas rising customer requirements
Airways staff flying economy from Heathrow test just 1 in 7 of its new cars; that mean quality should keep moving
to New York) led to quality problems ahead

materials and components. Companies have to put in Quality circles

place a documented quality assurance system. This
A quality circle is a group of employees who meet
should operate throughout the company, involving
together regularly for the purpose of identifying
suppliers and subcontractors. The main criticism of QA
problems and recommending adjustments to the
is that it is a paper-based system and therefore
working processes. This is done to improve the product
encourages staff to tick boxes rather than care about the
or process. It is used to address known quality issues
customer experience.
such as defective products. It can also be useful for
Improvement identifying better practices that may improve quality. In
addition, it has the advantage of improving staff morale
Customer expectations of quality are always changing.
through employee involvement. It takes advantage of
It is important that businesses seek to improve quality.
the knowledge of operators.
Therefore, staff need to be encouraged to put forward
ways in which their jobs can be done better. The Zero defects
Japanese term kaizen (meaning ‘continuous
The aim is to produce goods and services with no faults
improvement’) has become common in British
or problems. This is vital in industries such as
manufacturing.
passenger aircraft production or the manufacture of
surgical equipment.
32.4 Other quality initiatives
Real business
Six Sigma
Copyright © 2015. Hodder Education Group. All rights reserved.

A programme developed by America’s General Electric Boeing Dreamliner

Company, which aims to have fewer defective products In January 2013 all of Boeing’s new 787 Dreamliner
than 1 per 300,000. To achieve this, staff are trained to aircraft were grounded. With each plane having a list
become ‘Green Belt’ or ‘Black Belt’ quality experts. price of over $200 million this was a huge and costly
Although gimmicky, this has been followed widely by embarrassment for the American plane maker and its
global airline customers.
other companies.
The specific problem was a battery on the plane
that overheated and sometimes caught fire. In fact,
‘Quality is our best assurance of customer
though, the Dreamliner had already suffered far more
allegiance, our strongest defence against foreign teething problems than would usually be expected
competition, and the only path to sustained growth from Boeing.
and earnings.’ Jack Welch, General Electric chief

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 Benefits when improving quality:
● A great deal of research shows that staff like to take
The reason proved to be the way Boeing had
organised the huge operation of developing and
pride in their work, and that working to high quality
engineering the production process. Due to lack of standards is important. Management focus on
production capacity, 60 per cent of the design and quality, therefore, can boost morale and motivation.
production of key components had been outsourced ● Really high quality standards can boost price
to suppliers from around the world. Because Boeing’s levels remarkably. At the time of writing, Waitrose
own quality standards had not been applied uniformly, supermarkets has champagne at prices from £20 to
the company’s quality assurance and quality control £255 for a bottle; so customers are willing to pay
systems struggled to cope. £255 for a product they only need to pay £20 for.

Difficulties when improving quality:

32.5 Benefits and difficulties ● If quality control is to be effective it must balance the
of improving quality costs against the advantages; 100 per cent quality is
The traditional belief was that high quality was costly: possible, but it may make the product so expensive
in terms of materials, labour, training and checking that sales suffer.
systems. Therefore, managements should beware of ● Companies that rely on outsourced or temporary
building too much quality into a product (the term staff may struggle to achieve the high levels of
given to this was ‘over-engineered’). The alternative quality implied by a TQM culture. True quality is
approach, put forward by the American writer Philip about service as well as the product – which relies on
Crosby, is that ‘quality is free’. The latter view suggests the wholehearted commitment of staff
that getting things right first time can save a huge
amount of time and money.

Five Whys and a How

Question Answer
Why are some companies able to get Some companies can make high, long-term profits without
away with the appalling quality revealed needing customer loyalty. They rely on finding a steady
on TV programmes such as Cowboy stream of naïve customers; consumer protection laws try –
Builders or Watchdog? but often fail – to stop these things happening
Why may companies find it hard to correct Images tend to build up over time, so they can be hard to
an image of poor quality? shift. Change may require consistent quality programmes
over several years
Why is quality assurance more popular Quality assurance can be used to check the whole supply
these days than quality control? chain, rather than just the final product. That fits with the needs
of Tesco or Waitrose, who want to be sure of provenance
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Why does quality matter if you’re buying a It still matters, even if the customer may not mind about
£10 skirt from Primark? queues or scruffy displays. The skirt must be cut well enough
to fit properly and made of fabrics that look good
Why do new firms sometimes struggle They may have a very positive culture, but not yet have the
with quality? processes in place to ensure quality
How would you set about improving First, give each worker a complete unit of work, i.e. producing
quality at a struggling handbag maker? the whole bag without division of labour, which would be
hugely motivating; and drop any piecework payments

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 Workbook
Key terms
Competitiveness: the ability of a firm to beat its Trade-off: accepting less of one thing to achieve
competitors (for example, Galaxy is a highly competitive more of another (for example, slightly lower quality in
brand in the chocolate market). exchange for cheapness).
Right first time: avoiding mistakes and therefore Zero defects: eliminating quality defects by getting
achieving high quality with no wastage of time or materials. things right first time.

Evaluation: Improving quality

In recent years, there has been a change in the emphasis rewards in the marketplace. Companies have also
on quality. The quality business has itself grown. The found that the initiatives, especially where they are
management section of any bookshop will reveal several people-based, have brought other advantages: changes
titles dedicated to quality management. The growth of in working practices have improved motivation and
initiatives such as TQM and continuous improvement efficiency, and have reduced waste and costs.
goes on. The number of worldwide registrations for ISO This change in emphasis has not been without
9000 increases by more than 25 per cent each year. Not problems. The shift to a focus on the customer and the
all of these are from British businesses; there has been role of the employee could result in additional costs.
a rapid rise in overseas registrations. With an increase in Unless this results in increased profits, shareholders
the international awareness of quality, British businesses may feel that they are losing out. Some businesses have
will have to ensure that they continue to be competitive. found that changing cultures is not easy. Resistance
This growth in emphasis on quality has undoubtedly from workers and management has often caused
brought benefits to business. Increased quality brings problems.

Workbook
A. Revision questions
(30 marks; 30 minutes)
1. State two reasons why quality management is 5. Give two marketing advantages that come from
important. (2) a quality reputation. (2)
2. How important is quality to the consumer? (3) 6. What costs are involved if the firm has quality
problems? (3)
3. Suggest two criteria customers may use to judge
quality at: 7. What is Total Quality Management? (3)
a) a budget-priced hotel chain (2) 8. Outline two benefits of adopting quality circles
b) a Tesco supermarket (2) to a clothing chain such as Topshop. (4)
c) a McDonald’s. (2) 9. Outline two additional costs that may be
4. Why has there been an increase in awareness of incurred in order to improve quality. (4)
Copyright © 2015. Hodder Education Group. All rights reserved.

the importance of improving the quality

of products? (3)

B. Revision exercises
DATA RESPONSE
Horsemeat and food quality in 2013 was quickly forced to admit that one of its products
In January 2013 supermarkets were hit by an contained 30 per cent horsemeat. Discounter Aldi also
extraordinary scandal as it emerged that foods made of had to endure some tough headlines. Broadly, higher-
processed ‘beef’ actually contained horsemeat. Tesco priced retailers such as Waitrose, Sainsbury and Marks

201

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 & Spencer came out of the saga pretty well; Tesco, So what should Tesco have done? First, it should
Asda and Morrisons’ fared worse. In the 12 weeks to have switched its focus from public relations to
17 February Tesco’s market share slipped below quality management. Tesco shoppers probably
30 per cent for the first time in several years. believed that tough Tesco buyers went to suppliers,
So how could it happen? checked the quality standards, then negotiated
toughly on price. Clearly the checking part may
Amazingly, most supermarkets do not check the meat
have been a bit of a myth. To clear the air, the
when it arrives at their depots. This task is outsourced
company should have brought in a new policy of
(‘farmed out’) to companies approved by the British
checking at the producer, and then checked as
Retail Consortium. Inspectors go once to the source
products arrived at Tesco. In effect this would have
of supply, acting on behalf of all retailers. But in
been a full Quality Assurance regime. Having set the
evidence to a government committee in February
new policy up, it would then have been time to tell
2013, Paul Smith, a recently retired food inspector
the consumer.
told the committee: ‘The suppliers can select which
“approved inspection body” they use. They also pay
for the audit. Yes, they can pick which audit company,
the alleged policeman, they wish. In practice they The meat inspection workforce managed by
also pick the individual auditor by heaping praise and the Food Standards Agency has shrunk from
requesting the same individual for the next visit.’ a high point of 1700 - during the BSE and
E. coli crises in the 1990s - to around 800
today. This has been a direct consequence
Throughout the world, our customers want of the deregulatory policies of both the
safe, affordable products. Many also want to European Commission and UK Government
know that what they buy is sourced to robust to hand over more and more meat inspection
ethical and environmental standards. duties to the meat industry and dispense
We believe it is possible to provide for all with proper independent inspection.
our customers, whatever their needs, whilst Source: Unison (trade union)
upholding strong standards across our
business and in our supply chains.
Source: Tesco Social Responsibility Report Tesco knew perfectly well that government inspection
of food had been run down in recent years (see box).
So it should have been making greater efforts to protect
So despite the claims it makes in its Social its customers (and its own reputation). It seems to have
Responsibility Report, Tesco does nothing to check been very short-sighted in its approach to quality. It is
on its food supplies. Other companies such as likely to keep feeling the impact on its market share.
Waitrose may well do so, as they had no problem
with horsemeat contamination. Questions (25 marks; 30 minutes)
The consequence of this slack approach to quality 1. Explain Tesco’s performance at choosing effective
is clear in the impact of the scandal on food sales. suppliers. (9)
In the four weeks after the scandal fi rst hit, sales
2. To what extent is quality of importance to a
of frozen burgers were down (nationally) by over
business such as Tesco? (16)
Copyright © 2015. Hodder Education Group. All rights reserved.

40 per cent and sales of all ready meals were down

by 12 per cent.

C. Extend your understanding

1. To what extent should quality management be 2. To what extent is quality a major competitive
solely a matter for the production department? (20) issue in service businesses? (20)

202 Section 4 Decision-making to improve operational performance

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