WEEK 11: CRAFTING A STRATEGY,  A focus strategy based on low-cost

THE QUEST FOR COMPETITIVE concentrating on a narrow buyer

ADVANTAGE segment and outcompeting rivals by
having lower costs than rivals.
Introduction
 A focus strategy based on
In the tourism and hospitality industry, differentiation-concentrating on a
the success or failure of a business and narrow buyer and outcompeting
destination depends on the service. rivals by offering niche members
This chapter focuses on the primary customized attributes better than
options a company has particularly in rivals’ products and services.
crafting a strategy to compete B. Complementary Strategic
successfully in the industry and secure Options
an attractive market position.  Collaborative strategies
 Merger and acquisition
strategies
 Vertical Integration
Strategies
 Outsourcing strategies
 Offensive strategies
 Defensive strategies
 Website Strategies
C. Choosing appropriate
functional areas strategies to
support the above strategies
choices.
D. Timing a company’s strategic
moves in the marketplace.
 First-time movers?
 Fast-follower?
 Late-mover?
A COMPANY’S MENU OF STRATEGIC
OPTIONS SOME IMPORTANT DEFINITIONS:

A. Basic Competitive Strategy  Competitors – it is a firm

Options operating in the same market
 Overall low-cost provider strategy- with similar products targeting
striving to achieve overall costs than similar customers.
rivals.  Competitive rivalry – is the
 Broad differentiation strategy- ongoing set of competitive
seeking to differentiate the actions and responses occurring
company’s product offering from between rivals.
rivals.  Competitive behavior – is a set
 Best-cost provider strategy-giving of competitive actions and
customer move value for money by responses firms takes to build or
incorporating good to excellent defend.
products and services.  Multi-market competitive –
firms competing against each
 other in several product  There tradeoff between
geographic markets. financial and strategic
 Competitive dynamics – all objectives.
competitive behavior that is the
THE BALANCE SCORECARD
local set of actions and
responses taken by all firms  Strategy evaluation and control
competing within the market. techniques derive their name
from “balance”.
To provide an idea of what this means,
 A firm simply a listing of all key
new ways of competing may include the
objectives to work associated
ff:
with the dimension.
 Bringing new goods and services
TYPES OF STRATEGIES
to the market more quickly.
 The use of new technologies. Comprehensive Strategic Model
 Diversifying the product line.
 Shifting product services  Alternative strategies that an
emphasis. enterprise could.
 Consolidation.  Many, if not most, organizations
 Combining online selling with simultaneously pursue a
physical stores. combination of two more
strategies.
LONG-TERM OBJECTIVES
LEVEL OF STRATEGIES
Long-term objectives represent the
result expected from pursuing certain  Level of strategies from small
strategies. and large companies:
 In large firms there are four
A. The Nature of Long-Term levels of strategies: corporate,
Objectives divisional, functional, and
 Objectives should be operational.
quantitative, measurable,  In a small firm there are three
realistic, understandable, levels of company: company,
challenging, hierarchical, functional, and operational.
obtainable, and congruent
among organizational INTEGRATION STRATEGIES
units.
Vertical integration strategies are
B. Financial versus Strategic
Forward, Backward and Horizontal
Objectives
integration.
 Financial objectives
include one associated Forward Integration – involves gaining
with growth in revenue, ownership, franchising is an effective
earnings, higher means of implementing forward
dividends, improved cash integration.
flow, etc.
Distribution has six guidelines for
 Strategic objectives
forward integration that may be an
include larger market
effective strategy:
shares.
  When an organization’s presence  Competes in a growing industry.
is especially expensive or  Increased economies of scale.
unreliable.  Has both capital and human
 The availability of quality talent needed.
distribution is so limited.  When competitors are faltering
 Organizations compete in an due to a lack of managerial
industry that is growing and expertise.
expected to continue growing.
INTENSIVE STRATEGIES
 The organization has both capital
and human resources needed to Market penetration, market
manage a new business. development, and product development
 The advantage of stable are sometimes referred to as intensive
production is particularly high. strategies because they require
 Present high-profit margins. intensive efforts if a firm’s competitive
position with existing products is to
Backward Integration – strategy of
improve.
seeking ownership or control of the
firm’s supplier. Market Penetration
Seven guidelines when backward  It seeks to increase market share
integration may be effective: for present products or services
in present markets through
 When an organization’s present
greater marketing efforts.
suppliers are especially
 It includes increasing the
expensive.
number of salespersons,
 Number of suppliers is small,
advertising expenditures, and
and the number of competitors is
publicity efforts.
large.
 Organization competes in an Guidelines for when market penetration
industry that is growing rapidly. is especially effective:
 The organization has both capital
and human resources to  When current markets are not
manage. saturated.
 The advantage of stable prices is  When market shares of major
particularly important. competitors have been declining
 Present supplies have high-profit while total industry sales have
margins. been increasing.
 An organization needs quickly  When the correlation between
acquire a needed resource. dollar sales and dollar marketing
expenditures has been high.
Horizontal Integration – strategy of  When increased economies of
seeking ownership or increased control scale provide major advantages.
over a firm’s competitors.
Market Development
Five guidelines when horizontal
integration may be an effective strategy: Involves introducing present products
or services into new geographic areas.
 When an organization can gain
monopolistic characteristics.
Six guidelines when the market may be DIVERSIFICATION STRATEGIES
an effective strategy:
Two general types of diversification
 When new channels of strategies are related and unrelated:
distribution are available that
 Businesses are related when
are reliable, inexpensive, and
their value chains possess
good quality.
competitively valuable cross-
 When an organization is very
business strategies fits.
successful what if does?
 Businesses are unrelated when
 When new untapped or
their value chains are so
unsaturated markets exist.
dissimilar that no competitively
 When an organization has the
valuable cross-business
needed capital and human
relationship exists.
resources to manage expanded
operations. Most companies favor related
 When an organization has excess diversification strategies to capitalize on
production capacity. synergies as follows:
 When an organization’s basic
industry rapidly is becoming  Transferring competitively
global in scope. valuable expertise.
 Combining the related activities
Product Development of separate businesses into a
single operation to achieve lower
is a strategy that seeks increased sales
costs.
by improving or modifying products or
 Exploiting common use of a well-
services.
known brand name.
Five guidelines for when to use product  Collaborating across businesses
development: to create valuable resource
strengths and capacities.
 When an organization has
successful products that are in The greatest risk of being in a single
the maturity stage of the product industry is having all the firm’s eggs in
cycle. one basket.
 When an organization competes
Related Diversification
in an industry that is
characterized by rapid Six guidelines for when related
technological developments. diversification may be effective are
 When major competitors offer identified below:
better-quality products at
comparable prices.  When an organization competes
 When an organization competes in a no-growth or slow-growth
in a high-grow industry. industry.
 When an organization has  When adding new, but related
especially strong research and products would enhance sales of
development capabilities. current products.
 When new, but related products
could be offered at competitive
prices.
  Products have seasonal sales Divestiture
levels that counterbalance
The action or process of selling off
existing peaks and valleys.
subsidiary business interests or
 Products are in the decline stage
investments. The divestiture of state-
of the life cycle.
owned assets.
 When an organization has a
strong management team.  Selling a division or part of an
organization is called divestiture.
DEFENSIVE STRATEGIES
 This can be used to rid
Retrenchment organizations of businesses that
are unprofitable.
 Is the process of reducing costs
 It has become a very popular
and assets to reverse declining
strategy as firms try to focus on
sales and profits.
their core strengths.
 Is a strategy to strengthen an
 Historically firms have diverse
organization’s core competence.
their unwanted or poorly
 Involves selling off land, pruning
performing divisions.
product lines, closing marginal,
closing obsolete factories, Six guidelines for when to use
automating processes, reducing divestiture:
the number of employees, and so
 Organizations should pursue a
on.
retrenchment strategy to
In some cases, bankruptcy can be an achieve needed improvement.
effective retrenchment strategy:  The division needs more
resources to be competitive than
Bankruptcy – helps people who can no
a company can provide.
longer pay their debts get a fresh start
 Divisions are responsible for an
by liquidating assets to pay their debts
organization’s poor performance.
or by creating a repayment plan.
 The division is a misfit with the
 Is a liquidation procedure used rest of the organization.
when a corporation cannot  When a large amount of cash is
operate successfully or obtain needed quickly and cannot be
creditor agreements. obtained
 Allows an organization to  When government antitrust
recognize and come back after action threatens an
filing. organization.
 Provides relief to family farmers
Liquidation
with a debt of less than $1.5
million.  Is the process of selling off assets
 Is available to small businesses to repay creditors and dissolve a
with unsecured debts of less business.
than $100,000.  Selling all of a company’s assets,
in parts, for their tangible worth
Historically, 106 public U.S. companies
is called liquidation.
filed bankruptcy in 2010, less than half
the 211 that fielded the prior year.
Three guidelines for when to use There are two alternative types of focus
liquidation: strategies:
 The organization has pursued  Is a low-cost focus strategy that
both retrenchment and offers products or services to a
divestiture strategies, but neither small range (niche) of customers
has been successful. at the lowest price available on
 When an organization’s only the market.
alternative is bankruptcy.  Is a best value focus strategy
 When stakeholders of a firm can that offers products to a small
minimize their losses by selling range of customers at the best
assets. price value available on the
market. This is sometimes called
MICHAEL PORTER’S FIVE GENERIC
focused differentiation.
STRATEGIES
Porter’s five strategies imply different
According to Porter strategies allow
organizational arrangements, control
organizations to gain a competitive
procedures, and incentive systems.
advantage from three different bases:
 Cost leadership
 Differentiation WEEK 12: STRATEGY REVIEW,
 Focus EVALUATION, AND CONTROL
Cost leadership emphasizes the The best-formulated and best-
production of standardized products at implemented strategies become obsolete
a very low per-unit cost for price- as a firm’s external and internal
sensitive consumers. There are two environments change. It is essential,
types of cost leadership strategies. therefore that strategies systematically
review, evaluate, and control the
 A low-cost strategy that offers a
execution of strategies.
product to a wide range of
customers at the lowest price The Nature of Strategy Evaluation
available on the market.
Strategy evaluation is vital to an
 Is a best-value strategy that
organization’s well-being.
offers products to a wide range of
customers at the best price value Strategy evaluation basic activities:
available on the market.
 Examining the underlying bases
Differentiation is a strategy aimed at of a firm’s strategy,
producing products and services  Comparing expected results with
considered unique industry-wide and actual results, and
directed at consumers who are  Taking corrective actions to
relatively price insensitive. ensure that performance
conforms to plans.
Focus means producing products and
services that fulfill the needs of small Adequate and timely feedback is the
groups of consumers. cornerstone of effective strategy
evaluation.
Strategy evaluation is essential to A fundamental problem facing
ensure that stated objectives are being managers today is how to control
achieved. employees effectively in light of modern
organizational demands for greater
Criteria for evaluating a strategy:
flexibility, innovation, creativity, and
A firm must consider the following- initiative from employees.

 Consonance The Process of Evaluating

 Advantage Strategies

The firm’s external assessment.  Evaluating strategies on a

continuous rather than a
 Consistency periodic basis allows
 Feasibility benchmarks of progress to be
The firm’s internal assessment. established and more effectively
monitored.
Strategy evaluation is becoming
increasingly difficult with the passage of Strategy evaluation tool:
time, for many reasons.  Balance scorecard
Other reasons why strategy evaluation  Published information
is more difficult today include the  Contingency planning
following trends:  Auditing

 A dramatic increase in the The basic requirement of Strategy

environment’s complexity. evaluation / Characteristics of a
 The increasing difficulty of Strategy evaluation:
predicting the future with  Economical
accuracy  Meaningful
 The increasing number of  Useful information
variables  Provide timely information
 The rapid rate of obsolescence of  Provide a true picture
even the best plans  Not to dominate decisions
 The increase in the number of  Simple
both domestic and world events
affecting organizations Twenty-First-Century Challenges in
 The decreasing time span for Strategic Management
which planning can be done with
Three particular challenges or decisions
any degree of certainly
that face all strategists today are:
Tourism Industry
 Deciding whether the process
is a multidimensional industry. should be more an art or a
science, (Art or Science)
Tourism is a multidimensional  Deciding whether strategies
phenomenon. should be visible or hidden from
 Dependent on many varied stakeholders, (Visible or
activities which are separate but Hidden)
interdependent
  Deciding whether the process
should be more top-down or
bottom-up in their firm. (Top-
down or Bottom-up Approach)
WEEK 13: STRATEGY
IMPLEMENTATION
The Nature of Strategy
Implementation
 Strategy formulation is
positioning forces before action.
 Strategy implementation is
managing forces during the
action.
Implementation Strategies:
 Strategy formulation focuses on
Management Issues
effectiveness.
 Strategy implementation focuses Strategy Implementation
on efficiency.
 Strategy formulation is primarily  Varies among different types and
an intellectual process. sizes of organizations
 Strategy implementation is Strategy implementation actions:
primarily an operational process.
 Strategy formulation requires  Altering sales territories
good intuitive and analytical  Adding new departments
skills.  Closing facilities
 Strategy implementation requires  Hiring new employees
special motivation and  Cost-control procedures
leadership skills.  Changing advertising strategies
 Strategy formulation requires  Building new facilities
coordination among a few MANAGEMENT ISSUES:
individuals.
 Strategy implementation requires
coordination among many
individuals.
COMPREHENSIVE STRATEGIC
MANAGEMENT MODEL:
Annual Objectives  To promote from within or hire
from the outside
 Decentralized activity
 To establish a high or low safety
 Involves all managers in the firm
stock of inventory
- Basis for allocating
 To buy lease, or rent new
resources
production equipment
- Primary mechanism for
evaluating managers RESOURCE ALLOCATION
- Major instrument for
A central management activity that
monitoring progress
allows for strategy execution.
toward long-term
objectives Four types of resources:
- Established
organizational, divisional,  Financial resources
and departmental  Physical resources
priorities.  Human resources
 Horizontal consistency of  Technological resources
objectives MANAGING CONFLICT
 Vertical consistency of objectives
 Objectives should state: Conflict is a disagreement between two
- Quantity or more parties on one more issue.
- Quality
 Conflict is not always “bad”
- Cost
 Absence of conflict
- Time
 Signal indifference or apathy
POLICIES  Can energize opposing groups to
action
Policies facilitate solving recurring  May help managers identify
problems and guide the implementation problems
of strategy
Conflict Management and Resolution
Policies Set
 Avoidance
 Boundaries  Diffusion
 Constraints  Confrontation
 Limits
MATCHING STRUCTURE WITH
Example issues requiring STRATEGY
management policy
Change in strategy Change in
 To offer extensive or limited Structure
management development
workshops and seminars  Structure largely dictates how
 To centralize or decentralize objectives and policies will be
employee-training activities established.
 To recruit through employment  Structure dictates how resources
agencies, college campuses, will be allocated.
and/or newspapers
CHANDLER’S STRATEGY Also called:
STRUCTURE RELATIONSHIP:
 Downsizing
 Rightsizing
 Delayering
Employed when ratios of line with
benchmarked competitors
Primary benefit sought is cost
reduction.
REENGINEERING
- Involves reconfiguring or
redesigning work, jobs, and
processes to improve cost,
quality, service, and speed.
- Concerned more with the
BASIC FORMS OF STRUCTURE employee and customer well-
being than shareholder well-
Functional Structure
being.
 Groups tasks and activities by
Also called:
business function.
 Process management
Divisional Structure
 Process innovation
 Decentralized and organized by  Process redesign
geography, product, customer, or
LINKING PERFORMANCE AND PAY
process.
TO STRATEGIES
Strategic Business Unit Structure
 Most companies practicing pay-
(SBU)
for-performance
 Groups similar divisions;  Dual bonus system becoming
delegates authority and more common. (Based on both
responsibility to SBU executive annual objectives and long-term
objectives)
Matrix Structure  Profit Sharing (incentive
 Most complex of all designs. compensation used by 30% of
Depends upon both vertical and companies)
horizontal flows of authority and  Gain Sharing (performance
communication targets set for employees or
departments.)
RESTRUCTURING
- To change or to make up
organizational patterns.
TEST FOR PERFORMANCE PAY  Designing of physical spaces,
PLANS facades, buildings
 Deliberate role modeling,
 Does the plan capture attention?
teaching, and coaching
 Do employees understand the
 Explicit reward and status
plan?
systems, promotion criteria
 Is the plan improving
 Stories, legends, and myths
communication?
about key people and events
 Does the plan payout when it
 What leaders pay attention to,
should?
measure, and control
 Is the company or unit
 Leader reactions to critical
performing better?
incidents and crises
MANAGING RESISTANCE TO  How the organization is designed
CHANGE and structured
 Organization systems and
Change raises anxiety over fear of: procedures
 Economic loss  Criteria used for recruitment,
 Inconvenience selection, promotion, and
 Uncertainly retirement
 Break in status-quo PRODUCTION/OPERATIONS
Resistance to change CONCERNS

 Single greatest threat to Production processes typically

successful strategy constitute more than 70% of a firm’s
implementation total assets

MANAGING THE NATURAL Decisions on:

ENVIRONMENT  Plant size
 Wide appreciation for firms that  Inventory/inventory control
conduct operations that “mend”  Quality control
rather than “harm” the  Cost control
environment.  Technological innovation

CREATING A STRATEGY HUMAN RESOURCE CONCERNS

SUPPORTIVE CULTURE  Assessing staffing needs and
 Strategists should strive to costs
preserve, emphasize, and build  Develop performance incentives
upon aspects of existing culture  Child-care policies
that support new strategies.  Work-life balance

Elements linking culture to strategy: MARKET SEGMENTATION

 Formal statements of philosophy, Bases for Segmentation Markets:

charters, etc. used for  Geographic
recruitment and selection, and  Psychographic
socialization.  Behavioral
 WEEK 14: EXECUTING THE
STRATEGIES: MARKETING,
FINANCE/ACCOUNTING, R&D, AND
MIS ISSUES
An organization’s capacity to execute its
strategy depends on its “hard”
infrastructure in organizational
structure and systems and on its “soft”
infrastructure its culture and norms.
Introduction:
Strategies have no chance of being
PRODUCT POSITIONING implemented successfully when
organizations do not market goods and
- Developing schematic
services well, when firms cannot raise
representations that reflect how
needed working capital when firms
products or services compare to
produce technologically inferior
competitors on dimensions most
products, or when firms have a weak
important to success in the
information. Strategy
industry.
implementation is the translation of
Product Positioning based on: chosen strategy into organizational
action to achieve strategic goals
 Customers wants and objectives.
 Customer’s needs
The following are the main steps in
implementing a strategy.
 Developing an organization has
the potential of carrying out
strategy successfully.
 Disbursement of abundant
resources to strategy essential
activities.
 Creating strategy encouraging
policies.
 Employing best policies and
programs for constant
improvement.
Product Positioning Map as Strategy-  Linking reward structure to the
Implementation Tool accomplishment of results.
 Making use of strategic
 Look for vacant niche
leadership.
 Avoid sub-optimization
THE NATURE OF STRATEGY with consumers than just informing
IMPLEMENTATION consumers about a product or service.
Implementation is a Challenge:  Companies should encourage
their employees to create wikis-
 Less than 10 percent of
websites that allow users to add,
strategies formulated are
delete, and edit content
successfully implemented.
frequently.
 Strategy implementation directly
 Firms should provide incentives
affects the lives of plant
to consumers to share their
managers division managers,
thoughts, opinions, and
department managers, project
experiences on the company
managers, personnel managers,
website.
staff managers, supervisors, and
current marketing issues. New Principles of Marketing
CURRENT MARKETING ISSUES  Today a business or
organization’s website must
Some examples of marketing
provide clear and simple
decisions that may require policies
instructions.
are as follows:
 The New Principles of Marketing
 How to make advertisements According to Parise, Guinan, and
more interactive to be more Weinberg:
effective? a. Don’t just talk to consumers
 How to best take advantage of work with them throughout the
Facebook and Twitter marketing process
conservations about the b. Give consumers a reason to
company and industry. participate.
 To use exclusive dealerships or c. Listen to and join the
multiple channels of distribution conversation outside your
 To use heavy, light, or no TV company’s website.
advertising d. Resist the temptation to sell, sell,
 To limit (or not) the share of sell. Instead attract, attract,
business done with a single attract.
customer e. Don’t control online
 To be a price leader or follower conversations; let them flow
 To offer a complete or limited freely.
warranty. f. Find a “marketing technologist” a
 To reward salespeople based on person who has three excellent
straight salary, straight skill sets (mark freely
commission, or a combinates technologist and social
salary commission interaction).
g. Embrace instant messaging and
CURRENT MARKETING ISSUES chatting.
Marketing of late has become more Advertising Media
about building a two-way relationship
  Recent research by Forrester  Market segmentation decisions
Research reveals that people directly affect marketing mix
ages 18 to 27 spend more time variables: product, place,
weekly on the internet than promotion, and price.
watching television, listening to
the radio, or watching DVDs or
VHS tapes. Marketing Bases
 According to analysts at
Corporate Eye, advertising  Geographic and demographic
investments decreased or stayed bases for segmenting markets
fairly even through 2013 with are the most commonly
one exception Internet employed.
advertising as expected increased  Evaluating potential market
27.9 percent between 2010 and segments requires strategies to
2013. determine the characteristics
 Internet advertising is growing so and needs of consumers, analyze
rapidly that marketers are and consumer similarities and
more allowed to create, bigger, differences, and develop
more intrusive ads that take up consumer group profiles
more space on the web page.  Segmentation is key to matching
supply and demand, which is
MARKET SEGMENTATION one of the thorniest problems in
customer service.
Market segmentation is widely used in
implementing strategies, especially for Retention Based Segmentation
small and specialized firms. Market
segmentation can be defined as the The basic approach to tagging
subdividing of a market into distinct customers is to utilize historical
subsets of costumer according to needs retention data to make predictions
and buying habits. about active customers regarding:

Market segmentation is an important  Whether they are at high risk of

variable in strategy implementation for canceling their service
at least three major reasons:  Whether they are profitable to
retain
 Strategies such as market  What retention tactics are likely
development, product to be most effective
development, market
penetration, and diversification FINANCE/ACCOUNTING ISSUES
require increased sales through Finance and Accounting Topics
new markets and products. Central to Strategy Implementation
 Market segmentation allows a
firm to operate with limited Some examples of decisions that may
resources because mass require finance/accounting policies:
production, mass distribution,
 To raise capital with short-term
and mass advertising are not
debt, long-term debt, preferred
required.
stock, or common stock.
  To lease or buy fixed assets. liabilities, current liabilities, total
 To determine an appropriate assets, and fixed.
dividend payout ratio.  List comments on the projected
 To use LIFO, FIFO, or a market- statements. Any time a
value accounting approach. significant change is made in an
 To establish a certain percentage item from a prior year to the
discount on accounts within a projected year, a remark should
specified period of time. be provided.
 To determine the amount of cash
Financial Budgets
that should be kept on hand.
 A financial budget is a document
Projected Financial Statements
that details how funds will be
 Projected financial statement obtained and spent for a
analysis is a central strategy- specified period of time.
implementation technique  There are almost as many
because it allows an organization different types of financial
to examine the results of various budgets as there are types of
implementation decisions. organizations. Some common
 When compared to prior years to types of budgets include cash
industry averages financial ratios budgets, operating budgets,
provide valuable insights into the sales budgets, and fixed budgets.
feasibility of various strategy-  Perhaps the most common type
implementation approaches. of financial budget is the cash
budget.
The six steps required to perform a
 Financial budgets have some
projected financial analysis:
limitations.
 Prepare the projected income a. Budgetary programs can
statement before the balance become so detailed that
sheet. Start by forecasting sales they are cumbersome and
as accurately as possible. overly expensive.
 Use the percentage of sales b. Financial budgets can
method to project the cost of become a substitute for
goods sold (CGS) and the objectives.
expense items in the income c. Budgets can hide
statement. inefficiencies if based
 Calculate the projected net solely on precedent rather
income. than on a periodic
 Subtract from the net income evaluation of
any dividends to be paid for that circumstances and
year. This remaining net income standards.
is retained earnings. d. Budgets are sometimes
 Project the balance sheet items, used as instruments of
beginning with retained earnings tyranny that result in
and then forecasting frustration, resentment,
stockholder’s equity, long-term absenteeism, and high
turnover.
RESEARCH AND DEVELOPMENT coordinating activities among
(R&D) ISSUES divisions, and managing funds.
 Firms must increasingly be
 R&D personnel can play an
concerned about computer
integral part in strategy
hackers and take specific
implementation.
measures to secure and
 Technological improvements that
safeguard corporate
affect consumer and industrial
communications, files, orders,
products and services shorten
and business conducted over the
product life cycles.
Internet.
 R&D policies can enhance
 In many firms, information
strategy-implementation efforts
technology is doing away with
to:
the workplace and allowing
a. Emphasize product or
employees to work at home or
process improvements.
anywhere, anytime. Many people
b. Stress basic or applied
see the office-less trend as
research.
leading to a resurgence of family
c. Be leaders or followers in
togetherness in U.S. society.
R&D.
d. Develop robotics or WEEK 15: TOTAL QUALITY
manual-type processes. MANAGEMENT SYSTEMS:
e. Spend a high, average, or HOSPITALITY AND TOURISM
low amount of money on MANAGEMENT
R&D.
Total quality control is an effective
f. Perform R&D within the
system for integrating the quality
firm or contract R&D to
development, quality maintenance, and
outside firms.
quality improvement efforts of the
g. Use university researchers
various groups in an organization so as
or private sector
to enable production and service at the
researchers.
most economical levels which allows
MANAGEMENT INFORMATION full customer satisfaction (A. V.
SYSTEMS (MIS) ISSUES Feigenbaum, former President and
CEO, General System Company).
 Firms that gather, assimilate,
and evaluate external and Introduction
internal information most
 Total – involving the entire
effectively are gaining
department of the company
competitive advantages over
 Quality – achieving customer
other firms.
satisfaction all the time
 Information collection, retrieval,
 Management – maintaining
and storage can be used to
high-level quality in every sector
create competitive advantages in
ways such as cross-selling to A large number of contemporary
customers, monitoring suppliers, organizations are adopting total quality
keeping managers and management (TQM) to satisfy and
employees informed, delight their customer. TQM requires
creating a customer-centered culture in Members of top management must lead
the hospitality and tourism service the TQM effort that also provides vision.
industry through an analysis of TQM demands the organization moves
customer expectations, developing away from ‘management by control’
system of measurement and control, to ‘management by commitment’.
and integrating the system with the Only when the whole organization
business. accepts the responsibility and
commitment of quality management
This chapter aims to review the Critical
can the TQM process be implemented
Service Factors (CSFs), the process of
effectively.
TQM implementation, and its
implication. It maintains that Customer Focus
organizations must strive to
 Customer is the ‘king’.
continuously improve these processes
Confirming the customer’s needs
by incorporating the knowledge and
and expectations is the essence
experience of workers.
of success in today’s business
The CSFs of TQM are identified as organization that understands
follows: what customers want and
provides a product or service to
 Meeting customer expectations,
meet this requirement to gain
and growing demands.
competitive advantage and profit.
 Customer focus.
 Improvement of the team’s Ex. Such as market research can be
development used to collect information.
 Changing the ideology of
Continuous Improvement
product-centered culture of
service system to a costumer-  Continuous improvement aims to
centered culture. attain levels of performance that
 Spreading the “quality message” are significantly higher than
through effective education and current levels, so the
training programs. organization can attain long-term
 Teamwork and involvement. survival and development. This
 Benchmarking and employee process requires eliminating
involvement. errors, removing slack, and
 Clear mission. Employee reducing variations.
involvement and empowerment.
 Recognition and award. Get Things Right First Time
 Training and development.  TQM undertakes a change to
 Commitment by top reactive. It requires that everyone
management at all levels and must try to get things right at
support. first time to reduce inspection
Leadership is one of the key factors and waste. It is also called as
in implementing TQM. Effective “zero defect”. Also implies wider
leadership should develop a clear communication, staff decision,
mission statement and then build up a and problem-solving.
strategy to support the mission. Competitive Benchmarking
  This is one of the most important  There is nothing more important
approaches to TQM. The concept to an organization’ action
of benchmarking is defined by process that getting right
the Society of Management communication. Good
Accountants of Canada as: communication is a great
motivator. It avoids
“A systematic and continuous
misunderstanding and reduce
measurement process” (Parker and
the cost of quality by avoiding
Harrison, 1995). Its purpose is to
mistakes. Top management
provide a target and improving the
should build a good
performance of the organization to
interpersonal relationships to
achieve the superiority in the
ensure that they only
market place.
communicate constructive
Employee Involvement criticism to motivate and improve
both individual and team skills.
 The emphasis throughout all All managers, supervisors, and
stages of TQM implementation staff in an organization must
should be the involvement of all recognize the values and effects
the employees in decision of good communication because
making, problem-solving, and it is a significant factor in
the financial success of the firm. creating and maintaining the
TQM encourages all level of standard for TQM’s successful
people to become more closely implementation.
relate to the organization’s goal
and objectives. Involvement Recognition and Reward
means to empower employees,
 Recognition is the process
give them information, increase
whereby management shows
their knowledge, and reward
acknowledgment of employees’
quality performance.
outstanding performance.
Training and Education Recognition and reward are both
effective motivators and
 The training and education of all simulators for desire
the employees from top to performance and employee
bottom are the fundamental satisfaction. They are the key
building blocks for the forms of positive reinforcement
successful implementation of for letting employees know they
TQM. Training in the quality- are valuable member of the
related concept of tools is organization. Reward can be
regarded as the most important given in many forms. An
factor in increasing employees’ organization must use
capacity to do their job, finding recognition and reward not to
out and solving problems, force people to do thing
releasing the full potential of excellently but to encourage
workers, and continuously them to do so.
improving quality.
Feedback
Communication
  This ensures that team members
know and understand the role
they are playing and their
contributions to the success of
the team. They should be told
what is expected and should
mutually agree on the criteria to
be used to assess their
performance. Feedback, which is
the link to fostering good
communication, should be
frequently provided and
evaluated.
Philosophy of TQM
 The methodology of Total Quality
Management is intended to
achieve business excellence.
 TQM is providing a service
quality that strikes a balance
between guess expectations and
their perception of the service
received.