Is Quality Good Marketing or is Good Marketing Quality?

CASE STUDY FOR CHAPTER 1

Is Quality Good Marketing or Is Good Marketing Quality?

Quality is important to the employees of a Fortune 500 leisure furniture manufacturer and retailer.  Franchise owners are required to operate their stores with a focus on high quality, knowing that their license may be revoked if the corporation judges their quality to be inadequate. Franchise owners recognize that commitment to quality begins with man­agement and filters down to all areas of the busi­ness. Managers believe that if they cut corners, their employees are likely to do the same. They empha­size that things should be done correctly the first time and that there is always something that can be improved. They are never totally satisfied with the present level of quality. This commitment to the pursuit of excellence is passed down to every employee. The franchisor’s quality motto is “Excellence and quality are not destinations; they are journeys.” maker.

Quality efforts are made in all areas of the business in an attempt to achieve “Zero Unsatis­fied Customers.” The first thing a customer notices at each franchise store is its “curb appeal.” The parking lot is kept clean. An attractive sign dis­plays the mission of the company, which explains the company’s commitment to satisfying cus­tomers through service, selection, and value. When the customer enters the showroom, several displays of furniture are visible immediately. These displays, called vignettes, are small room settings including, for example, a sofa, on or two chairs, a coffee table, and an end table. Lamps and accessories are included in the vignettes, although the store carries very few such items and most are not available for purchase. Vignettes show the dif­ferent styles (country, traditional, contemporary, and transitional) that are available. The vignettes are intended to provide the customer with an “im­pression of quality” upon entering the store. Much care is taken in designing the vignettes, right down to the spacing between the pieces of furni­ture, and they are constantly monitored. The entire showroom is dusted and cleaned at least once a day; carpets and upholstered furniture are sham­pooed every month. The sales counter is kept neat and uncluttered. As one franchisee stated, “Never give a customer a reason not to buy.”

Training and continuing education of a high­ quality sales staff is a company priority.

The sales­person must believe in the store’s product and service quality and attempt to instill this in customers’ minds. The salesperson must attempt to understand customers’ needs and to satisfy them with the company’s products. All salespersons seek five key pieces of information about the customer. The first concerns the customer’s tastes, involving questions such as:

1. Have you been shopping for furniture recently?
2. How long have you been shopping?
3. Where have you been shopping?
4. What piece or pieces have you seen that you like?

The second is who is the purchase-decision maker. (In many cases, this person is not present.)

The third area is timing.  Does the customer need the merchandise by a certain date or for a particular reason?  The fourth piece of information is how much the customer wants to invest (not spend). Finally, the salesperson asks how the customer wishes to pay for the merchandise and offers several payment options. The salesperson sends each customer, whether a purchaser or not, a thank‑you note as a follow‑up.

The franchisor also emphasizes quality in warehousing. This includes handling of the product from the point of receiving until its shipment from the warehouse. Furniture received at the warehouse is inspected for defects, such as rips and scratches. If a defect cannot be repaired, the unit is promptly shipped back to the manufacturer. The next step is to steam out any bumps or creases that occurred in shipping. When furniture is delivered to a franchisee’s showroom, the vice president of merchandising is responsible for placing it in the showroom for proper price-tagging.

For customer delivery the store rents professional‑looking uniforms for its delivery personnel. The delivery equipment is well‑maintained, clean, and reliable. Trucks are cleaned every day and repainted frequently. The trucks are on a tight maintenance schedule in order to maximize reliability. Customers can request a guaranteed two‑hour delivery window. Delivery personnel call the day prior to the scheduled delivery to remind the customer of the time and to confirm that someone will be home. At the customer’s residence, delivery personnel must complete tasks specified on a checklist, including placing the furniture exactly where the customer wants it, confirming that items such as recliners are in working order, demonstrating proper operation when appropriate, and other tasks. The delivery person is not permitted to leave until the customer is satisfied with the product and the service. If there are any problems or complaints that cannot be resolved by the delivery person, he or she must contact the manager and arrange a solution.

Customers receive numerous guarantees, including lifetime parts warranties, seven‑day exchange privileges, and in‑home consultations. Follow‑up telephone calls ask customers about their feelings toward all aspects of their experience with the purchase. They are asked about store appearance, if the merchandise was in excellent condition when delivered, if it is sufficient to meet their needs, how the delivery personnel performed, and so on. As one franchise owner sums it up, “The best way to assure quality is through product inspection and market research.”

QUESTIONS TO ANSWER FOR HW1 FROM CHAPTER 1

1. Of what value in achieving quality are the actions this company takes in store appearance, warehousing, delivery, and customer relations? Can you think of other aspects of quality that have not been mentioned here? (10 Points)
2. Do you agree with the franchisee’s statement at the end of the case? Why or why not? (10 Points)
3. How would you address the question posed by the case title? (10 points)

CASE STUDY FOR CHAPTER 2

Quality in Practice: Toyota Motor Corporation, Ltd.

The Toyota brand name has earned an international reputation for quality. The roots of Toyota Motor Corporation, founded in 1937, stem from the Toyoda Automatic Loom Works. Sakichi Toyoda invented a loom with an automatic stopping function; whenever a thread broke or the machine ran out of thread, it stopped automatically. This approach was built into automotive assembly lines to improve quality and productivity and led to the development of the “Toyota Production System,” which has commonly become known as lean production. A significant feature of lean production is the practice of continuous improvement by every worker, demanding the questioning of every process and testing of all assumptions. Errors and defects are viewed as learning opportunities to remove waste and improve efficiency. In 1951, Eiji Toyoda instituted a system of creative suggestions based on the motto “Good Thinking, Good Products,” which is prominently displayed in every production facility. One example is the Rakuraku seat, a comfortable work chair mounted on the tip of an arm that allows a line worker to easily get into and out of cramped car-body interiors. In 2000, more than 650,000 suggestions were submitted—almost 12 per employee—and 99 percent were adopted.

At Toyota, everybody helps whenever they can. Even top and middle managers are well-known for getting their “hands dirty” by helping workers on the production line when necessary. Toyota uses games, competitions, and cultural events to promote its 3 C’s: creativity, challenge, and courage. It trains workers extensively, not only in job skills, but also in personal development that focuses on positive attitudes and a sense of responsibility. Toyota’s education system includes formal education, on-the-job training, and informal education.

Toyota is implementing a direct monitoring system that supports quality. For example, its French plant is connected by a broadband system to the head office, enabling it to transmit video, audio, and facility performance data. Engineers in Japan can monitor the data of the plant’s operation in real time, check machinery utilization rates, diagnose malfunctions, and provide ideas for improvement. Information technology and e-commerce are also used to expand relationships with suppliers and customers. For example, customers may request quotes and gather information that previously was only available to dealers.

Shotaro Kamiya, first president of Toyota Motor Sales, stated, “The priority in receiving benefits from automobile sales should be in the order of the customer, then the car dealer, and lastly the maker. This attitude is the best approach in winning the trust of customers and dealers and ultimately brings growth to the manufacturer.” The guiding principles of Toyota are as follows:

1. Honor the language and spirit of the law of every nation and undertake open and fair corporate activities to be a good corporate citizen of the world.
2. Respect the culture and customs of every nation and contribute to economic and social development through corporate activities in the communities.
3. Dedicate ourselves to providing clean and safe products and to enhancing the quality of life everywhere through all our activities.
4. Create and develop advanced technologies and provide outstanding products and services that fulfill the needs of customers worldwide.
5. Foster a corporate culture that enhances individual creativity and teamwork value, while honoring mutual trust and respect between labor and management.
6. Pursue growth in harmony with the global community through innovative management.
7. Work with business partners in research and creation to achieve stable, long-term growth and mutual benefits, while keeping ourselves open to new partnerships.

Toyota has approximately 40 production facilities in more than 20 countries and regions outside Japan. When Toyota began expanding outside of Japan, many believed that the culture could not be copied or applied to foreign cultures, especially in the United States. With a focus of incorporating the best elements of Japanese and local traditions, while avoiding the weaknesses of both, Toyota as proven that its approaches and culture can work everywhere.

One popular phrase at Toyota is “change or die.” The company continually seeks to redefine itself to adapt to changes in society and the business environment. Toyota’s recent vision is captured by the phrase harmonious growth—a harmony between man, society, and the environment.

We wish to make Toyota not only strong but a universally admired company, winning the trust and respect of the world. We must be a company that is accepted wholeheartedly by people around the world, who would think it natural if Toyota became No. 1 in size, since we provide attractive products that excel in environmental protection and in safety and thus contribute immensely to local communities. That is the goal of “Harmonious Growth” and what I regard as corporate virtue. – Hiroshi Okuda, Chairman

QUESTIONS TO ANSWER FOR HW1 FROM CHAPTER 2

1. What do Toyota’s guiding principles mean for its management system? In particular, how do they reflect the principles of total quality? (10 Points)
2. We noted that SSM Health Care learned from manufacturing companies in their quality journey. What can nonmanufacturing companies learn and apply from Toyota’s philosophy and practices? Suggest specific things that education and government might learn. (10 Points)

CASE STUDY FOR CHAPTER 3

Customer Focus at Amazon.com

Warren Buffett, the well-known financier and CEO of Berkshire Hathaway, has never been a big backer of technology businesses.¹ However, he owns $459 million worth of Amazon.com’s bonds, making him one of Amazon’s biggest debt holders. Buffet observes, “I’ve been using a computer for eight or ten years now and I still really pay for only three things on the Internet: The Wall Street Journal, online bridge, and books from Amazon.com. That they are one of only three companies online that have gotten money out of my pocket tells me they are doing something right.”

The concept of Amazon began in 1994 when Jeff Bezos, its founder and CEO, read a study that predicted the Internet would explode in popularity. He settled on selling books online because almost every book was already catalogued electronically, yet no physical bookstore could carry them all. Bezos has a rare talent for a relentless focus on the customer, and a studied disregard for short-term pressures to show results on the “bottom line.” The original Amazon model envisioned giving customers access to a gigantic selection without the time, expense, and hassle of opening stores and warehouses and dealing with inventory. However, Bezos quickly discovered that the only way to make sure customers get a good experience and that Amazon gets inventory at good prices was to operate his own warehouses so he could control the transaction from start to finish. In its 2002 Annual Report a letter from the 1997 Annual Report was reproduced, explaining Amazon’s customer-focused philosophy in these words:

From the beginning, our focus has been on offering our customers compelling value. We realized that the Web was, and still is, the World Wide Wait. Therefore, we set out to offer customers something they simply could not get any other way, and began serving them with books. We brought them much more selection than was possible in a physical store (our store would now occupy 6 football fields), and presented it in a useful, easy-to-search, and easy-to-browse format in a store open 365 days a year, 24 hours a day. We maintained a dogged focus on improving the shopping experience, and in 1997 substantially enhanced our store. We now offer customers gift certificates, 1-ClickSM shopping, and vastly more reviews, content, browsing options, and recommendation features. We dramatically lowered prices, further increasing customer value. Word of mouth remains the most powerful customer acquisition tool we have, and we are grateful for the trust our customers have placed in us. Repeat purchases and word of mouth have combined to make Amazon.com the market leader in online bookselling.²

In its 2002 Annual Report, Bezos’s letter made numerous points to explain how that vision of customer service had developed and expanded, including:

• We have deep selection that is unconstrained by shelf space.
• We turn our inventory 19 times in a year.
• We personalize the store for each and every customer.
• We trade real estate for technology (which gets cheaper and more capable every year).
• We display customer reviews critical of our products.
• You can make a purchase with a few seconds and one click.
• We put used products next to new ones so you can choose.
• We share our prime real estate, our product detail pages, with third parties, and, if they can offer better value, we let them.
• Customer experience costs that remain variable, such as the variable portion of fulfillment costs, improve in our model as we reduce defects. Eliminating defects improves costs and leads to better customer experience.³

Many of the customer-pleasing features of Amazon’s operations are not noticed, or even known, by Amazon’s customers. These fall into the categories of technology, order fulfillment, and retailing strategies. In technology, the company’s website has been, and remains, leading edge. In an effort to serve customer needs, Amazon was one of the early pioneers to develop software for collaborative filtering of customer data. Basically, the filter is used to suggest similar or related products to a customer after he or she has focused on a product or product category. For example, if a customer browses or purchases Managing for Quality and Performance Excellence, other books in quality management would then be suggested on the viewer’s Web browser. These suggestions are based on what other readers of the text had purchased, in addition to the target text. Web features and capabilities have expanded over the years, to include features such as “look inside the book” for a chapter preview, in-store pickup of orders, shipping choices (priority vs. regular), and affinity group selections (Wedding Registry, Baby Registry, personal Wish List, etc.).

In order fulfillment, the capabilities of its high-tech warehouses continue to drive costs down, as mentioned earlier. For example, Amazon has a nearly perfect process for sorting multiple item orders. As it expands its offerings and adds more retail partners, Amazon’s fulfillment capabilities pay dividends to its partners, as well as adding revenues to Amazon. By reducing the time it takes to get all the items in an order into the sorting system, Amazon shipped 35 percent more units with the same number of people than it had in earlier years.⁴

Its retailing strategy is based more and more on partnerships with those who, in most businesses, would be considered competitors. Amazon proclaims that it seeks “to offer Earth’s Biggest Selection and to be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online.” However, at any time, its competitor-partners may be offering the same item through their linked websites at a different price. For example, when a book is being viewed, the web page will also permit the viewer to go to a linking web page of a partner’s book company, where the same title used (or even new) book is being sold for a lower price. Its partners include well-known retailers such as Borders Books, Waldenbooks, Waterstone, Target Stores, Lands’ End, and thousands of other lesser-known organizations, large and small. In fact, through what is called their Associates Program, Amazon.com provides a link to 900,000 websites carrying specialty items and where online auctions are taking place every day.

With millions of customers and potential customers accessing its global sites in the United States, the United Kingdom, Germany, Japan, and Canada daily, Amazon.com’s sophisticated technology allows it to build an in-depth and potentially valuable database of many of its customers. In 1999, Amazon.com experimented with a highly controversial feature on its website. It started featuring thousands of individual bestseller lists categorized by Zip codes, workplaces, and colleges—wherever its customers were ordering from. With a mouse click on its website, browsers could peek behind the scenes at the books that specific groups were reading, the compact discs they were listening to, and the videos they were watching. Amazon described it as ‘’fun,’’ happily announcing the feature, Purchase Circles, in a press release. Soon, however, citing customer complaints, the company began backtracking. Customers were allowed to opt out of having their data collected, as long as they were savvy enough to read the fine print and send an e-mail to the company. Companies could choose not to be included by sending a fax.⁵ Despite the controversy, Amazon .com still has Purchase Circles on its website.

QUESTIONS TO ANSWER FOR HW1 FROM CHAPTER 3

1. How does Amazon.com’s CRM software help it to gain market share and maintain its competitive advantage? (10 points)
2. How are operating efficiencies realized in order fulfillment activities of Amazon.com? Will costs continue to fall, given that their warehouses are currently operating at less than 50% of capacity? (Note: This measure is expected to change over time, depending on the state of the economy.) (10 points)
3. What are the customer privacy risks, besides the ones mentioned in the case, that Amazon.com must guard against in order to continue to grow its business? (10 points)

CASE STUDY FOR CHAPTER 4

Nordam Europe, Ltd.

Nordam Europe, Ltd. is a joint venture between The Nordam Group, Inc., and GE. Aircraft Engine Services, Ltd. The Nordam group is an acknowledged leader in aircraft component manufacturing and repair with facilities on three continents, and is the largest privately held FAA-approved repair station in the world for composite, aircraft structures. Some of its customers include: General Electric, British Airways, FedEx, DHL, and Air France. The Blackwood, Wales facility’s primary role is the overhaul and repair of jet engines. The Blackwood division employs 180 workers, 16 of whom are aged 50 and over.

The company has a strong, though brief, history of adoption and practice of equal opportunity in its hiring and HR practices. The company’s Equal Opportunities policy prohibits hiring, placement, or dismissal based on gender, race, religion, or age. The HR Department is currently in the process of reviewing most of the company’s HR policies in order to develop a Staff Handbook containing all employee related policies. The policies were originally set up in 1997, when the company was formed. Approval of the revised policies will be done by the managing director and the Head of Support Services. A systematic process is also being set up to review all HR policies annually.

The company’s early HR policies were developed in a period of rapid expansion. The internal promotion of the Head of Support Services as the senior HR manager has resulted in development of a new, systematic approach towards upgrading all aspects of employee relations management. With a non-discriminatory HR process, the company will continue to judge all employees on the basis of their ability, attitude, skills, commitment, and general approach to work.

Recruitment

In the past, Nordam Europe had used an employment agency for recruitment, but recently it has set a policy to place all recruitment advertising for operative staff with the local JobCentre, a government supported agency. Nordam continues to use some employment agents to fill certain positions, and at the senior management level, the company has made use of a headhunting agency. The HR department has been vigilant in avoiding the use of direct or indirect reference to age or other bias in advertising. In addition, it develops both job and person profiles, again ensuring that there are no age-related or other discriminatory descriptions.

Selection and Retention

Nordam Europe’s business is heavily dependent on a high level of safety, quality, and working to precise standards in order to maintain aircraft jet engine nacelles and thrust reversers. Nordam continues to work on policies that will provide stability in its workforce. The following is a brief summary of the company’s selection process.

1. Applicant’s résumés are received.
2. Screening of applicants is performed by a departmental manager and a personnel officer to develop a short list of those they would like to interview. Suitability for the job is assessed by reviewing the individuals’ background and relevant job or technical experience. The process avoids any consideration of race, gender, nationality, disability, religion, or age.
3. The short-listed applicants are invited for interview with the departmental manager and personnel officer. The latter is a trained, experienced interviewer who provides consistency within the interviewing process, ensuring that equal opportunity issues are taken into consideration where appropriate. The company is clear that all decisions relating to job offers are made on the basis of suitability for the post and that age, or other non-job related factors, are irrelevant.

Nordam Europe’s Head of Support Services was voluntarily separated from his previous job after 30 years in the automotive industry, where he worked primarily in finance, administration, and operational areas. He sought alternative work in those areas. He circulated his résumé to numerous companies, but was concerned that his age (50) would count against him. The individual was pleased to be asked to visit Nordam Europe for an informal chat. He was later surprised to be offered a role in the production-engineering department. Although new to production engineering, Nordam felt that he would be able to make a valuable contribution to the business, because of his previous experience and administrative skills. He began in production engineering on a three-month temporary contract, but after approximately four weeks, Nordam recognized his capabilities and offered him a permanent position within the company, which he accepted.

Training and Development

Nordam Europe engages in extensive training and development. Because of the industry’s need to maintain safety and precision standards in aircraft components, there are ongoing training requirements. These are related to technological advances in the context of repairs to aircraft engine nacelle and thrust reversers. All new employees receive a copy of Training and Development Policy Statement upon company induction. The annual staff appraisal system includes performance measurement and provides an opportunity to identify training and development needs in line with the company’s business objectives. Shop floor workers are expected to take training, particularly where training is required to maintain their technical approvals to work on jet engines. All workers have been found to be eager to receive the training made available.

Promotion

Because of the newness of the company, a formal promotion structure has not been developed, although a few individuals have been promoted to fill key posts, when vacated. Age is never a factor in selection for promotion. The post of Head of Support Services was created in 1999. As mentioned, the individual who was hired for the position in production engineering had broad experience in finance, administration, and operational areas in the automotive industry. He was promoted to Head of Support Services. Later, the Head of Support Services was invited by the new managing director to take responsibility for the company’s Human Resource Department. Despite him not being an HR specialist, the company felt that his previous experience would provide a good core competence, particularly in the area of “managing people.” Thus, the previous experiences of an older worker was recognized by a company and used to good effect in filling a variety of posts. As the Head of Support Services said, “I was able to offer a range of experiences and a high degree of flexibility to an organization that was developing and growing.”

Redundancy (Layoff) Policy

Recently, the company faced the situation of having to make several employees redundant (British term for layoffs). The company’s redundancy policy had several options including seeking volunteers, a reduction in the scale of working and the application of objective selection criteria. The objective selection criteria were used in this situation. No worker was selected for redundancy on the basis of their age.

QUESTIONS TO ANSWER FOR HW1 FROM CHAPTER 4

1. How do the approaches used by Nordam Europe seem to support high performance work, drawing upon the ideas presented in this chapter? (10 points)
2. How do employee education, training, and development address the organizational needs associated with new employee orientation, diversity, ethical business practices, and management and leadership development? (10 points)

NOTE: Adapted from http://www.dwp.gov.uk/age-positive/ by permission of Age Positive/Department for Work and Pensions.