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ENGM 620: Quality Management

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1 ENGM 620: Quality Management
Session Four – 18 September 2012 Quality and Strategy

2 Mission & Strategy Def: The corporate mission outlines a firm’s values, intended markets and product, broad goals and objectives, core competencies, and strategic capabilities. Def: The corporate strategy states how a firm will achieve its goals and objectives

3 What is Strategy? Distinguishing strategy from tactics:
Strategy is the overall plan for deploying resources to establish a favorable position. Tactic is a scheme for a specific maneuver. Characteristics of strategic decisions: Important. Involve a significant commitment of resources. Not easily reversible.

4 Sources of Competitive Advantage
COST ADVANTAGE Similar product at lower cost COMPETITIVE ADVANTAGE Price premium Differentiation through quality Focus through quality Quality as a core competency from unique product DIFFERENTIATION ADVANTAGE 6

5 The Impact of Quality on Profitability
ROI (%) Relative Price Relative Direct Cost Relative product quality Low 33% % High Relative product quality Low 33% % High Relative product quality Low 33% % High Low 25% % High Relative market share Low 25% % High Relative market share Low 25% % High Relative market share Conclusion: Increases in quality add more to price then they do to cost. 34

6 Why is leadership crucial?
When goals are set, one of three things will occur: People will achieve the goals and incur positive results People will distort the data People will distort the system From the textbook…

7 Effectiveness and Efficiency
Leaders Doing Right Things Ineffective Effective Managers Doing Things Right Death (fast) Success (slow) Survival

8 Managing Complex Change
Confusion Skills Incentives Resources Action Plan Change Vision Anxiety Gradual Frustration False Starts

9 Leading Practices (Leaders)
They create a strategic vision and clear quality values that serve as a basis for business decisions at all levels of the organization. They set high expectations. They demonstrate substantial personal commitment and involvement in quality, often in a missionary-like fashion. They integrate quality values into daily leadership and management. They sustain an environment for quality excellence. Leadership is the process by which a leader influences a group to move towards the attainment of superordinate goals.

10 Power The many forms include: The power of expertise Reward power
Coercive power Referent power Legitimate power For followers to have power, leadership must share power. As a result leadership is about the sharing of power.

11 Dimensions of Leadership
Knowledge Diversity, learning style, ethics, coping Communication Conflict mgmt, teaming, motivating, Planning Decision making, evaluation, task/time mgmt Vision Assessing internal, external environments, identifying opportunities

12 Discussion What are some of the ways leaders resolve conflict in organizations? Which of these seem to be more effective? Video – Stanford Executive Briefing, Implementing Strategy with Jennifer Chatman, edited to 15 minutes norms

13 Costs of Quality Prevention Costs Appraisal Costs Failure Costs
Failure costs – internal and external



16 Strategic Process Strategy Formulation Strategy Implementation Mission
& Strategic Goals Competitive Analysis * Strengths * Weakness * Opportun * Threats Specific Strategies * Corporate * Business * Functional Carry Out Plans Maintain Control Assess Environmental Factors Organizational

17 One of the Tools Competitive Analysis SWOT Strengths Weaknesses
Opportunities Threats

18 Macroprocesses Inspect Customer Juran anatomy of macroprocess does not match that of the functional organization Functional goals often at a heavy price of macroprocess There should be a clear responsibility for macroprocess

19 Forced Choice Model Organization Position Mission Objectives
Strengths, Weaknesses Forecast Operational needs Major Future Programs Environmental Assessment Economic Environment Key regulatory issues Major technology forces Opportunities, threats Competitor strategies Strategic Options Action Plans Contingency Plans

20 Hoshin Kanri or Policy Deployment
The Company develops a year plan The Senior Executives develop the current years objectives. Catchball occurs The process is interactive Teams report up Management delivers feedback Hoshin is Japanese for a compass, a course, a policy, or a plan Kanri refers to management control Catchball describes the interactive nature of the Hoshin planning process involves reporting from teams and feedback from management

21 Leading Practices (Strategic)
Top management and employees all actively participate in the planning process. They customer wants and needs to drive the strategy. They involve suppliers in the strategic planning process. They have well-established feedback systems for continuous measurement and re-evaluation of the planning process.

22 Best (Better?) Practices
Control the quality and operational performance of key processes used to produce and deliver products Identify root causes of variation, make corrections, verify results Continuously improve processes to achieve better quality, cycle time, and performance Set “stretch goals” and make extensive use of benchmarking and reengineering

23 Strategy, Quality, and the Supply Chain
Logistics? When shall we ship? What mode of transportation shall we use? How do we optimize our shipping practices?

24 Strategy, Quality, and the Supply Chain
Suppliers? Who are our preferred suppliers? What is our process for supplier selection? How do we develop suppliers? How do we link with our suppliers? Do we source globally?

25 Strategy, Quality, and the Supply Chain
Inventory management? Where do we optimally store inventory How much? How long? Do we have perishable stock? Do we carry safety stock? ARE we maintaining good levels of service?

26 Discussion Why might the forced choice model be useful for companies inexperienced in strategic planning? Video – Stanford Executive Briefing, Implementing Strategy with Jennifer Chatman, edited to 15 minutes norms

27 Discussion What is the concept of catchball?
Video – Stanford Executive Briefing, Implementing Strategy with Jennifer Chatman, edited to 15 minutes norms

28 Discussion Juran argues for both incremental improvements and breakthrough thinking in the strategic plan. Do you agree? Video – Stanford Executive Briefing, Implementing Strategy with Jennifer Chatman, edited to 15 minutes norms

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