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Mar 3, 2010

Does Quality Lead to Better Business Results?

The effects of quality on business results are mixed; some firms have been wildly successful with their quality efforts and other companies have been unsuccessful in gaining bottom-line results. There are two primary reasons for this.

First, there are many variables that affect profitability besides quality. The firm might produce the highest-quality, obsolete product in the world. If the firm produces a high-quality product or service that no one wants to buy, quality management systems likely will not save it.
Second, many companies implement quality incorrectly. Quality improvement takes a long time, and many firms' desire quick returns on investment for quality train­ing programs. When these returns are slow in coming, the companies give up in mid­stream and wonder why their quality efforts were ineffective. At the same time, quality programs have been shown to be effective in a variety of cultures and industries when implemented correctly. Hence, the mixed results. As a result, we need to understand the relationships between quality and other variables.
Quality and Price : The relationship between price and quality has long been stud­ied. Indeed, the laws of supply and demand lead to a natural ordering of competing products on a price scale such that a superior product would be the most highly priced.
Quality and Cost: A fundamental difference exists between a low-price strategy, which is based on competitive pricing, and a low-cost orientation that is based on con­tinual learning and production competence.
Quality and Productivity: The relationship between quality and productivity is clearer and has been demonstrated over time. The elimination of waste results in higher productivity. Simplification of processes also results in flows that are simpler and of higher productivity.
Quality and Profitability: Many quality enthusiasts have declared that quality will always result in improved profitability. They will further state that those cases where quality does not lead to improved profits are the fault of the offending implementer.
Quality and the Environment: Another strategic imperative receiving increasing at­tention is the effect of business on the environment. Because of regulatory pressures— both domestic and international—firms realize they must integrate environmental concerns into their strategic plans.

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