Chapter 1: Managing for Quality

Quality is the standard for measurement.

is the measurement of excellence.
is clean, fresh and well appointed.
is dynamic rather than static.
is fluid and evolutionary.
Managing for quality looks at issues of safety and presentation from the perspectives of the customers.
means meeting the customers expectations in the product or service being purchased.
Does not simply happen; the organizational culture of a company makes it happen.
It only means reducing
Hassles
Barriers
Mistakes
Defects
Obstacles
Deficiencies
Delays

Total Quality Management this philosophy states that bottom line performance will take care of itself in an
organization that is committed to, and practices quality effort.

Examples of Managing for Quality

Accepting returned merchandise that does not meet customer expectations.
Presentation of the main course by an executive chef to dear friends celebrating a special occasion in a
restaurant.
Timely check-in at a hotel.
Recognition of a club member by name in a private club dining room.
The welcoming greetings by a long-time server offered to a returning family at a resort.

When quality is considered in every process, management is able to completely redirect its focus away from
the bottom line because quality products and services sold in the proper markets automatically increase the
organizations financial performance.

The System for Managing and Improving Quality

To begin managing and improving quality

Know your customers
Understand how the requirements of customers drive efforts of an organization.

Three broad sets of expectations in any organization

1. Internal Customers Expectations
Are associates who are selected, oriented and trained to create and deliver the products and services of the
organization.
They are the staff members and managers.
2. External Customers Expectations
Are the people that purchase the organizations products and services.
They are the one who selects an organization to help meet their needs and exceed their expectations, they
pay with their hard-earned money as well as their irreplaceable time, and, therefore, they expect and
deserve value.

The quality perceived by them determines the level of improvements needed, so it is essential to
monitor and evaluate the quality delivered to them. If ask in a sincere and genuine way, they will give
honest feedback.
If asked in a sincere and genuine way, they will give honest feedback to a representative of an
organization. This feedback can be used in conjunction with customer complaints and can lead to the
identification of quality improvement opportunities.
Financial Expectations
Vary between organizations. Businesses expect to make profit for the stakeholders, while non-profit
organizations frequently expect to generate a surplus.
They are the owners and investors-public or private.
This profit or surplus is used to build organization by investing for future needs and in future growth.

3.

Continuous Quality Management is the key to managing and improving

quality for both internal and external customers.
The objective is to deliver results that are better today compared to those of
yesterday.
This concept utilizes cross-functional teams of associates and managers to
constantly innovate and improve quality as perceived by customers.
Managements role in the CIQ journey is to facilitate the progress of the
internal customers giving them the necessary resources to deliver the
required improvements.

Resources used to achieve quality management

Tools of the Trade these help measure and monitor quality improvements.
they are simply ways to track how we are doing.
Strategic Quality Planning this begins with a personal vision, which transforms into a shared vision within
the organization. Both personal and shared visions answer the question What do I want to create? This vision
is the driver behind strategic goals and critical processes.
Assessing Quality the requirements of the customers as well as how the organization is doing in the delivery
of requirements at levels that meet or exceed the customers expectations.
Implementing Quality six steps include;
1. Educating
2. Assessing
3. Addressing the burning issues
4. Determining critical processes and how to measure process
5. Redesigning the process
6. Continuous Improvement
Leading Quality responsibility of everyone in the organizations, since leadership is intimately related to
managing and improving quality.
Quality Life results from the effective application of quality principles to ones personal life; it also has a
direct impact on the individual who ultimately must make a contribution to the organization as a team member
and internal customer of the organization.

DOING THE RIGHT THINGS

QUALITY AND LEADERSHIP
QUALITY IS ULTIMATELY RELATED TO LEADERSHIP
Leadership involves the process of taking people somewhere with an idea, creating a compelling vision to
help them see into the future, and then leading them to that future.
QUALITY BECAME A SERVICE ISSUE

QUALITY-DRIVEN ORGANIZATIONS ARE CUSTOMER-DRIVEN ORGANIZATIONS

Successful organizations listen to their customers, both internal and external. And involve their suppliers in
some of the key decision-making processes in the organization. We refer to this as listening to the voices of
quality or the pathway to excellence.
Benchmarking helps an organization study a process at another organization and adapt, modify, and apply
the process at their own organization.

THINGKING OUTSIDE OF THE BOX THROUGH BENCHMARKING

Why do so many people resist change?

They maintain their stability by hanging on to familiar and old ways of doing things. (comfort zone)
When things change, we have to give up something in return; most people do not like to do this.
(sentimental)
It puts pressure on other departments because their people are required to make changes that are more
time-consuming.

STARTING THE PROCESS OF MANAGING AND IMPROVING QUALITY

Three common threads can be identified in organizations that excel in managing and improving quality:
1. Leadership by top management.
2. A view that quality is a long-term process.
3. A passion for gathering and acting on feedback form customers. (Always listen to your customers.)

Cross-Functional Teams composed of people in various functional departments to determine the present
level of quality and improvements.

Chapter 2: Champions of Quality

An organizations leaders should set directions and create customer focus, clear, and visible values, and high
expectations. The directions, values, and expectations should balance the needs of all your stakeholders.
Leaders should ensure the creation of strategies, systems, and methods for achieving excellence, stimulating
innovations, and building knowledge and capabilities.

Dr. W. Edwards Deming

Went to japan to help improve the quality of Japanese manufacturing specifically automobiles.
He helped post-WORLD WAR II Japan rebuild its economy by introducing a philosophy and a statistical
methodology to improve quality.

Dr. Joseph M. Juran

Quality requires a commitment and action from top management, training in the management of quality, and
quality improvements at a revolutionary rate.

Two Types of Managers (Mc. Mene)

1. VANO (Visual Appearance/Accounting Number Only) Manager

2.

A sales transaction is just a number.

The level of internal and external customer satisfaction does not impact profit.

Quality is solely the visual appearance of the facility.

Profit is the difference between sales and costs.

Todays profit is the primary objective, no matter what.

The Ritz-Carlton Manager
Helps people live better
Treats people with dignity
Involves people in the planning of the work that affects them, to increase the pride and joy they derived
from their work.
Armand V. Feigenbaum
Organization should commit to quality.
Six Key Points
1. Total Quality Control (TQC) is a system for integrating quality development.
2. Quality Control represents a management tools.
3. Product Quality is effected by both technology and human factors.
4. Quality control impacts all aspects of production.
5. Prevention Cost, Appraisal Costs, Internal Failure Cost, and External Failure Costs.
6. Quality is controlled in the process.

Philip Crosby
He promoted the concept of zero defect.
Less expensive to do things right the first time.

Karou Ishikawa
Customer as both internal and external.

Genichi Taguchi
Developed a formula to calculate the costs associated with a lack of quality.

Fundamental Goal of Six Sigma

Defines Measure Analyzes Improve Controls (DMAIC) searches for incremental improvement in a process
that falls below customer expectation, as reflected in the process specifications.
Defines Measures Analyzes Defines Verifies (DMADV) is utilized if a current process needs more than
simple incremental improvement or when developing a new process.

Chapter 3: Quality Management

Quality is sustainable, tangible, value and its worth repeating over and over if you care enough. Dan W.
Darrow
Change Fighters (Why do people resist change?)
One reason is fear. Fear is pain arising from anticipation of evil. Fear can be overcome if people are moved out
from their comfort zone.
Another reason is insecurity. When we shift paradigms, people get nervous.
Change is extra work for the leader and members of them team.
Some people like the old ways.

Implementation of the quality principles in your organization requires time; the end result will bring customer
loyalty, satisfaction, increased market share, and financial contribution.

Paradigm Shift a change from one way of thinking to another. Its a revolution, a transformation, a sort of
metamorphosis. It just does not happen, but rather it is driven by agents of change. Is the measurement of
excellence.
EVEN IF YOU ARE IN THE RIGHT TRACK, YOULL GET RUN OVER IF YOU JUST SIT THERE
Change Makers (To overcome resistance to change)
You have to spell out expectations exactly. Explain the advantages of the proposed change to the resisters, from
the resisters perspectives.
When people know where they are going and understand the goal and WIIFM (Whats in it for me), they will
buy into the change.
The more quickly you explain the advantages (and disadvantages, if any) of the impending change, the more
quickly people can embrace it.
By involving the people in the decisions about the changes that affect them, they learn about the challenges
associated with the change.
Leaders must develop positive attitudes in their internal customers in order to reduce the level of resistance to
change.
Understanding is the powerful tool in transforming change resisters into change makers.
Process Thinking the goal of this is to identify the root cause so the hassle can be eliminated at its source.
The logic is that since the hassle occurs across areas, input from as many affected people as possible from
different functional areas, is advantageous in finding a way to eliminate the hassle.
Continuous Improvement it represents a step-like incremental series of better results. It is a series of planned
and monitored outcomes.

1.
2.
3.
4.

Functional Teams
Quality Improvement Team (QIT) is composed of managers/work-group leaders. This teams primary
responsibility is to make decisions and monitor quality activities. Prioritize the hassles and issues then they
assign the hassle/issue to a WGT for analysis.
Action Group Team (AGT) is a team set up to work on a specific hassle or opportunity for improvement and
includes representatives from multiple departments.
Senior Quality Improvement Team (SQIT) is the organizations executive team. It is the overseer of the
quality improvement initiatives. Primary responsibility is to appoint to AGT.
Work Group Team is a group of associates based in the functional area in which they work. The goal is to
have members of this team become more self-directed by self-managing. Ensures that idea are being
implemented and improvement are being made.

Core Principles
Customer-first Orientation everything we do should be focused on the customer.
Trust we must trust our internal customers to perform the quality work we have empowered them to do.
Team Work we use the strengths of individuals and the synergy of teams to serve our customers.
Management by Fact decisions are made based on facts, not feelings or emotions.
Customer Feedback both internal and external customer.
Preventing Hassles this is achieved by doing things right the first time.

Celebration of Success when we achieve success, we celebrate and recognize associates who have
participated and contributed.

Needs and Expectations = Requirements

Requirements are simply valid specifications set between you and the customers.
The specifications must be current (not yesterdays), based on expectations (meaning that minimally we meet,
but optimally we exceed, expectations), and based on the organizations responsibilities (that is, making a profit,
staying in business, growing the business over time).

1.
2.
3.
4.
5.
6.

Kinds of Customers
Existing Customers these are the current users of the organizations processes. They are why we create
products and services.
Former Customers these customers used to use the products and services of the organization. It is important
to learn why they stopped, since that information may help convince them to return if the hassles that drove
them away can be eliminated.
Potential Customers these have never tried the organizations products and services but may be convinced to
do so. Identify their needs and expectations, create products and services that meet and exceed, and this group
will become existing customers.
Ultimate Customers if an organization is part of a distribution network, these are the customers who
ultimately receive products or services.
Indirect Customers this group does not directly use the organizations products and services, but they have
an effect on these customers. They may include government regulators and advocacy groups.
Suppliers this group provides products, services, and information to the organization. They share in the
quality creation and value determination when they are treated as strategic allies and partners.

Chapter 4: Strategic Management

Strategic Management can be defined as the art and science of formulating,

implementing and evaluating cross-functional decisions that enable an organization to
achieve its objectives.
focuses on integrating management, marketing, finance/accounting,
production/operations, research and development, and computer information system
to achieve organizational success.

The purpose of Strategic Management is to exploit and create new and different opportunities for
tomorrow

1
2
3
4
5
6

Stages of Strategic Management

Strategy Formulation includes . . .
Developing a vision and mission,
issues include . . .
Identifying an organizations external
1 Deciding what new business to enter
opportunities and threats,
2 What businesses to abandon
Determining
internal
strengths
and
3 How to allocate resources
weaknesses,
4 Whether to expand operations or diversify
Establishing long-term objectives,
5 Whether to enter international markets
Generating alternative strategies, and
6 Whether to merge or form a joint venture
Choosing particular strategies to pursue
7 How to avoid hostile takeover.

Strategy Implementation requires a firm to establish annual objectives, devise policies, motivate employees,
and allocate resources so that formulated strategies can be executed
action stage
requires personal discipline, commitment and sacrifice.
includes . . .
1 Developing a strategy-supportive culture
2 Creating an effective organizational structure
3 Redirecting marketing efforts
4 Preparing budgets
5 Developing and utilizing information systems
6 Linking employee compensation to organizational performance

Strategy Evaluation is the final stage in strategic management

is where the management identifies when particular strategies are not working well
is the primary means for obtaining information.

All strategies are subject to future modification because external and internal factors are constantly
changing

1
2
3

(3) Three Fundamental Strategy Evaluation Activities

Reviewing external and internal factors that are the bases for current strategies.
Measuring performance
Taking corrective actions.

Key Terms in Strategic Management

Competitive Advantage is defined as anything that a firm does especially well compared to rival firms
Strategic management is all about gaining and maintaining competitive advantage.

1
2

A firm can sustain competitive advantage for only a certain period due to rival firms imitating and
undermining that advantage. Thus it is not adequate to simply obtain competitive advantage.

A firm must strive to achieve sustained competitive advantage by

Continually adapting to changes in external trends and events and internal capabilities, competencies, and
resources.
Effectively formulating, implementing and evaluating strategies that capitalize upon those factors.
Strategists Are the individuals who are most responsible for the success or failure of an organization. Help an
organization gather, analyze and organize information.
They track the industry and competitive trends, develop forecasting models and scenario analyses, evaluate
corporate and divisional performance, spot merging market opportunities, identify business threats and
develop creative action plans.
Have various job titles such as Chief Executive Officer, President, Owner, and Chair of the Board,
Executive Director, Chancellor, Dean, and Entrepreneur.
Vision & Mission Statements
A Vision Statement answers the question What do we want to become?
Mission Statements are enduring statements of purpose that distinguish one business from the other
similar firms.
It identifies the scope of a firms operations in product and market terms. It describes the values and
priorities of an organization.
What is our business?

8
9

External Opportunities & Threats refer to economic, social, cultural, demographic, environmental,
political, legal, governmental, technological, and competitive trends and events that could significantly benefit
or harm an organization in the future.
May include the passage of law, the introduction of a new product by a competitor, a national catastrophe,
or the declining value of the peso.
Internal Strengths & Weaknesses Are an organizations controllable activities that are performed especially
well or poorly.
They arise in the management, marketing, finance/ accounting, production/operations, research and
development and management information systems activities of a business.
Long-Term Objective
Objectives can be defined as specific results that an organization seeks to achieve in pursuing its basic
mission.
Long-term - means more than a year.
Objectives are essential to organizational success because they state direction; aid in evaluation; create
synergy; reveal priorities; focus coordination; and provide a basis for effective planning, organizing,
motivating and controlling.
Strategies are the means by which long-term objectives will be achieved.
May include geographic expansion, diversification (branch out), acquisition (procurement), product
development, market penetration, retrenchment (cost-cutting), divestiture (The partial or full disposal of an
investment or asset through sale, exchange, closure or bankruptcy), liquidation (selling-out) and joint
ventures.
Annual Objective are short-term milestones that organizations must achieve to reach long-term objectives.
Like long-term objectives, annual objectives should be measureable, quantitative, challenging, realistic,
consistent, and prioritized.
Policies are the means by which annual objectives will be achieved.
Includes guidelines, rules, and procedures established to support efforts to achieve stated objectives.

Strategic Management Model

Benefits of Strategic Management

Financial Benefits
Research indicates that organizations using strategic management concepts are profitable and successful
than those that do not.

Businesses using strategic management concepts show significant improvement in sales, profitability, and
productivity compared to firms without systematic planning activities.
High-performing firms tend to do systematic planning to prepare for future fluctuations in their external
and internal environment.
High-performing firms seem to make more informed decisions with good anticipation both short and longterm consequences.
Non-Financial Benefits
Enhances the problem- prevention capabilities of organizations because it promotes interaction among
managers at all divisional and functional levels.
An enhanced awareness of external threats
An improved understanding of competitors strategies
Increased employee productivity
Reduced resistance to change
A clearer understanding of performance-reward relationship.

Benefits of Strategic Management

1 It allows for identification, prioritization and exploitation of opportunities.
2 It provides an objective view of management problems.
3 It represents a framework for improved coordination and control of activities.
4 It minimizes the effects of adverse conditions and changes.
5 It allows major decisions to better support established objectives.
6 It allows more effective allocation of time and resources to identified opportunities.
7 It allows fewer resources and less time to be devoted to correcting erroneous or ad hoc (unprepared) decisions.
8 It creates a framework for internal communication among personnel.
9 It helps integrate the behavior of individuals into a total effort.
10 It provides a basis for clarifying individual responsibilities.
11 It encourages forward thinking.
12 It provides a cooperative, integrated, and enthusiastic approach to tackling problems and opportunities.
13 It encourages a favorable attitude toward change.
14 It gives a degree of discipline and formality to the management of a business.

Chapter 5: Importance of Internal and External Audit

Internal Strengths & Weaknesses are an organizations controllable activities that are performed especially
well or poorly.
They arise in the following activities of a business:
1 Management it is consisting of five (5) basic: Planning, Organizing, Motivating, Staffing, and
Controlling.
2 Marketing can be describe as the process of defining, anticipating, creating, and fulfilling customers
needs and wants for products and services.
3 Finance/ Accounting financial condition is often considered the single measure of a firms competitive
position and overall attractiveness to investors.
The function of finance/ accounting comprise of three (3) decisions: Investment Decision, Financing
Decision, and Dividend Decision.
4 Production/Operations
5 Research and Development are directed at developing new products before competitors do, at
improving product quality, or at improving manufacturing processes to reduce costs.
6 Management Information Systems (MIS) it is a computer based system that provides information for
decisions making on planning, organizing and controlling the operation of the sub-system of the firm and
provides a synergistic organization in the process.
are capable of taking advantage of the computational ability of the company like processing, storage
capacity among others.

External Opportunities & Threats is to develop a finite list of opportunities that could benefit a firm and
threats that should be avoided.
Can be divided into five (5) broad categories:
1 Economic Forces these forces affect the outcome of the firm's marketing activities, by determining
the volume and strength of demand for its products.
Factors such as which determine the state of competitive environment in which a firm operates:
Level of Employment
Rate of Inflation
Rate of Interest
Fiscal and Monetary Policies
2 Social, Cultural, Demographic, and Environmental Forces are shaping the way people live, work,
produce, and consume.
New trends are creating a different type of consumer and consequently, a need for different products,
different services, and different strategies.
3 Political, Governmental, and Legal Forces National, state, and local governments are major regulators,
deregulators, subsidizers, employers, and customers of organizations.
4 Technological Forces influence organizations in several ways. A technological innovation can have a
sudden and dramatic effect on the environment of a firm. First, technological developments can
significantly alter the demand for an organization or industry's products or services.
Technological trends include not only the glamorous invention that revolutionizes our lives, but also the
gradual painstaking improvements in methods, in materials, in design, in application, unemployment, and
the transportation and commercial base. The diffusion into new industries and efficiency" (John Argenti).
5 Competitive Forces Collecting and evaluating information on competitors is essential for successful
strategy formulation.
Identifying rival firms and determining their strengths,
weaknesses, capabilities,
opportunities, threats, objectives, and strategies.

Porters Five-Forces Model

Industry Competitors
Rivalries naturally develop between
companies competing in the same
market. Competitors use means such as
advertising, introducing new products, more attractive customer
price competition to enhance their standing and market

Pressure from Substitute Products

Substitute products are the natural result of industry competition,
profitability within the industry. A substitute product involves the
do the same function as the product the industry already produces.

service and warranties, and

share in a specific industry.

but they place a limit on

search for a product that can

Bargaining Power of Suppliers

Suppliers have a great deal of influence over an industry as they affect price increases and product quality.
A supplier group exerts even more power over an industry if it is dominated by a few companies, there are no
substitute products, the industry is not an important consumer for the suppliers, their product is essential to the
industry, the supplier differs costs, and forward integration potential of the supplier group exists.
Bargaining Power of Buyers
The buyer's power is significant in that buyers can force prices down, demand higher quality products or
services, and, in essence, play competitors against one another, all resulting in potential loss of industry profits.

Potential New Entrants

New entrants to an industry can raise the level of competition, thereby reducing its attractiveness. The threat of
new entrants largely depends on the barriers to entry. High entry barriers exist in some industries (e.g.
shipbuilding) whereas other industries are very easy to enter (e.g. estate agency, restaurants).

Value Chain Model

Primary Activities
Inbound Logistics involve relationships with suppliers and include all the activities required to receive, store,
and disseminate inputs.
Operations are all the activities required to transform inputs into outputs (products and services).
Outbound Logistics include all the activities required to collect, store, and distribute the output.
Marketing and Sales activities inform buyers about products and services, induce buyers to purchase them,
and facilitate their purchase.
Services includes all the activities required to keep the product or service working effectively for the buyer
after it is sold and delivered.
Secondary Activities
Procurement is the acquisition of inputs, or resources, for the firm
Human Resource Management consists of all activities involved in recruiting, hiring, training, developing,
compensating and (if necessary) dismissing or laying off personnel.
Technological Development pertains to the equipment, hardware, software, procedures and technical
knowledge brought to bear in the firm's transformation of inputs into outputs.
Infrastructure serves the company's needs and ties its various parts together, it consists of functions or
departments such as accounting, legal, finance, planning, public affairs, government relations, quality assurance
and general management.

SWOT Analysis can be used to measure an

organization's competencies and identify opportunities to taken by
business management in the future.
Organizations conduct a SWOT Analysis in order to identify various
factors that can impact performance. In other words, SWOT is used to
improve the current situation.

Mc Donalds SWOT Analysis

Strengths
It has a strong global presence and is considered as a market leader in both the domestic as well as the
international markets.

 It is a global brand that owns 31,000 restaurants serving in 120 countries. Of these 31,000 restaurants at
least14,000 restaurants are situated in the US.
They own an active childrens charity by the named The Ronald McDonald House.
It takes steps in adjusting the Ingredients and product offerings in order to comply with the upgraded health
standards deemed necessary by the USDA.
It earns revenue by fast food sales as well as a property investor and a franchiser of restaurants.
It has branded menu items i-e Big Mac, Chicken McNuggets, which further promote McDonalds.
It is recognized as one of the worlds most recognized logos.
It adapts to the cultural differences regarding the region where the restaurant is set up.
It has located itself in major airports, cities, highways, tourist locations, theme parks.
It has an efficient food preparation style that follows the process in a systematic way.
It takes food safety extremely cautiously.
It was the first to provide the customers about nutrition facts.

Weaknesses
Their test marketing for pizza failed to yield a substantial product. Leaving them much less able to compete
with fast food pizza chains.
High employee turnover in their restaurants leads to more money being spent on training.
It has yet to accomplish going on the trend of organic food. Until recently, had very few options for eating
healthy.
Price competition with the competitors resulting in low revenue.
Lack of innovative products
Negative image due to Fast Food Nation and other media sources
Advertisement techniques that target children
Consumers use disposable income to purchase fast food meals so when the budget it threatened, consumers
redirect these funds
Public perception: McDonalds has been impacted by negative press like the documentary "Supersize Me" by
Morgan Spurlock in which he contributed our societys obesity to McDonalds and other fast food chains.

Opportunities
It can adapt to the needs of the societies and undergo an innovative product line.
It can research ways to use green energy and packaging which will work as a part of their promotional effort
as well as fulfill their social responsibility.
It can create new product offerings, use mobile text messaging to offer services that appeal to consumers.
It can upscale some of its restaurant settings at luxurious locations to attract more customers.
It can provide optional items that are regarded to be the basis of allergy for some.
It can slow down the level of expansion in order to increase the profitability of the organization.

Threats
The recession negatively impacts the holding position of the firm regarding its revenue streams, even though
they are quite diversified.
Foreign currency fluctuations are regarded to be a major problem as it uses standard pricing for its food items.
More restaurants that are increasing their food offering and declining the price.
Health issues regarding the fast food chain.
Heavy investments on promotional campaigns which decrease the gaining of market share.
Some parents criticize the firms cradle to grave marketing strategy that focuses on kids, who later on take it as
a trend to their adulthood.
Sued various times for unhealthy food, usually with addictive additives.
Emergence of major fast food competitors: Burger King, Starbucks, Wendys, Taco Bell, KFC.
The expansion has made the firm vulnerable to the slow economies of the other countries.