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ch04&05 - Self Study Unit

ch04&05 - Self Study Unit - SELFSTUDY UNIT#7(2005...

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SELF-STUDY - UNIT #7     (2005 Fall) 1. Identify two ways quality can improve profitability. 1. Increase sales    increases in sales often occur as firms speed response, lower selling prices as  a result of economics of scale, and improve their reputation for quality products. 2. Reduce costs  – similarly, improved quality allows costs to drop as firms increase productivity  and lower rework, scrap, and warranty costs. 2. Explain quality as defined by the following: 1. The American Society for Quality  – The totality of features and characteristics of a product or  service that bears on its ability to satisfy stated or implied needs. 2. The User  – Lies in the eyes of the beholder. 3. Manufacturing based  – Making it right the first time. 4. Product based  – Quality is a precise and measurable variable. 3. Identify and briefly explain 3 implications of quality. 1. Company reputation  – An organization can expect its reputation for quality – be it good or bad –  to follow it. Quality will show up in perceptions about the firm’s new products, employment  practices, and supplier relations. Self-promotion is not a substitute for quality products. 2. Product liability  – The courts increasingly hold organizations that design, produce, or distribute  faulty products or services liable for damages or injuries resulting from their use. Legislation such  as the Consumer Product Safety Act sets and enforces product standards by banning products  that do not reach those standards. Impure foods that cause illness, nightgowns that burn, tires  that fall apart, or auto fuel tanks that explode on impact can all lead to huge legal expenses, large  settlements or losses, and terrible publicity. 3. Global implications  – In this technological age, quality is an international, as well as OM,  concern. For both a company and a country to compete effectively in the global economy,  products must meet global quality, design, and price expectations. Inferior products harm a firm’s  profitability and a nation’s balance of payments. 4. Name 4 costs of quality.
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