Managing Quality

The Importance of Quality

The two main aspects of a product or service that customers use to make decisions are price and quality. Quality is therefore important for a business that wants to be profitable and compete with rivals (competitors).

What determines quality?

Quality is determined by lots of of factors such as:
- The quality of the materials that are used.
- The quality of the production process.
- The style of a product.
- The durability, speed, and quality of a service.

Customer expectations

When customers buy a product they have expectations about the quality of the product and service.
For companies that produce goods, the goods need to be of a certain quality. The product should not break after one use (unless it is a disposable item) and it should be fit for purpose.
For companies that provide a service, a customer will have expectations about the benefits of the service and the time it will take for it to be completed.

Customer service

For all businesses, it is important to have good quality customer service. If a company fails to deliver a good quality of customer service, customers may buy products and services from competitors instead.

Customer returns

There are costs associated with returns:
- If a customer is unhappy with a good or service then they may be able to return it for a refund. This often means that a product is wasted and the costs of processing a return may be high.
- Businesses like Asos offer free 28 day returns for customers. This is likely to be one of Asos’ largest costs.
- In 2016, the Financial Times reported that it cost retailers £60bn each year to process customer returns.

Lost customers

Customers who think a business does not deliver high quality products or services are less likely to purchase from that business again.

Low quality is costly - product recalls

A product may be found to be unsafe for use or may violate legal requirements. A business may be forced to recall all products like this.
In 2015, Volkswagen was found to have cars that exceeded the legal limit for emissions. This meant they had to recall 11 million cars worldwide at a great cost to the business.

Measuring Quality

How a company measures quality depends on the product or service. Different products will have different things that are important to measure. For a car, a company may randomly test the engines to make sure they have the correct horsepower. To measure quality, companies can use:

Customer feedback

Getting reviews from customers is a common way that firms measure the quality of a product or service.
- For example, sites like Airbnb ask people who stay in properties listed on the website to rate them afterward.
- TripAdvisor collects reviews from customers and some restaurants now have hand-held technology to allow people to review their experience instantly.

Customer surveys

Firms will sometimes do more detailed customer surveys, asking them about their experience with the good or service.
Using customer surveys, businesses can find out if there are quality problems in any of their products.

Identifying Quality

To measure and identify quality, businesses can:

Check quality in production process

Businesses can check the raw materials from the suppliers, take random samples of products that are in the middle of being produced (made) and take random samples of finished products.
It can be expensive to do this checking, but it means that defects are spotted before they reach customers. It also may stop a business bearing the costs involved in processing returns.

Customer service and complaints

Customer service is a common way for firms to identify problems that they have with their product.
Customer service is beneficial because it helps businesses to correct an issue that the company has not yet identified.
There are monetary costs and reputation costs from having dissatisfied customers.

1Enterprise & Entrepreneurship

1.1The Dynamic Nature of Businesses

1.1.1The Dynamic Nature of Businesses

1.1.2Risk & Reward

1.1.3The Role of Business Enterprise

1.1.4The Role of Business Enterprise 2

1.1.5The Role of the Entrepreneur

1.1.6End of Topic Test - Dynamic Nature of Business

1.1.7Grade 9 - Dynamic Nature of Business

1.2Spotting a Business Opportunity

1.2.1Customer Needs

1.2.2Market Research

1.2.3Market Segmentation

1.2.4The Competitive Environment

1.2.5Primary & Secondary Market Research

1.2.6End of Topic Test - Business Opportunities

1.2.7Application Questions - Business Opportunities

1.2.8Exam-Style Questions - Market Segmentation

1.3Putting a Business Idea into Practice

1.3.1Business Aims

1.3.2Business Objectives

1.3.3Business Revenues & Costs

1.3.4Costs - Calculations

1.3.5Revenue - Calculations

1.3.6Business Profits & Break-Even Analysis

1.3.7Profits & Losses - Calculations

1.3.8Interest - Calculations

1.3.9Cash & Cash Flow

1.3.10Cash & Cash Flow 2

1.3.11Cash Flow - Calculations

1.3.12Sources of Business Finance

1.3.13End of Topic Test - Business in Practice

1.3.14Grade 9 - Business in Practice

1.3.15Exam-Style Questions - Business in Practice

1.4Making the Business Effective

1.4.1The Options for Start-Up & Small Businesses

1.4.2Limited Liability

1.4.3Franchising & Not-For-Profits

1.4.4Business Location

1.4.5The Marketing Mix

1.4.6Business Plans

1.4.7End of Topic Test - Effective Business

1.4.8Application Questions - Effective Business

1.4.9Exam-Style Questions - Business Plans

1.5Business Stakeholders

1.5.1Business Stakeholders

1.5.2Technology & Business

1.5.3Legislation & Business

1.5.4Legislation & Business 2

1.5.5The Economy & Business

1.5.6External Influences

1.5.7End of Topic Test - Business Stakeholders

1.5.8Grade 9 - Business Stakeholders

2Building a Business

2.1Growing the Business

2.1.1Business Growth

2.1.2Finance

2.1.3Changes in Business Aims & Globalisation

2.1.4Ethics & Business

2.1.5The Environment & Business

2.1.6End of Topic Test - Growing a Business

2.1.7Application Questions - Growing a Business

2.1.8Exam-Style Questions - Business Growth

2.2Making Marketing Decisions

2.2.1Product

2.2.2Product Life Cycle

2.2.3Price

2.2.4Pricing Methods

2.2.5End of Topic Test - Product & Price

2.2.6Grade 9 - Product & Price

2.2.7Promotion & Advertising

2.2.8PR & Sales Promotions

2.2.9Sponsorship & Product Placement

2.2.10Promotional Mix

2.2.11End of Topic Test - Promotion

2.2.12Application Questions - Promotion

2.2.13Exam-Style Questions - Promotional Mix

2.2.14Place & Wholesalers

2.2.15Direct to Consumer

2.2.16E-commerce & M-commerce

2.3Making Operational Decisions

2.3.1Job Production

2.3.2Batch & Flow Production

2.3.3Working with Suppliers

2.3.4Effective Supply Chains

2.3.5Just In Time & Just In Case

2.3.6Managing Quality

2.3.7Total Quality Management

2.3.8The Sales Process

2.3.9End of Topic Test - Operational Decisions

2.3.10Grade 9 - Operational Decisions

2.3.11Exam-Style Questions - Managing Stock

2.4Making Financial Decisions

2.4.1Gross Profit & Net Profit - Definitions

2.4.2Gross Profit - Calculations

2.4.3Net Profit - Calculations

2.4.4Rate of Return

2.4.5Rate of Return - Calculations

2.4.6Research & Financial Data

2.4.7Marketing Data

2.4.8Percentage Change - Calculations

2.5Making Human Resource Decisions

2.5.1Organisational Structures

2.5.2Organisational Structures 2

2.5.3Recruitment

2.5.4Effective Recruitment

2.5.5Training a Workforce

2.5.6Motivating a Workforce

2.5.7End of Topic Tests - Human Resources

2.5.8Application Questions - Human Resources

2.5.9Exam-Style Questions - Human Resources

Jump to other topics