F 4 THE IMPORTANCE AND BENEFITS OF QUALITY

F 4 - THE IMPORTANCE AND BENEFITS OF QUALITY MANAGEMENT 1

Overview of key concepts • Quality is all about customer satisfaction. • Quality is important because if affects a customer’s perception on the business – therefore it can affect present and future sales. • There are several ways businesses can ensure quality is achieved – either through quality control systems or quality assurance systems. 2

Quality Definition: ‘Is a measure of excellence which is free from defects or significant variations. A product or service whose features consistently allow it to satisfy (or delight) customers. ’ Quality is a matter of personal opinion – so it is subjective and can vary from one customer to another. 3

Quality The quality of a product depends on its ability to meet customer requirements consistently. This will depend upon: • How well the needs have been defined (from market research) • How well the firm has designed the manufacturing process • How well designed the product is (the product’s USP) 4

Benefits of quality • Gaining a competitive advantage – if a business can create a product that is of higher quality than its competitors through a patented method, this will give them a CA • Impact on sales – if product meets customers’ demands then demand should rise (JLP) • Creating a USP – unique selling point can increase demand (The Ritz afternoon tea – tangible and intangible quality) • Impact on selling price – USP means higher prices will be charged; ‘perceived quality’ (M&S, Waitrose, Harrods, Hotel Chocolat) • Pricing flexibility – can charge higher prices or have a range of products for different target customers enabling business to have a range of quality products for each size of purse. (British Airways) • Cost reductions – less waste and therefore reduced costs which can be passed on to customers. • Firms reputation – not having a quality system in place can damage reputation. 5

Issues with any quality system • Costs – it is a costly business, especially admin costs • Training – the whole workforce may have to have a change of culture and training • Disruption to production – can cause major disruption when being implemented 6

Benefits of improving quality • Gaining a competitive advantage • Increasing sales volume • Creating a USP • More scope to increase selling price • Greater opportunity for pricing flexibility • Cost reductions • Greater brand loyalty and reputation 7

Difficulties of improving quality • Difficult to convince people there’s a problem • Difficulties in agreeing the best solution • Quality systems give greater responsibility to staff – may require changes in how they are managed or their approach – may not go down well • Resistance to change • Costly and time-consuming • Keeping pace with customer views on quality may be difficult • Expense (a business must ultimately decide if the improvements to quality will outweigh the costs) - Training Quality systems Information systems Testing Inspection Installing equipment 8