© 2005 by Nelson, a division of Thomson Canada Limited. 1 Consumer Stakeholders: Product and Service Issues Search the Web The American Society for Quality provides a web site with an aray of information on quality topics:

© 2005 by Nelson, a division of Thomson Canada Limited. 2 2 Chapter Twelve Objectives Describe and discuss the two major product issues: quality and safety Explain the role and functions of Health Canada Enumerate and discuss the reasons for the growing concern about product liability and differentiate strict liability, absolute liability, and market share liability Outline business’s responses to consumer stakeholders to include consumer affairs offices, product safety offices, total quality management (TQM) programs, and Six Sigma

© 2005 by Nelson, a division of Thomson Canada Limited. 3 Chapter Twelve Outline Two Central Issues: Quality and Safety Health Canada Food and Drug Safety Administration in Canada The U.S. Food and Drug Administration FDA Business Response to Consumer Stakeholders Summary

© 2005 by Nelson, a division of Thomson Canada Limited. 4 Introduction to Chapter Twelve The chapter focuses on product quality and safety, product liability, and business’s response to consumer stakeholders.

© 2005 by Nelson, a division of Thomson Canada Limited. 5 Quality and Safety Two Central Issues The Issue of Quality Driven by an increase in family income and intense global competition The Issue of Safety Driven by the public’s increasing concern with safety and business’s responsibility to address this concern

© 2005 by Nelson, a division of Thomson Canada Limited. 6 Quality Issues Performance Features Reliability Conformance Durability Serviceability Aesthetics Perceived quality Critical Dimensions of Product Quality

© 2005 by Nelson, a division of Thomson Canada Limited. 7 Quality Issues Ethical Dimensions of Quality Contractual theory Due care theory Social costs view

© 2005 by Nelson, a division of Thomson Canada Limited. 8 Safety Issues Historical View Caveat Emptor Caveat Vendor

© 2005 by Nelson, a division of Thomson Canada Limited. 9 Product Liability Reasons for the Growing Concern.. FIRST... Product liability has become a major issue because of the sheer number of cases where products resulted in injury, illness, or death and of financial awards. SECOND... We have become an increasingly litigious society. THIRD…Rise in the strict liability doctrine

© 2005 by Nelson, a division of Thomson Canada Limited. 10 Product Liability Extensions of the Strict Liability Absolute liability Market share liability

© 2005 by Nelson, a division of Thomson Canada Limited. 11 Product Liability Other Issues Product tampering and extortion Product liability reform –Consuer Demands and Product Liability

© 2005 by Nelson, a division of Thomson Canada Limited. 12 Health Canada Administers Food and Drugs Act –Releases advisories and warnings on food, drugs, and consumer products Provide information and policies on genetically modified foods Nutrition Labelling Health and safety risks posed by the sale and use of drug products, natural health products, medical devices, pesticides, etc. Product Safety Programme (PSP)

© 2005 by Nelson, a division of Thomson Canada Limited. 13 Product Safety Programme (PSP) Protects the health of Canadians through the management of health and safety risks associated with consumer products. –Consumer Product Safety (CPS) –Product Safety Laboratory (PSL) –Hazardous Products Act (HPA)

© 2005 by Nelson, a division of Thomson Canada Limited. 14 Product Safety Programme – Other Features Cosmetics – Manages the health risks associated with the use of cosmetics and personal-care products Workplace Hazardous Materials Information System (WHMIS) Consumer and Clinical Radiation Protection New Substances and Products of Biotechnology

© 2005 by Nelson, a division of Thomson Canada Limited. 15 Food and Drug Safety Administration in Canada Healthy Environments and Consumer Safety Branch (HECS) –Promote safe living, working, and recreational environments –Assess and reduce health risks posed by environmental factors –Regulate tobacco and controlled substances –Promote initiatives to reduce and prevent harm caused by tobacco and controlled substances –Regulate safety of industrial and consumer products

© 2005 by Nelson, a division of Thomson Canada Limited. 16 HECS’s Principal Programs Drug Strategy and Controlled Substances Product Safety Safe Environments Sustainable Development Tobacco Control Workplace Health and Public Safety

© 2005 by Nelson, a division of Thomson Canada Limited. 17 Health Products and Food Branch (HPFB) Minimizing health risk factors to Canadians Promoting conditions that enable Canadians to make healthy choices Major Programs: –Therapeutic products –Food, including all Health Canada nutrition activities –Natural health products –Biologics and Genetics

© 2005 by Nelson, a division of Thomson Canada Limited. 18 U.S. Food and Drug Administration Some major responsibilities... Regulate the labelling of foods Develop safety standards for drugs Conduct product recalls Premarket test new drugs Regulate safety of medical devices (implants, etc.)

© 2005 by Nelson, a division of Thomson Canada Limited. 19 Business’s Response to Consumers Consumer Affairs Offices Establishing Consumer Affairs Offices Product Safety Offices Establishing Product Safety Offices Total Quality Management Programs (TQM) Instituting Total Quality Management Programs (TQM)

© 2005 by Nelson, a division of Thomson Canada Limited. 20 Business’s Response to Consumers Consumer Affairs Offices (CAO) Basic mission is to heighten management’s responsibilities to consumer stakeholders Essential functions –Establish a database –Audit programs –Recommend programs, policies and practices –Establish effective communications

© 2005 by Nelson, a division of Thomson Canada Limited. 21 Business’s Response to Consumers CAO Factors for Success or Failure Proximity to CEO’s office Clear access to all information about the company’s customers and authority to create the information Availability of quantified information about consumers Accessibility to effective performance measures to evaluate all employees in the company

© 2005 by Nelson, a division of Thomson Canada Limited. 22 Business’s Response to Consumers Product Safety Offices Need for Greater Organization 1.Complexity of products 2.Subtlety of hazards generated during product use 3.Coordination problems in large organizations

© 2005 by Nelson, a division of Thomson Canada Limited. 23 Business’s Response to Consumers Levels at Which to Locate Product Safety Offices Divisional level Corporate level

© 2005 by Nelson, a division of Thomson Canada Limited. 24 Business’s Response to Consumers Other Functions of Product Safety Offices Set the tone for the product safety effort Structure and enforce penalties Develop links to other quality and safety initiatives Assist with product safety litigation Assist the regulatory liaison Set up product safety committees Perform safety audits and tests Design contingency plans for product recalls

Total Quality Management 13-23

© 2005 by Nelson, a division of Thomson Canada Limited. 26 Total Quality Management Sigma Six Version of TQM TQM on steroids –3.4 defects per million versus sigma four 6,000 defects per million

© 2005 by Nelson, a division of Thomson Canada Limited. 27 Total Quality Management

© 2005 by Nelson, a division of Thomson Canada Limited. 28 Absolute liability Consumer Product Safety Commission (CPSC) Contractual theory Delayed manifestation cases Due care theory Food and Drug Administration (FDA) Health Canada Market share liability Six sigma Social costs Strict liability Total quality management (TQM) Selected Key Terms