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Study on Total Quality Management for Competitive Advantage in International Business | OMICS International
E-ISSN: 2223-5833
Arabian Journal of Business and Management Review
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Study on Total Quality Management for Competitive Advantage in International Business

Leela Krishna Ganapavarapu* and Sireesha Prathigadapa

Associate Professor, Koleggemilang, Malaysia

*Corresponding Author:
Dr. Leela Krishna Ganapavarapu
Associate Professor
Koleggemilang, Malaysia
Tel: +374 10 23-72-61
E-mail: [email protected]

Received date: September 03, 2014; Accepted date: October 20, 2014; Published date: May 01, 2015

Citation: Ganapavarapu LK, Prathigadapa S (2015) Study on Total Quality Management for Competitive Advantage in International Business. Arab J Bus Manage Rev 5:3.

Copyright: © 2015 Ganapavarapu LK, et al. This is an open-access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.

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Keywords

International business; MNC; Competitive advantage; TQM; Quality

Introduction

The traditional focus of business strategies has been finance and marketing. These parallel two of the principal sources of competitive advantage i.e. cost and differentiation. Total quality with a focus on people leads to improvements in both areas. Therefore, quality can be viewed as a strategy in itself. The role of quality in business strategy has taken two significant steps since 1980. First, many firms have recognized that a strategy driven by quality can lead to significant market advantages. Second, the lines between quality strategy and generic business strategies have become blurred to the point where TQM principles are integrated into most businesses' normal business planning; that is, TQM is a basic operating philosophy that provides the foundation for effective management. For most companies, integration of TQM into strategic business planning is the result of a natural evolution. For most new companies or those that have enjoyed a reasonable measure of success quality takes a back seat to increasing sales, expanding capacity, or boosting production. Strategic planning usually focuses on financial and marketing strategies [1-5].

Competitive Advantage

Competitive advantage denotes a firm's ability to achieve market superiority over its competitors. In the long run, a sustainable competitive advantage provides above-average performance. A strong competitive advantage has six characteristics:

• It is driven by customer wants and needs. A company provides value to its customers that competitors do not.

• It makes a significant contribution to the success of the business.

• It matches the organization's unique resources with the opportunities in the environment. No two companies have the same resources; a good strategy uses them effectively.

• It is durable and lasting and difficult for competitors to copy. A superior research and development department, for example, can consistently develop new products or processes to remain ahead of competitors.

• It provides a basis for further improvement.

• It provides direction and motivation to the entire organization.

As each of these characteristics relates to quality, quality can be an important means of gaining competitive advantage. Let us see how total quality contributes to competitive advantage. Discuss cost leadership, differentiation, and people as principal sources of competitive advantage, and their relationship to quality; Relate quality to the achievement of higher profitability; Describe the importance of quality in meeting customer expectations in product design, service, flexibility and variety, innovation, and rapid response; and Discuss empirical results showing the impact of quality on business results.

Sources of competitive advantage

The classic literature on competitive strategy suggests that a firm can posses' two basic types of competitive advantage: low cost and differentiation.

Cost leadership

Many firms gain competitive advantage by establishing themselves as the low-cost leader in an industry. These firms produce high volumes of mature products and achieve their competitive advantage through low prices. Such firms often enter markets that were established by other firms. They emphasize achieving economies of scale and finding cost advantages from all sources. Low cost can result from high productivity and high capacity utilization. More importantly, improvements in quality lead to improvements in productivity, which in turn lead to lower costs. Thus a strategy of continuous improvement is essential to achieve a low-cost competitive advantage [6-8].

To achieve cost leadership for high volume products, companies use a variety of approaches:

• Early manufacturing involvement in the design of the product both for make-versus-buy decisions and for assurance that the production processes can achieve required tolerances.

• Product design to take advantage of automated equipment by minimizing the number of parts eliminating fasteners, making parts symmetric whenever possible, avoiding rigid and stiff part and using one-sided assembly designs.

• Limited product models and customization in distribution centers rather than in the factory.

• A manufacturing system designed for a fixed sequence of operations. Every effort is made to ensure zero defects at the time of shipment. Work-in-process inventory is reduced as much as possible, and multi skilled, focused teams of employees are used.

• A cost leader can achieve above-average performance if it can command prices at or near the industry average. However, it cannot do so with an inferior product. The product must be perceived as comparable with competitors or the firm will be forced to discount prices well below competitors' prices to gain sales. This can cancel any benefits that result from cost advantage.

Differentiation

To achieve differentiation, a firm must be unique in its industry along some dimensions that are widely valued by customers. It selects one or more attributes that customers perceive as important and positions itself uniquely to meet those needs. For instance, Dell's direct business model was the first of its kind in the computer industry and continues to be a principal source of the company's success.

People

The competitive advantage resulting from an organization's people can drive low cost and differentiation. Much of its cost advantage comes from its very productive, motivated, and unionized workforce. Providing a work environment that foster cooperation, initiative, and innovation; educating and training the workforce; and enhancing the factors that affect well-being, satisfaction, and motivation are very difficult for competitors to copy. This is a significantly different philosophy from the work environment that came into being during the Industrial Revolution [9-14].

TQM Dimension for Competitive Advantage

There are eight TQM Dimensions with respect to TQM implementation for Competitive Advantage, as follows:

(1) Customer focus: Must understand that their success depends significantly on customers. Therefore, firms should understand and determine customer needs by meeting their requirements and striving to exceed their expectations.

(2) Leadership: Top management must establish unity of purpose and direction. They must create and maintain the internal environment in which people can become fully involved in achieving the organisation’s purpose.

(3) Teams of people: Employees at all levels must be recognised as the essence of the organisation, and strategies must be put in place to ensure their full involvement, so that the organisation can derive maximum benefits from their abilities.

(4) Process Management: A desired result is achieved more efficiently when related resources and activities are managed as a process.

(5) Security/ System approach to management: Identifying, understanding and managing a system of interrelated processes for a given objective improves the operational effectiveness and efficiency of firms.

(6) Continuous Improvement: The “Plan-Do-Check-Act” cycle is applied to processes. The “Plan” establishes the objectives and processes necessary to deliver results in accordance with customer requirements and the organisations policies; the “Do” implements the processes: the “Check” monitors and measures the processes and products against policies, objectives and requirements and reports on the results; and the “Act” takes actions to continually improve process and system performance.

(7) Reliability: Describe the importance of quality in meeting customer expectations in product design, service, flexibility and variety, innovation, and rapid response.

(8) Suppliers' Management: Firms and their suppliers are interdependent, and a mutually beneficial relationship would enhance the ability of both to create value.

Research Design

This study is mainly aimed to investigate the relationship among TQM Practices for Competitive Advantage. The specific Objective of the study is to analyse the association of TQM Factors for Competitive Advantage in ISO Certified organisations and those organisations without ISO. The data has been collected from respondents of various organisations national and international repute. A survey instrument with Likert’s scale was used to collect the perceptions of respondents. The sample size is 60 in which 30 are from ISO Certified organisations and 30 from the others. The statistical analysis was made with Average, Standard Deviation and t- test [15,16].

Based on the given research a structure, below hypothesis is proposed for further academic examination:

H0. The TQM activities cause no difference for competitive advantage in terms of the Customer Focus Responsiveness, Leadership, Reliability, Ease of Use system, Team-building, Security, Competence, and Product portfolio.

H1. The TQM activities actually cause significant difference for competitive advantage in terms of the Customer Focus Responsiveness, Leadership, Reliability, Ease of Use system, Teambuilding, Security, Competence, and Product portfolio.

Analysis of Data

The TQM activities between the respondents with the ISO certification and respondent units without ISO certifications in terms of the Customer Focus Responsiveness, Leadership, Reliability, Ease of Use system, Team-building, Security, Competence, and Product portfolio. Comparison is made between organizations with and without ISO (QMS) certification to determine the competitive advantage of organizations. The t-test is used to test the statistical significance of the differences in TQM practices (Table 1).

Factor ISO Certified Without ISO Certification t-test
N Mean Std. Dev N Mean Std. Dev. p-value
Customer Focus,
Responsiveness
  30   4.63   0.43   30   4.34   0.52   .003*
Leadership 30 4.38 0.88 30 4.3 0.58 .041*
Reliability 30 4.32 0.53 30 4.03 0.8 .028*
Ease of Use System 30 4.55 0.57 30 3.87 0.47 .000*
Building Teams 30 4.34 0.41 30 3.67 0.84 .000*
Security 30 4.38 0.39 30 3.98 0.5 .000*
Competence 30 4.18 0.56 30 3.88 0.64 .013*
Product portfolio 30 4.63 0.43 30 4.34 0.52 .003*

Table 1: Total Quality Management for Competitive Advantage. Source: Survey Data. p-values with *mark are significant at .050 level.

The results show that there are statistically significant differences for items with *marks. The findings suggest that the evidence is significant (Average p-values<.050) to confirm that the TQM factors for Competitive Advantage in the organizations. Observation: Null Hypothesis is rejected as all TQM Constructs found significant with ttest comparison of means. Hence The Alternative Hypothesis is accepted. It is concluded that the Quality Management Standards (ISO) Certification actually causes significant difference for Competitive Advantage.

Summary and Conclusion of Study

TQM always focus on customer satisfaction. Competitive advantage denotes a firm's ability to achieve market superiority over its competitors. In the long run, a sustainable competitive advantage provides above-average performance. The characteristics relate to quality, quality can be an important means of gaining competitive advantage.

The study concludes that Total Quality management activities cause significant impact on Competitive advantage of Organisations in Global businesses.

Further, it is suggested that all the business organisations should implement TQM in phased manner to meet the challenges in the globalised economies.

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