Chapter 5 TQM

Competitive Advantage and Strategic

Management for Performance Excellence

Chapter 5

Competitive Advantage denotes a firm’s ability to achieve market superiority over its competitors.

Strategy is the pattern of decisions that determines and reveals a company’s goals, policies and plans to meet the needs of its stakeholders.

Strategic Planning is the process by which the members of an organization envision its future and develop necessary procedures and operations to carry out that vision.

Quality, Competitive Advantage and the Bottom Line

1. A strong competitive advantage is driven by

customer wants and needs.

2. A strong competitive advantage makes a

significant contribution to the success of

the business.

3. A strong competitive advantage matches the

organization’s unique resources with the

opportunities in the environment.

4. A strong competitive advantage is durable and

lasting and difficult for competitors to copy.

5. A strong competitive advantage provides a basis for

further improvement.

6. A strong competitive advantage provides direction

and motivation to the entire organization.

Quality and the Bottom Line

Source of Competitive Advantage

2 basic types of competitive advantage

1. Low Cost

2. Differentiation

Cost Leadership Early manufacturing involvement in the design

of the product. Product design to take advantage of

automated equipment. Limited product models and customization in

distribution centers rather than in the factory. A manufacturing system designed for a fixed

sequence of operations.

Differentiation

People

Quality and Differentiation Strategies

• Superior product and service design,

• Outstanding service,

• High agility,

• Continuous innovation, and

• Rapid response.

Competing on Superior Product Design

Useful techniques of quality engineering:o Concurrent engineering, in which engineering and

production personnel develop product designs that are both functional and easy to manufacture.

o Value analysis, in which the function of every component of a product is analyzed.

o Design reviews, in which managers assess how well the design relates to customer requirements; and

o Experimental design, in which formal statistical experiments are applied.

Role of Quality in Product Design

Competing on Service

5 key dimensions of service quality:o Reliability The ability to provide what is promised,

dependably and accurately.o Assurance The knowledge and courtesy of employees and

their ability to convey trust and confidence.o Tangibles The physical facilities and equipment, and the

appearance of personnel.o Empathy The degree of caring and individual attention

provided to customers. o Responsiveness The willingness to help customers and

provide prompt service.

Role of Quality in Service

Competing on AgilityAgility is the capacity for flexibility and rapid

change to product variety.Flexibility means adapting successfully to

changing environmental conditions and process requirements.

Variety refers to the ability to produce a wide range of products and options.

3 types of Products:• Custom Products, generally made in small

quantities, are designed to meet customer’s specification wisely.

• Option-oriented products are unique configurations of subassemblies that are designed to fit together.

• Standard products are made in larger quantities.

Role of Quality in Agility

Competing on Innovation

Role of Quality in Innovation The criteria are non-prescriptive. Customer-driven quality emphasizes the

“positive side of quality” Workforce focus stresses employee and also

encourages creative approaches to improve employee.

Continuous improvement and learning are integral parts of the activities of all workgroups.

The focus on future requirements of customers encourages companies to seek creative ways to serve their patrons.

Competing on Time

Cycle Time refers to the time it takes to accomplish one cycle of a process.

Role of Quality in Time Competitiveness

Information and Knowledge for Competitive AdvantageOrganizations need performance measures for three reasons:

o To lead the entire organization in a particular direction; that is, to drive strategies and organizational change;

o To manage the resources needed to travel in this direction by evaluating the effectiveness of action plans; and

o To operate the processes that make the organization work and continuously improve.

Balanced ScorecardThe term coined by Robert Kaplan and David Norton of

Harvard Business School.• Financial Perspective: Measures the ultimate results that

the business provides to its shareholders.• Internal Perspective: Focuses attention on the

performance of the key internal processes that drive the business.

• Customer Perspective: Focuses on customer needs and satisfaction as well as market share.

• Innovation and Learning Perspective: Directs attention to the basis of a future success – the organization’s people and infrastructure.

Strategic Planning for Performance Excellence

Quality and Performance Excellence as a Strategic focus.

Quality in the Process of Strategic Planning.

Quality in the Process of Strategic Planning Plan for the long term and understand

requirements that might affect the organization’s future opportunities and directions.

Project the future competitive environment. Develop action plans and deploy resources. Ensure that deployment will be effective.

Strategic Planning

2 Principal Activities

Strategy Development

Strategy Implementation

Strategy Development The MISSION of a firm defines its reason for

existence. The VISION describes where the organization

is headed and what it intends to be. The VALUES or GUIDING PRINCIPLES directs

the journey to a vision by defining attitudes and policies for all employees that are reinforced through conscious and subconscious behaviour at all levels of the organization.

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.

Strategy Implementation

Linking Human Resource Plans and Business Strategy

Hoshin Planning / Policy Development

Hoshin means policy or policy development. Policy development is a systems approach to managing change in critical business processes.

The Seven Management and Planning Tools

Affinity DiagramThe Affinity Diagram is a tool for organizing a large

number of ideas, opinions and facts relating to a broad problem or subject area.

Interrelationship DigraphAn Interrelationship Digraph identifies and explores causal

relationships among related concepts or ideas.

Tree DiagramA Tree Diagram maps out the paths and tasks necessary to

complete a specific project or reach a specified goal.

Matrix DiagramsMatrix Diagrams are “spreadsheets” that graphically

display relationships between ideas, activities or other dimensions in such a way as to provide logical connecting points between each item.

Matrix Data AnalysisMatrix data analysis takes data and arranges them to

display quantitative relationships among variables to make them more easily understood and analyzed.

Process Decision Program ChartA Process Decision Program Chart(PDPC) is a method for

mapping out every conceivable event and contingency that can occur when moving from a problem statement to possible solutions.

Arrow DiagramArrow Diagram is used to sequence and schedule project

tasks.

Core Competencies and Strategic Work System Design Work Systems Core Competencies

Technology expertiseUnique service offeringsA Marketplace nicheParticular business acumen

Outsourcing Vertical Integration

Santiago, Luigi D.

Sarabia, Maricon C.

Chapter 5

Competitive Advantage and Strategic Management for Performance Excellence