Quality: The Business Strategy


Warren, Jim   (1988, ASQC)   Rockwell International, Troy, MI

Annual Quality Congress, Dallas TX    Vol. 42    No. 0
QICID: 3451    May 1988    pp. 382-388
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Article Abstract

It is human nature to want to be different, to be the one that thinks of a new idea and becomes successful. It is also human nature to want to change when it appears that others are changing. In a quest to be different and keep up with change businesses have some times abandoned the basics of providing quality goods and services for the "new" corporate strategies.

One of these strategies in portfolio management. Like a personal stock portfolio that is made up a variety of securities, portfolio management is when a corporation has a portfolio of businesses. There could be a number of different types of businesses in a corporate portfolio, consumer products, financial services, government industries, commercial industrial, aircraft, electronics, and so on. Such portfolios are intended to accommodate businesses at different stages of growth while also spreading the risk of rising and falling markets. In recent years there have been a number of corporations that have acquired new, and sometimes totally new and different businesses, in order to implement a portfolio management strategy.

When a corporation has a portfolio of businesses it also needs a method of evaluating the performance and potential profit contribution of the individual business units. One well known method for evaluating business units was developed in the late 70's by the Boston Consulting Group. The method, sometimes referred to as the Boston Consulting Grid, consisted of evaluating and categorizing each business unit according to its overall market share along with its potential growth inside the industry in which it participated. Once businesses were categorized, appropriate investment and operating strategies were applied in an effort to optimize long term corporate profitability. The problem was, and still is to a degree, that many corporate leaders have been so enamored with the portfolio strategies that they have taken their eyes off the basics of providing a quality product. Instead, they have attempted to maintain corporate profitability by the buying, selling, and resizing of businesses within the portfolio.

Parts of the automotive industry are a prime example of businesses that have fallen victim to these strategies and problems. In the early 1980's business school graduates were saying that the Automotive industry was a mature industry and lacked growth potential, while at the same time the Japanese and their suppliers were making plans to build new plants in the United States and sell cars in the capacity saturated market. While the consultants were telling U.S. companies to contract to stay profitable, the Japanese were expanding and investing in the United States.

Until recently, U.S. companies have only viewed quality as a defensive strategy, not an offensive one. In the past, if a company had poor quality it ended up with too many customer complaints and eventually the product would not sell. Quality was viewed as something you had to have to stay out of trouble. Quality control was basically an inspection function along with a score keeper that analyzed what was scrapped, reworked, or failed in the field. While US companies were caught up in the minutia of parts and specifications, the Japanese were successfully achieving superior quality levels and using quality as an offensive strategy to penetrate US markets.

American companies that are now faced with the dilemma of lost market share and lower profits are now asking how they can achieve the same Japanese quality levels. The first step in changing a company's quality levels is learning how to make quality an offensive strategy. The purpose of this paper is to discuss the Japanese use of quality, to compare it to some of the current business philosophies, and describe the initial steps necessary to make quality an offensive strategy.


Automobile industry

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