1. Quality & Global Competitiveness - Ch. 2

Chapter 2

Syed. M. Ahmed, Ph.D.

Quality and Global Competitiveness


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

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


 Impact of Competitiveness on Quality of Life  Factors Inhibiting Competitiveness

 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

 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.


 At each successive level of competition, the quality of the competitors has increased.

 It is extremely important for a country’s business to be able to compete globally. When they can’t, 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?

 ABC’s 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.


 Example: Two companies ABC, Inc. and XYZ, Inc., both need to compete in the global market place in order to survive.

 XYZ’s 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 company’s overall costs.

Factors to consider when qualifying the costs of poor quality Syed. M. Ahmed, Ph.D.


 Reducing the costs associated with poor quality is mandatory for companies that hope to compete in the global marketplace. 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.

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.


2. Decide how to estimate the costs of these activities.

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 nation’s 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

Factors Inhibiting Competitiveness (1) Business/Government-Related Factors

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


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

 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

 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.


 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.

Education-Related Factors  The quality of a country’s 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) 1. 2. 3. 4. 5.



Most competitive countries in the world (2002): Japan Germany Switzerland Demark United States

Critical indicators of National Competitive Status

The assessment is based on a nation’s domestic economic strength, internationalization, government infrastructure, finance management, science and technology, and work force.

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.

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 organization’s competitiveness.

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.

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

Characteristics of World-Class Organizations (2) How to make an organization world-class? 1. Worker productivity (improvement) 2. Employee training and development

4. Employee benefits and perquisites 5. Codes of workplace conduct 6. Conflict resolution Syed. M. Ahmed, Ph.D.


3. Open communication between management and employees

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?

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.


1. Competitive analysis strategies (cost efficiencies in operations, speed to market, research and development supremacy, zero defects, real-time order management etc.)

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

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.


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

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 organization’s financial results instead of managing the people and process that produce those results.

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.


 Also called managing by the numbers.

 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. 4. Fundamental shift in labor-management relations.

Current Global Trends Syed. M. Ahmed, Ph.D.


3. Increasing potential for an interruption in the World’s oil supply.

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 country’s ability to compete in the international marketplace: 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.


1. An economy that is open to foreign investment and trade.

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) 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.

Global Disadvantages of U.S. Companies Syed. M. Ahmed, Ph.D.


Global Advantages of U.S. Companies

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)



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1. Quality & Global Competitiveness - Ch. 2

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