Chapter 2

Quality and Global Competitiveness

Quality and Global Competitiveness

Syed. M. Ahmed, Ph.D.

Course Instructor: Dr. Syed M. Ahmed, Ph.D.

College of Engineering & Computing Florida International University, Miami, Florida

Lecture Outline
The relationship between Quality and Competitiveness Cost of Poor Quality Impact of Competitiveness on Quality of Life Factors Inhibiting Competitiveness
Quality and Global Competitiveness

Comparisons of International Competitors Industrial Policy and Competitiveness Technology and Competitiveness Human Resources and Competitiveness
Syed. M. Ahmed, Ph.D.

Characteristics of World-Class Organizations E-Commerce, Information Quality, and Competitiveness Management by Accounting: Antithesis of Total Quality Key Global Trends U.S. Companies: Global Strengths and Weaknesses

The Relationship Between Quality and Competitiveness

At each successive level of competition, the quality of the competitors has increased. In business, the competition is now moved from local, regional or national level to International level, which is making it tougher day by day. Now only those companies who are able to produce worldclass quality can compete at international level.
Syed. M. Ahmed, Ph.D.

Quality and Global Competitiveness

It is extremely important for a countrys business to be able to compete globally. When they cant, jobs are lost and the quality of life in that country declines correspondingly.

Cost of Poor Quality (1)

Quality costs money? Should quality be reduced to cope up with financial constraints? Example: Two companies ABC, Inc. and XYZ, Inc., both need to compete in the global market place in order to survive.
Quality and Global Competitiveness

ABCs executives take major cost-cutting initiatives such as eliminating quality audits, choose low-bid suppliers, cut back on R&D, etc.
Syed. M. Ahmed, Ph.D.

XYZs executives try to eliminate extra costs such as costs associated with later deliveries to customers, billing errors, scrap & rework, etc., without compromising on quality. Which company will survive in long run??

Cost of Poor Quality (2)

The costs of poor quality account for 15 to 30% of a companys overall costs. Reducing the costs associated with poor quality is mandatory for companies that hope to compete in the global marketplace.
Quality and Global Competitiveness

Factors to consider when qualifying the costs of poor quality

Syed. M. Ahmed, Ph.D.

Traditional Costs

Hidden Costs

Cost of Poor Quality (3)

Steps to measure the costs of poor quality 1. Identify all activities that exist only or primarily because of poor quality. 2. Decide how to estimate the costs of these activities.
Quality and Global Competitiveness

3. Collect data on these activities and make the cost estimates. 4. Analyze the results and take necessary corrective actions in the proper order of priority.
Syed. M. Ahmed, Ph.D.

Improvements in product or service features can lead to higher market share at a better price, which, of course, means higher revenue.

Impact of Competitiveness on Quality of Life

A nations ability to compete in the global marketplace has a direct bearing on the quality of life of its citizens.

Quality of Life Issues in the United States

Quality and Global Competitiveness

Syed. M. Ahmed, Ph.D.

Factors Inhibiting Competitiveness (1)

Business/Government-Related Factors

Emphasis on short-term profits fed by fear of unfriendly takeover attempts and pressure from lenders or shareholders.
Quality and Global Competitiveness

Excessive medical costs. Excessive costs of liability inflated by lawyers working on contingency fees.
Syed. M. Ahmed, Ph.D.

To overcome these business-related inhibitors, it requires business and government to work together in a positive, constructive partnership to enact policies that will reduce the non-value added costs to a minimum.

Factors Inhibiting Competitiveness (2)

Family-Related Factors Human resources are a critical part of the competitive equation. The more knowledgeable, skilled, motivated, and able to learn members, the better the labor pool will be.
Quality and Global Competitiveness

Family background play an important role in basic education of the kids. The countries with strong family values are found to be better in educating their kids and hence producing knowledgeable and smart workers.
Syed. M. Ahmed, Ph.D.

Education-Related Factors The quality of a countrys education system is a major determinant of the quality of its labor pool. The higher the quality of the labor pool, the higher the quality of entry-level employees.

Comparisons of International Competitors (1)

Most competitive countries in the world (2002): 1. 2. 3. 4. 5. Japan Germany Switzerland Demark United States
The assessment is based on a nations domestic economic strength, internationalization, government infrastructure, finance management, science and technology, and work force.

Quality and Global Competitiveness

Syed. M. Ahmed, Ph.D.

Critical indicators of National Competitive Status

Comparisons of International Competitors (2)

How the Government can help?
1. Provide incentives that encourage business to behave in ways that promote competitiveness. 2. Remove barriers that mitigate against competitiveness.
Quality and Global Competitiveness

Syed. M. Ahmed, Ph.D.

Essential Components of US Industrial Policy

Technology and Competitiveness

Technology is the physical manifestation of knowledge. In a competitive environment where knowledge is King, welldesigned technology can enhance an organizations competitiveness.
Quality and Global Competitiveness

Syed. M. Ahmed, Ph.D.

Competitiveness-enhancing manufacturing technologies

Human Resources and Competitiveness

The most valuable resources for enhancing competitiveness are human resources. Germany and Japan are the best examples of effective human resources utilization.
Quality and Global Competitiveness

Syed. M. Ahmed, Ph.D.

Strategies for human resources competitiveness in Japan and Germany

Characteristics of World-Class Organizations (1)

1. Customer service. 2. Quality control and assurance. 3. Research and development/ new product development 4. Acquiring new technologies 5. Innovation 6. Team-based approach (adopting and using effectively) 7. Best practices (study and use of) 8. Manpower planning 9. Environmentally sound practices 10. Business partnerships and alliances 11. Reengineering of processes 12. Mergers and acquisitions 13. Outsourcing and contracting 14. Reliance on consulting services 15. Political lobbying

Quality and Global Competitiveness

Syed. M. Ahmed, Ph.D.

Characteristics of World-Class Organizations (2)

How to make an organization world-class?
1. Worker productivity (improvement) 2. Employee training and development 3. Open communication between management and employees
Quality and Global Competitiveness

4. Employee benefits and perquisites 5. Codes of workplace conduct 6. Conflict resolution

Syed. M. Ahmed, Ph.D.

7. Employee satisfaction 8. Flextime arrangements 9. Management-employee-union relations 10. Child care

Characteristics of World-Class Organizations (2)

World-class manufacturing: What it takes?
1. Competitive analysis strategies (cost efficiencies in operations, speed to market, research and development supremacy, zero defects, real-time order management etc.)
Quality and Global Competitiveness

2. Production and supply chain (collaborative planning, forecasting and replenishment, collaborative manufacturing and product design, supplier-managed inventory etc.) 3. Customization strategies (building to order, customized mass production, global sourcing and manufacturing, etc.)
Syed. M. Ahmed, Ph.D.

4. Electronic commerce strategies (supply management, Internet ordering, status and availability tracking by Internet) 5. Compensation systems (product profitability, inventory levels, manufactured/delivered costs per unit, worker productivity, employee retention rates, etc.)

E-Commerce, Information Quality, and Competitiveness

Organizations that hope to gain the benefit of e-commerce must make a full commitment to information quality. Poor information quality can be costly.

Quality and Global Competitiveness

Steps in establishing an effective information quality program

1. Assessment All key business processes should be systematically
reviewed to identify potential information quality problems.

2. Prioritizing Change Once potential problems have been

Syed. M. Ahmed, Ph.D.

identified, they should be prioritized. Those that have the greatest potential payoff should be given the highest priority.

3. Redesign and reeducation Information systems and processes

should be redesigned and personnel should be trained.

4. Reintegration An ongoing process of smoothing out the

boundaries among the various redesigned processes.

Management by Accounting: Antithesis of Total Quality

Management by accounting Managing an organizations financial results instead of managing the people and process that produce those results. Also called managing by the numbers.
Quality and Global Competitiveness

Disadvantages of Management by Accounting

It creates an analytically detached approach to decision making in which managers study financial printouts instead of gaining the insight that comes from first hand knowledge of the situation.
Syed. M. Ahmed, Ph.D.

It promotes a focus on short-term cost reduction. It makes for narrowly focused managers who review every problem from a finance and accounting perspective.

Key Global Trends

1. No major traditional hot or cold war for the foreseeable future. This stability sets the stage for increased global trade. 2. No major banking disruptions. 3. Increasing potential for an interruption in the Worlds oil supply.
Quality and Global Competitiveness

4. Fundamental shift in labor-management relations.

Current Global Trends

Syed. M. Ahmed, Ph.D.

1. Growing irrelevance of distance. 2. Shifts in the rates of growth of countries. 3. Rise of magacities.

US Companies: Global Strengths and Weaknesses (1)

Factors that account for a countrys ability to compete in the international marketplace: 1. An economy that is open to foreign investment and trade.
Quality and Global Competitiveness

2. A government that minimizes control on business, but does a good job of supervising financial institutions. 3. A judicial system that works well and helps reduce corruption.
Syed. M. Ahmed, Ph.D.

4. Greater transparency and availability of economic information. 5. Higher labor mobility, which enhances productivity and thus living standards. 6. Ease of entry by new business.

US Companies: Global Strengths and Weaknesses (2)

Global Advantages of U.S. Companies
1. Strong entrepreneurial spirit. 2. Presence of a small capitalization stock market for small and midsized companies. 3. Rapidly advancing technologies. 4. Comparatively low taxes 5. Low rate of unionization 6. World-class system of higher education.

Quality and Global Competitiveness

Global Disadvantages of U.S. Companies

Syed. M. Ahmed, Ph.D.

1. 2. 3. 4. 5. 6.

Expanding government regulation. A growing underclass of have-nots. A weak public school system (K-12). A poorly skilled labor force and poor training opportunities. An increasing protectionist sentiment (to restrict imports). Growing public alienation with large institution (public and private)

Quality and Global Competitiveness

Syed. M. Ahmed, Ph.D.

Questions/Queries?