BUS007 NOTES

Total Quality Management

Prelim

Philosophy

- Leaders of distinction in Business, Industry and Society

Core Values

 Excellent
 Disciplined
 Results-driven
 Socially Responsible

SPCBA VISION

A Premier institution of higher learning in the Southern Tagalog Region committed to

producing quality, technology-based and competitive graduates embodied with moral,
social and ethical values who will be leaders in business, industry and society.

Mission

To prepare the students to become effective and competitive successful leaders of society
capable of making sound contribution within the global marketplace.

BA Department Vision/ Mission

Vision

To be the number one academic department in sharing knowledge that can be transferred
to the students which they can apply in the actual workplace in business and government.

Mission

To inculcate in the hearts and minds of our students the highest standards of business
learning that can propel them to become world class potential leaders in business,
industry, and society.
Goals

To provide students with excellent lessons that will guide them in performing the
outcomes expected of them by ensuring that the professorial staff possess the necessary
skills and capabilities.

Program Outcomes

PROGRAM EDUCATIONAL OBJECTIVES

Three to five (3-5) years after graduation, SPCBA students are expected to:

1. Be seen occupying positions of responsibility and leadership.

2. Make sound contributions to business, community and government.

3. Articulate and discuss research findings and formulate wider organizational and
community solutions.

4. Research and conceptualize comprehensive solutions and provide quality products and
services that the general public and specialized industries need.

5. Continuous connection to SPCBA and contribution to college and alumni activities.

COURSE OUTCOMES (CO’S)

At the end of the semester, the students should be able to:

1. Understand the progress made by developing countries.

2. Comprehend the economic challenges confronting countries around the globe.
3. Enable the learners to design sound economic policies & programs sometime in the
future.
4. Empower students to gain insight of current economic conditions of the country &
around the globe.
5. Develop critical thinking among the students as a way of ensuring their
participation in the future economic development of their own country & the global
nations.
Learning interaction - You shall follow your enrolled schedules in attending to important
class sessions with your professors. You shall also follow it when physical classes (face-to-
face interaction) resume. Regular communication and coordination with your professors
are highly advised.

Learning assessments - All assessment activities like quizzes, major examinations and
assignments shall be complied online.

The virtual Classroom

Blended learning - An educational strategy which creates a wide array of opportunities for
learning growth by combining the online learning with traditional learning.

Learning environment - You can study anytime and anywhere (Learner-paced) as you will
be provided modules to study and practice. In addition, online class sessions are also
provided to help you in your learning journey. The virtual classroom

Grading System

30 % Preliminary Term

30 % Middle Term

40 % Pre-final Term

100 % Final Grade

Term grading

30 % Learner’s Output

30 % Quizzes

40 % Term Examination

100 % Term Grade

Netiquette

Proper decorum should be observed when attending online classes. In particular, you must
observed the following:
• When joining online class video conference, please turn off your microphone. Type your
complete name for proper recognition when necessary.

• It is advisable that the comments and chat messages should be for academic discussions.
During online video conference, turn off your microphone when there is no necessity for
you to talk.

• Follow the guidelines and deadlines set by your professors. For example, the proper
identification of the file to be submitted in order to ensure the correct recognition of your
work

Quality & Competitiveness

 The adoption of Quality Management contributes to the aggregate economic

efficiency indicators.

 Enhanced innovation.

 Development of Human Resources, which increases productivity & competitiveness

levels.

 Reliable internationally recognized-assurance schemes prevent technology barriers

to trade & facilitate market access.

 QM techniques improved quality, flexible production system & quality innovation

throughout the production chain.

 The cost of production & process improvements have been offset by the reduced
costs of quality defects.

 Source: Schuurman, H. (Dec. 1997). Quality management & competitiveness: the

diffusion of the ISO 9000 standards in Latin America & recommendations for
government strategies. Chile:United Nations

Factors Inhibiting Competitiveness

 Business & Government Related Factors

 Family Related Factors
 Education Related Factors
Cost of Poor Quality

Traditional Costs:

 Waste

 Rejects

 Retesting

 Rework

 Customer returns

 Inspection

 Recalls

Hidden Costs

 Excessive overtime,
 Pricing errors,
 Billing errors,
 Excessive turnover,
 Premium freight costs,
 Development cost of the failed product
 Field service costs
 Overdue receivables
 Handling complaints
 Expediting, system costs
 Planning delays
 Late paperwork
 Expediting
 System costs
 Planning delays
 Late paperwork, lack of follow-up, excess inventory
 Customer allowances
 Lack of follow-up
 Excess inventory
 Customer allowances
 and Unused capacity
Quality Management Practices in Selected Asian Countries

A. First group: Includes South Korea and Singapore: which are differentiated y
their global and world-class QM practices.
B. Second group: Includes Malaysia, Philippines, India, and Indonesia, which
have installed the equivalent of a Malcolm Baldridge Award.
C. Third group: Made up of Thailand, Brunei, and Bangladesh, has instituted
ISO-type QM systems.

Critical Indicators of Philippine Competitive Status

ASEAN Region: Singapore, Malaysia, Thailand, Indonesia, Philippines, Brunei, Vietnam, &
Lao PDR.

For 2018-19 Global Competitiveness report, Singapore ranked no. 1 & the Philippines
ranked 5th place.

Global Competitive Ranking:

Singapore - 2nd

Malaysia - 25th

Thailand - 38th

Indonesia - 45th

Philippines - 56th

Philippine Competitiveness Indicators

a. Macroeconomic stability – 90 out of 100

b. Labor Market, Financial System, Market Size,& Business dynamism- 40th place
globally
c. Growth of Innovative Companies- 15th
d. Institutions-101st
e. Organized Crime, Reliability of Police Services, & Conflict of Regulation -120th or
worst at the bottom worldwide
f. Actual Innovation in the Country-67th
 g. Research & Development – 99th
h. Trademark Application – 98th
i. Social Capital – 21th worldwide

Quality Management for Organizational Excellence

Dr. David L. Goetsch and Stanley Davis

MAJOR TOPICS

 What is Quality?
 The Total Quality Approach Defined
 Two Views of Quality
 Key Elements of Total Quality
 Total Quality Pioneers
 Keys to Total Quality Success
 The Future of Quality Management in 21st Century

Brief History of the Quality Management

• Skilled Craftsmen/ Artisans supervised by masters of the trade

Small volume: Parts fitted 'by eye'

• 1798- Eli Whitney

Designed and manufactured guns with interchangeable parts (quality control)

• 1911 - Frederick Taylor

Principles of scientific management defines role of inspector

• 1914 - Henry Ford

Creates the assembly line on a big scale (Quality = Inspection)

• 1924- Juran, Dodge, Romig, Edwards

Western Electric IE department:

• 1931- Shewhart

publishes control chart concepts

• 1950-1980's - Wake-up call for U.S. manufacturing

• 1980's-1990's -

Total Quality Management - including ISO

1987 Malcolm Baldrige National Quality Award created

• 1990's to today

Six Sigma and its variations

The Total Quality Approach to Quality Management

(Continued)

 Key characteristics of the total quality approach are as follows:

o strategically based, o continual process

o customer focus, improvement,
o obsession with quality, o bottom-up education and
o scientific approach, training,
o long-term commitment, o freedom through control,
o teamwork, and
o employee involvement and o unity of purpose
empowerment,

 The rationale for total quality can be found in the need to compete in the global
marketplace. Countries that are competing successfully in the global marketplace
are seeing their quality of living improve. Those that cannot are seeing theirs
decline.

DEMING 14 POINTS FOR MANAGEMENT

1. Create constancy of purpose toward improvement of product and service, with the aim
to become competitive and to stay in business and to provide jobs.

2. Adopt the new philosophy. We are in a new economic age. Western management must
awaken to the challenge, must learn their responsibilities, and take on leadership for
change.
3. Cease dependence on inspection to achieve quality. Eliminate the need for inspection on
a mass basis by building quality into the product in the first place.

4. End the practice of awarding business on the basis of price tag. Instead, minimize total
cost. Move toward a single supplier for any one item, on a long-term relationship of loyalty
and trust.

5. Improve constantly and forever the system of production and service, to improve quality
and productivity, and thus constantly decrease costs.

6. Institute training on the job.

7. Institute leadership. The aim of supervision should be to help people and machines and
gadgets to do a better job.

8. Drive out fear, so that everyone may work effectively for the company.

9. Break down barriers between departments. People in research, design, sales, and
production must work as a team to foresee problems of production and use that may be
encountered with the product or service.

10. Eliminate slogans, exhortations, and targets for the work force asking for zero defects
and new levels of productivity.

11a. Eliminate work standards (quotas) on the factory floor. Substitute leadership.

11b. Eliminate management by objective. Eliminate management by numbers, numerical

goals. Substitute leadership.

12a. Remove barriers that rob the hourly worker(s) of their right to pride of workmanship.

12b. Remove barriers that rob people in management and in engineering of their right to
pride of workmanship.

13. Institute a vigorous program of education and self-improvement.

14. Put everybody in the company to work to accomplish the transformation. The
transformation is everybody’s job.

Juran Trilogy

 Planning - Provide the operating forces with the means of producing products that
meet the customers needs.
 Control – Control vs. Breakthrough
  Improvement – project by project improvement

Ishikawa

 Training
 Continuous Improvement
 Statistical quality control

Crosby

 Zero Defects
 Behavior and motivational aspects of quality improvement

The Rest of the Pack

 Camp
 Peters
 Hammer & Champy
 Covey

Quality Theory Summary

> Information Analysis

> Team Building

> Strategic Planning

> Quality Department Role

> Breakthrough

One:

The Total Quality Approach to Quality Management

(Continued)

Common errors made when starting quality initiatives include

o senior management delegation and poor leadership;

o team mania;
 o the deployment process; a narrow;
o dogmatic approach;
o and confusion about the differences among education, awareness, inspiration, and
skill building.

Trends affecting the future of quality management include

o demanding global customers,

o shifting customer expectations,
o opposing economic pressures, and
o new approaches to management.

-------

Quality Management for Organizational Excellence

MAJOR TOPICS

 Strategic Management: Planning and Execution for Competitive Advantage

 What is Strategic Management?
 Competitive Strategy
 Core Competencies and Competitive Advantage
 Components of Strategic Management
 Strategic Planning Overview
 Creative Thinking in Strategic Planning
 Conducting the SWOT Analysis
 Developing the Vision

> Strategy Content

> The importance of time in quality improvement

> Leadership for quality

> Quality and ethics

> Quality as a strategy

> Quality strategy process

> Deploying quality

> Does quality lead to better business results?

> Supply chain strategy

Three:

Strategic Management: Planning and Execution for Competitive Advantage

(Continued)

• Developing the Mission

• Developing the Guiding Principles

• Developing Broad Strategic Objectives

• Developing Specific Tactics (Action Plan)

• Executing the Strategic Plan

• Strategic Planning in Action: A "Real World" Case

• Strategies that organizations can adopt for gaining a sustainable competitive advantage
are cost leadership, differentiation, and market-niche strategies.

• Core competencies are things an organization dose so well they can be viewed as
providing a competitive advantage.

• Strategies are approaches adopted by organizations to ensure successful performance in

the marketplace.

Strategic Management: Planning and Execution for Competitive Advantage

Strategic management is management that bases all actions, activities, and decisions
on what is most likely to ensure successful performance in the marketplace. The two major
components of strategic management are strategic planning and strategic execution.

Part of strategic planning is thinking creatively to eliminate "sacred cows" that work
against competitiveness.
• Strategic planning is the process whereby organizations develop their vision, mission,
guiding principles, broad objectives, and tactics for accomplishing the broad objectives.

• An organization's vision is its guiding force, the dream of what it wants to become and its
reason for being.

• An organization's mission describes who an organization is, what it does, and where it is
going.

• An organization's guiding principles establish the framework within which it will pursue
its mission. Together, the guiding principles summarize an organization's value system, the
things it believes are most important.

• An organization's broad strategic objectives translate its mission into more specific terms
that represent actual targets at which the organization aims. The objectives are more
specific than the mission, but they are still broad.

• Tactics are well defined, finite projects and activities undertaken for the purpose of
specific desired outcomes in support of the broad objectives.

• Even the best strategic plan will serve no purpose unless it is effectively executed. To
promote successful execution of strategies, organizations should undertake the following
activities: communicate, build capabilities, establish strategy-supportive stimuli, eliminate
administrative barriers, identify advocates and resisters, exercise strategic leadership, and
monitor and adjust as needed.

Strategic Quality Planning

Strategy Content

Quality improvement involves identifying potential areas for improvement and planning
the implementation of projects and improvements.

The importance of time in quality improvement

There are two aspects of time:

- The time it takes to achieve business goals as a result of quality

- The speed at which companies improve.

When goals are set, one of three things will occur:

1. People will achieve the goals and incur positive results

2. People will distort the data

3. People will distort the system

Leadership for quality

Leadership is the process by which a leader influences a group to move towards the
attainment of superordinate goals.

For followers to have power, leadership must share power. As a result leadership is about
the sharing of power.

This power takes many forms:

 The power of expertise

 Reward power
 Coercive power
 Referent power
 Legitimate power

Quality and Ethics

Quality appears to be good business

Quality is also good ethics

"We build good ships. At a profit if we can, at a loss if we must. But, we build good ships"

Quality as a strategy

Cost of Quality

PAF Paradigm

Prevention Costs

Appraisal Costs

Failure Costs

Differentiation through quality

Focus through quality

Quality as a core competency

Quality Strategy Process

The Forced Choice Model

1. Statement of the mission

2. Interrelated financial and non-financial objectives

3. Statement of strengths and weaknesses

4. Forecast of operations

5. Major future operations

6. Broad economic Assumptions

7. Key government/regulatory issues

8. Major technological forces

9. Significant marketing opportunities/threats

10. Explicit competitor strategies for each competitor

11. Generating Strategic options

Deploying Quality

Hoshin Kanri or Policy Deployment

The Company develops a 3 - 5 year plan

The Senior Executives develop the current years objectives.

Catchball occurs

The process is interactive

Teams report up

Management delivers feedback

Does Quality Lead to Better Business Results?

 Quality and
 Price
 Cost
 Productivity
  Profitability
 Environment

Supply Chain Strategy

Suppliers?

Who are our preferred suppliers?

What is our process for supplier selection?

How do we develop suppliers?

How do we link with our suppliers?

Do we source globally?

Inventory management?

Where do we optimally store inventory

How much? How long?

Do we have perishable stock?

Do we carry safety stock?

ARE we maintaining good levels of service?

Products?

How much product do we stock?

What product variety is necessary?

How do we win orders?

Where are our products in their life cycles?

Service?

How do we define service along the supply chain?

What do our customers want?

Can we segment the supply chain?

Who are our customers?

Quality Management for Organizational Excellence

Quality Management, Ethics, and Corporate Social Responsibility

MAJOR TOPICS

 Definition and Overview of Ethics

 Trust and Total Quality
 Values and Total Quality
 Integrity and Total Quality
 Responsibility and Total Quality
 Manager's Role in Ethics
 Organization's Role in Ethics
 Handling Ethical Dilemmas
 Ethics Training and Codes of Business Conduct
 Models for Making Ethical Decisions
 Beliefs versus Behavior: Why the Disparity?
 Ethical Dilemmas: Cases
 Corporate Social Responsibility Defined

Ethics is about doing the right thing within a moral framework. The most common
impediment to ethical conduct is human nature because people tend to behave according
to perceived personal interest.

Trust is a critical element of ethics, which, in turn, makes ethics critical in total quality.
Many of the fundamental elements of total quality depend on trust and ethical behavior,
including communication, interpersonal relations, conflict management, problem solving,
teamwork, employee involvement and empowerment, and customer focus . Trust can be
built by being loyal to those not present, keeping promises, and sincerely apologizing when
necessary.

Values are those core beliefs that guide our behavior. Individuals and organizations apply
their knowledge and skills most willingly to efforts in which they believe. Managers should
work to establish an environment in which values that lead to ethical behavior and values
that lead to peak performance are the same.
Integrity requires honesty, but it is more than just honest. Integrity is a combination of
honesty and dependability. People with integrity can be counted on to do the right thing, do
it correctly, and do it on time.

Accepting responsibility is part of ethical behavior. People who pass blame are not
behaving ethically. In a total quality setting, people are responsible for their performance.
When speaking of their organization, ethical people say, "we" instead of "they.”

Managers play a key role in ethics in an organization. They are responsible for setting an
example ethical behavior, helping employees make ethical choices, and helping employees
follow through and behave ethically after making an ethical choice. In carrying out these
responsibilities, managers can use the best-ratio approach, black-and-white approach, and
full-potential approach.

The organization's role in fostering ethical behaviour includes creating an ethical

environment and setting an ethical example. Key in creating an ethical environment is
having a comprehensive ethics policy. Key in setting an example is following the policy,
expecting all employees to follow the policy, and rewarding those who do.

In handling ethical dilemmas, managers should select the option that is most likely to build
trust, integrity, and a sense of responsibility and that is most likely to pass the various
ethics tests (i.e., front-page, morning-after, etc.).

People who believe in ethical values will sometimes make unethical decisions because of
self-interest, self-protection, conflicting values, or because they see the benefits as being
intangible or deferred.

Key elements of corporate social responsibility include the ethical aspects of the following
issues: human rights, safety and health, business practice, governance, environmental
engagement, consumer relations, marketplace activities, community involvement and
social development.
A Framework for Ethical Decision Making
We all have an image of our better selves—of how we are when we act ethically or
are “at our best.” We probably also have an image of what an ethical community, an ethical
business, an ethical government, or an ethical society should be. Ethics really has to do with
all these levels—acting ethically as individuals, creating ethical organizations and
governments, and making our society as a whole more ethical in the way it treats everyone.

What is Ethics?

Ethics refers to standards and practices that tell us how human beings ought to act
in the many situations in which they find themselves—as friends, parents, children,
citizens, businesspeople, professionals, and so on. Ethics is also concerned with our
character. It requires knowledge, skills, and habits.

It is helpful to identify what ethics is NOT:

Ethics is not the same as feelings. Feelings do provide important information for our
ethical choices. However, while some people have highly developed habits that make them
feel bad when they do something wrong, others feel good even though they are doing
something wrong. And, often, our feelings will tell us that it is uncomfortable to do the right
thing if it is difficult.

Ethics is not the same as religion. Many people are not religious but act ethically,
and some religious people act unethically. Religious traditions can, however, develop and
advocate for high ethical standards, such as the Golden Rule.

Ethics is not the same thing as following the law. A good system of law does
incorporate many ethical standards, but law can deviate from what is ethical. Law can
become ethically corrupt—a function of power alone and designed to serve the interests of
narrow groups. Law may also have a difficult time designing or enforcing standards in
some important areas and may be slow to address new problems.

Ethics is not the same as following culturally accepted norms. Cultures can include
both ethical and unethical customs, expectations, and behaviors. While assessing norms, it
is important to recognize how one’s ethical views can be limited by one’s own cultural
perspective or background, alongside being culturally sensitive to others.

Ethics is not science. Social and natural science can provide important data to help
us make better and more informed ethical choices. But science alone does not tell us what
we ought to do. Some things may be scientifically or technologically possible and yet
unethical to develop and deploy.

Six Ethical Lenses

If our ethical decision-making is not solely based on feelings, religion, law, accepted
social practice, or science, then on what basis can we decide between right and wrong,
good and bad? Many philosophers, ethicists, and theologians have helped us answer this
critical question. They have suggested a variety of different lenses that help us perceive
ethical dimensions. Here are six of them:

The Rights Lens

Some suggest that the ethical action is the one that best protects and respects the
moral rights of those affected. This approach starts from the belief that humans have a
dignity based on their human nature per se or on their ability to choose freely what they do
with their lives. On the basis of such dignity, they have a right to be treated as ends in
themselves and not merely as means to other ends. The list of moral rights—including the
rights to make one's own choices about what kind of life to lead, to be told the truth, not to
be injured, to a degree of privacy, and so on—is widely debated; some argue that non-
humans have rights, too. Rights are also often understood as implying duties—in
particular, the duty to respect others' rights and dignity.

The Justice Lens

Justice is the idea that each person should be given their due, and what people are
due is often interpreted as fair or equal treatment. Equal treatment implies that people
should be treated as equals according to some defensible standard such as merit or need,
but not necessarily that everyone should be treated in the exact same way in every respect.
There are different types of justice that address what people are due in various contexts.
These include social justice (structuring the basic institutions of society), distributive
justice (distributing benefits and burdens), corrective justice (repairing past injustices),
retributive justice (determining how to appropriately punish wrongdoers), and restorative
or transformational justice (restoring relationships or transforming social structures as an
alternative to criminal punishment).

The Utilitarian Lens

Some ethicists begin by asking, “How will this action impact everyone affected?”—
emphasizing the consequences of our actions. Utilitarianism, a results-based approach, says
that the ethical action is the one that produces the greatest balance of good over harm for
as many stakeholders as possible. It requires an accurate determination of the likelihood of
a particular result and its impact. For example, the ethical corporate action, then, is the one
that produces the greatest good and does the least harm for all who are affected—
customers, employees, shareholders, the community, and the environment. Cost/benefit
analysis is another consequentialist approach.

The Common Good Lens

According to the common good approach, life in community is a good in itself and
our actions should contribute to that life. This approach suggests that the interlocking
relationships of society are the basis of ethical reasoning and that respect and compassion
for all others—especially the vulnerable—are requirements of such reasoning. This
approach also calls attention to the common conditions that are important to the welfare of
everyone—such as clean air and water, a system of laws, effective police and fire
departments, health care, a public educational system, or even public recreational areas.
Unlike the utilitarian lens, which sums up and aggregates goods for every individual, the
common good lens highlights mutual concern for the shared interests of all members of a
community.

The Virtue Lens

A very ancient approach to ethics argues that ethical actions ought to be consistent
with certain ideal virtues that provide for the full development of our humanity. These
virtues are dispositions and habits that enable us to act according to the highest potential
of our character and on behalf of values like truth and beauty. Honesty, courage,
compassion, generosity, tolerance, love, fidelity, integrity, fairness, self-control, and
prudence are all examples of virtues. Virtue ethics asks of any action, “What kind of person
will I become if I do this?” or “Is this action consistent with my acting at my best?”
The Care Ethics Lens

Care ethics is rooted in relationships and in the need to listen and respond to
individuals in their specific circumstances, rather than merely following rules or calculating
utility. It privileges the flourishing of embodied individuals in their relationships and
values interdependence, not just independence. It relies on empathy to gain a deep
appreciation of the interest, feelings, and viewpoints of each stakeholder, employing care,
kindness, compassion, generosity, and a concern for others to resolve ethical conflicts. Care
ethics holds that options for resolution must account for the relationships, concerns, and
feelings of all stakeholders. Focusing on connecting intimate interpersonal duties to
societal duties, an ethics of care might counsel, for example, a more holistic approach to
public health policy that considers food security, transportation access, fair wages, housing
support, and environmental protection alongside physical health.

Using the Lenses

Each of the lenses introduced above helps us determine what standards of behavior
and character traits can be considered right and good. There are still problems to be solved,
however.

The first problem is that we may not agree on the content of some of these specific
lenses. For example, we may not all agree on the same set of human and civil rights. We
may not agree on what constitutes the common good. We may not even agree on what is a
good and what is a harm.

The second problem is that the different lenses may lead to different answers to the
question “What is ethical?” Nonetheless, each one gives us important insights in the process
of deciding what is ethical in a particular circumstance.

Making Decisions

Making good ethical decisions requires a trained sensitivity to ethical issues and a
practiced method for exploring the ethical aspects of a decision and weighing the
considerations that should impact our choice of a course of action. Having a method for
ethical decision-making is essential. When practiced regularly, the method becomes so
familiar that we work through it automatically without consulting the specific steps.

The more novel and difficult the ethical choice we face, the more we need to rely on
discussion and dialogue with others about the dilemma. Only by careful exploration of the
problem, aided by the insights and different perspectives of others, can we make good
ethical choices in such situations.

The following framework for ethical decision-making is intended to serve as a practical tool
for exploring ethical dilemmas and identifying ethical courses of action.

A Framework for Ethical Decision Making

Identify the Ethical Issues

1. Could this decision or situation be damaging to someone or to some group, or

unevenly beneficial to people? Does this decision involve a choice between a good
and bad alternative, or perhaps between two “goods” or between two “bads”?
2. Is this issue about more than solely what is legal or what is most efficient? If so,
how?

Get the Facts

3. What are the relevant facts of the case? What facts are not known? Can I learn more
about the situation? Do I know enough to make a decision?
4. What individuals and groups have an important stake in the outcome? Are the
concerns of some of those individuals or groups more important? Why?
5. What are the options for acting? Have all the relevant persons and groups been
consulted? Have I identified creative options?

Evaluate Alternative Actions

6. Evaluate the options by asking the following questions:

 Which option best respects the rights of all who have a stake? (The Rights Lens)
 Which option treats people fairly, giving them each what they are due? (The
Justice Lens)
 Which option will produce the most good and do the least harm for as many
stakeholders as possible? (The Utilitarian Lens)
 Which option best serves the community as a whole, not just some members?
(The Common Good Lens)
 Which option leads me to act as the sort of person I want to be? (The Virtue
Lens)
 Which option appropriately takes into account the relationships, concerns, and
feelings of all stakeholders? (The Care Ethics Lens)
Choose an Option for Action and Test It

7. After an evaluation using all of these lenses, which option best addresses the
situation?
8. If I told someone I respect (or a public audience) which option I have chosen, what
would they say?
9. How can my decision be implemented with the greatest care and attention to the
concerns of all stakeholders?

Implement Your Decision and Reflect on the Outcome

10. How did my decision turn out, and what have I learned from this specific situation?
What (if any) follow-up actions should I take?

Ethical Theory: Overview

Ethical Theories are attempts to provide a clear, unified account of what our ethical
obligations are. They are attempts, in other words, to tell a single “story” about what we are
obligated to do, without referring directly to specific examples. It is common in discussions
of business ethics to appeal to one or more ethical theories in an attempt to clarify what it
is right or wrong to do in particular situations. Some of the philosophical ethical theories
commonly appealed to include:

 Utilitarianism, which says that the right thing to do in any situation is whatever will
“do the most good” (that is, produce the best outcomes) taking into consideration
the interests of all concerned parties;

 Kantianism (or Deontology more generally), which says that—as a matter of respect
—there are certain absolute (or nearly absolute) rules that must be followed (for
example, the rule that we must respect people’s privacy, or respect other people’s
right to make decisions about their own lives);

 Social Contract Theory (or “contractarianism”), which says that, in order to figure
out what ethical rules to follow, we ought to imagine what rules rational beings
would agree to in an “ideal” decision-making context;

 Virtue Theory, which says that we ought to focus not on what rules to follow, but on
what kinds of people (or organizations!) we want to be, and what kinds of ethical
examples we ought to follow;
  Feminist Ethics, which is a complex set of interrelated perspectives that emphasize
interpersonal concerns such as caring, interdependence, and the ethical
requirements of particular relationships. Such concerns are traditionally identified
with women, but Feminist Ethics should not be thought of as a theory
only for women.

In some cases, scholars attempt to use a single ethical theory to shed light on a topic or
range of topics. (A good example would be Norman Bowie’s book, Business Ethics: A
Kantian Perspective.) A more typical approach—one taken by many business ethics
textbooks today—is to attempt to use insights from various ethical theories to shed light on
different aspects of a particular problem. Such an approach might involve, for example,
asking which decision in a particular situation would result in the best consequences (a
Utilitarian consideration) but then asking whether acting that way would violate any
Kantian rules or whether a person acting that way would be exhibiting the kinds of virtues
that a good person would exhibit.

The role of ethical theory in business ethics is somewhat controversial, in part

because Business Ethics is seen as a branch of “applied ethics.” Some regard applied ethics
(and hence Business Ethics, along with bioethics, environmental ethics, etc.) as a field that
takes “standard” ethical theories and applies them to practical problems. Such an approach
might involve asking, for example, “What would Kant say about privacy in the workplace?”
Others regard applied ethics as an attempt to gain theoretical insight (or to “build” better
ethical theories) by testing them against real-life problems.

Midterm

STRATEGIC PLANNING
Strategic Management

It is a process which includes the setting of company objectives, the analysis of its internal
& external environment, the creation, implementation, & monitoring of sustainable
strategies that will enable them to achieve the desired competitive advantage.

Successful Execution of Strategies

For the successful execution of strategies, organizations should undertake the following
activities:

 communicate, build capabilities,

 establish strategy-supportive stimuli,
 eliminate administrative barriers,
 identify advocates and resisters,
 exercise strategic leadership, and monitor and adjust as needed.

Strategies for Competitive Advantage

 COST LEADERSHIP
 DIFFERENTIATION
 MARKET-NICHE

Core competencies are things an organization dose so well they can be viewed as providing
a competitive advantage.

Competitive advantage - to be better than competitors.

Two Models for Solving Problems

A. The PDCA CYCLE

B. TOYOTA’S PRACTICAL PROBLEM SOLVING PROCESS

PDCA Cycle

A. PDCA (plan–do–check–act or plan–do–check–adjust) is an iterative four-step

management method used in business for the control and continuous improvement of
processes and products.[It is also known as the Deming circle/cycle/wheel, the Shewhart
cycle, the control circle/cycle, or plan-do–study–act (PDSA).

A. Deming’s Model

1. Plan: develop a plan to improve

 Identify opportunities for improvement

 Document the current process
 Create a vision of the improve process
 Define the scope of the improvement effort

2. Do: carry out the plan

 Develop first a prototype of a design before moving to full production

3. Study (check): examine the results

 Adjust as necessary

B. Toyota’s Model

1. Perceive the problem.

2. Clarify the problem.

 Observe the situation with an open mind.

 Compare actual situation to the standard (procedure, work instruction, flow
diagram, specifications, etc.)
 Determine if any variance exists.
  If multiple variance exists, prioritize by severity.
 Set improvement objective.

3. Determine actual “point of cause’ (POC)

4. Identify the root cause. You may use cause & effect diagrams, & the Pareto analysis.

5. Develop and implement a counter measure (solution to the problem).

6. Evaluate the counter measure’s effectiveness in solving the problem.

 Evaluate by analysis before the solution is implemented, & observe and monitor
after implementation.
 Achieve agreement that implemented countermeasure is valid & effective.

7. Change the original standard to reflect the countermeasure.

THE DECISION MAKING PROCESS

1. Identify or Anticipate the Problem

2. Gather the facts
3. Consider the alternatives
4. Choose the best alternative
5. Implement
6. Monitor & adjust

Categories of Decision Making

1. Objective-most likely to result in a quality decision.

 Logical & orderly

 Assumes that managers have the time to systematically pursue all steps in the
decision-making process.
 Assumes that complete & accurate information is available & that managers are free
to select what they feel is the best alternative.

2. Subjective Decision Making-based on logic & complete, accurate information, intuition,

experience, & incomplete information.

 Assumes that decision makers will be under pressure, short on time, & operating
with limited information.
  Its goal is to make the best decision under the circumstances.

Employee Involvement in Decision Making

a. Advantages

 Employee involvement can result to a more accurate picture of the problem,

including a more comprehensive list of solutions.

b. Disadvantages

 It takes time, & managers don’t have much time.

 Takes employees away from their jobs.
 Can result to conflict among team members.
 May lead to democratic compromises which does represent the best decision.

Techniques to Increase the Effectiveness of Group Involvement

 Nominal Group Techniques (NGT)

A structured variation of a small-group discussion to reach consensus. NGT gathers

information by asking individuals to respond to questions posed by a moderator,
and then asking participants to prioritize the ideas or suggestions of all group
members.

NOMINAL GROUP TECHNIQUE

Quality Circle

A group of workers who do the same or similar work, who meet regularly to
identify, analyze and solve work-related problems. It consists of minimum three and
maximum twelve members in number.

TQM-Case Studies

Group 1. Case Study: Quality Management System at Coca Cola Company

Coca Cola’s history can be traced back to a man called Asa Candler, who bought a specific
formula from a pharmacist named Smith Pemberton. Two years later, Asa founded his
business and started production of soft drinks based on the formula he had bought. From
then, the company grew to become the biggest producers of soft drinks with more than five
hundred brands sold and consumed in more than two hundred nations worldwide.
Although the company is said to be the biggest bottler of soft drinks, they do not bottle
much. Instead, Coca Cola Company manufactures a syrup concentrate, which is bought by
bottlers all over the world. This distribution system ensures the soft drink is bottled by
these smaller firms according to the company’s standards and guidelines. Although this
franchised method of distribution is the primary method of distribution, the mother
company has a key bottler in America, Coca Cola Refreshments.

In addition to soft drinks, which are Coca Cola’s main products, the company also produces
diet soft drinks. These are variations of the original soft drinks with improvements in
nutritional value, and reductions in sugar content. Saccharin replaced industrial sugar in
1963 so that the drinks could appeal to health-conscious consumers. A major cause for
concern was the inter product competition which saw some sales dwindle in some
products in favor of others.

Coca Cola started diversifying its products during the First World War when ‘Fanta’ was
introduced. During World War 1, the heads of Coca Cola in Nazi Germany decided to
establish a new soft drink into the market. During the ongoing war, America’s promotion in
Germany was not acceptable. Therefore, he decided to use a new name and ‘Fanta’ was
born. The creation was successful and production continued even after the war. ‘Sprite’
followed soon after.

In the 1990’s, health concerns among consumers of soft drinks forced their manufactures
to consider altering the energy content of these products. ‘Minute Maid’ Juices, ‘PowerAde’
sports drinks, and a few flavored teas variants were Coca Cola’s initial reactions to this new
interest. Although most of these new products were well received, some did not perform as
well. An example of such was Coca Cola classic, dubbed C2.

Coca Cola Company has been a successful company for more than a century. This can be
attributed partly to the nature of its products since soft drinks will always appeal to people.
In addition to this, Coca Cola has one of the best commercial and public relations programs
in the world. The company’s products can be found on adverts in virtually every corner of
the globe. This success has led to its support for a wide range of sporting activities. Soccer,
baseball, ice hockey, athletics and basketball are some of these sports, where Coca Cola is
involved

The Quality Management System at Coca Cola

It is very important that each product that Coca Cola produces is of a high quality standard
to ensure that each product is exactly the same. This is important as the company wants to
meet with customer requirements and expectations. With the brand having such a global
presence, it is vital that these checks are continually consistent. The standardized bottle of
Coca Cola has elements that need to be checked whilst on the production line to make sure
that a high quality is being met. The most common checks include ingredients, packaging
and distribution. Much of the testing being taken place is during the production process, as
machines and a small team of employees monitor progress. It is the responsibility of all of
Coca Colas staff to check quality from hygiene operators to product and packaging quality.
This shows that these constant checks require staff to be on the lookout for problems and
take responsibility for this, to ensure maintained quality.

Coca-cola uses inspection throughout its production process, especially in the testing of the
Coca-Cola formula to ensure that each product meets specific requirements. Inspection is
normally referred to as the sampling of a product after production in order to take
corrective action to maintain the quality of products. Coca-Cola has incorporated this
method into their organizational structure as it has the ability of eliminating mistakes and
maintaining high quality standards, thus reducing the chance of product recall. It is also
easy to implement and is cost effective.

Coca-cola uses both Quality Control (QC) and Quality Assurance (QA) throughout its
production process. QC mainly focuses on the production line itself, whereas QA focuses on
its entire operations process and related functions, addressing potential problems very
quickly. In QC and QA, state of the art computers check all aspects of the production
process, maintaining consistency and quality by checking the consistency of the formula,
the creation of the bottle (blowing), fill levels of each bottle, labeling of each bottle, overall
increasing the speed of production and quality checks, which ensures that product
demands are met. QC and QA helps reduce the risk of defective products reaching a
customer; problems are found and resolved in the production process, for example, bottles
that are considered to be defective are placed in a waiting area for inspection. QA also
focuses on the quality of supplied goods to Coca-cola, for example sugar, which is supplied
by Tate and Lyle. Coca-cola informs that they have never had a problem with their
suppliers. QA can also involve the training of staff ensuring that employees understand
how to operate machinery. Coca-Cola ensures that all members of staff receive training
prior to their employment, so that employees can operate machinery efficiently. Machinery
is also under constant maintenance, which requires highly skilled engineers to fix
problems, and help Coca-cola maintain high outputs.

Every bottle is also checked that it is at the correct fill level and has the correct label. This is
done by a computer which every bottle passes through during the production process. Any
faulty products are taken off the main production line. Should the quality control
measures find any errors, the production line is frozen up to the last good check that was
made. The Coca Cola bottling plant also checks the utilization level of each production line
using a scorecard system. This shows the percentage of the line that is being utilized and
allows managers to increase the production levels of a line if necessary.
Coca-Cola also uses Total Quality Management (TQM), which involves the management of
quality at every level of the organization, including; suppliers, production, customers etc.
This allows Coca-cola to retain/regain competitiveness to achieve increased customer
satisfaction. Coca-cola uses this method to continuously improve the quality of their
products. Teamwork is very important and Coca-cola ensures that every member of staff is
involved in the production process, meaning that each employee understands their
job/roles, thus improving morale and motivation, overall increasing productivity. TQM
practices can also increase customer involvement as many organizations, including Coca-
Cola relish the opportunity to receive feedback and information from their consumers.
Overall, reducing waste and costs, provides Coca-cola with a competitive advantage.

The Production Process

Before production starts on the line cleaning quality tasks are performed to rinse internal
pipelines, machines and equipment. This is often performed during a switch over of lines
for example, changing Coke to Diet Coke to ensure that the taste is the same. This quality
check is performed for both hygiene purposes and product quality. When these checks are
performed the production process can begin.

Coca Cola uses a database system called Questar which enables them to perform checks on
the line. For example, all materials are coded and each line is issued with a bill of materials
before the process starts. This ensures that the correct materials are put on the line. This is
a check that is designed to eliminate problems on the production line and is audited
regularly. Without this system, product quality wouldn’t be assessed at this high level.
Other quality checks on the line include packaging and carbonation which is monitored by
an operator who notes down the values to ensure they are meeting standards.

To test product quality further lab technicians carry out over 2000 spot checks a day to
ensure quality and consistency. This process can be prior to production or during
production which can involve taking a sample of bottles off the production line. Quality
tests include, the CO2 and sugar values, micro testing, packaging quality and cap tightness.
These tests are designed so that total quality management ideas can be put forward. For
example, one way in which Coca Cola has improved their production process is during the
wrapping stage at the end of the line. The machine performed revolutions around the
products wrapping it in plastic until the contents were secure. One initiative they adopted
meant that one less revolution was needed. This idea however, did not impact on the
quality of the packaging or the actual product therefore saving large amounts of money on
packaging costs. This change has been beneficial to the organization. Continuous
improvement can also be used to adhere to environmental and social principles which the
company has the responsibility to abide by. Continuous Improvement methods are
sometimes easy to identify but could lead to a big changes within the organization. The idea
of continuous improvement is to reveal opportunities which could change the way
something is performed. Any sources of waste, scrap or rework are potential projects
which can be improved.

The successfulness of this system can be measured by assessing the consistency of the
product quality. Coca Cola say that ‘Our Company’s Global Product Quality Index rating has
consistently reached averages near 94 since 2007, with a 94.3 in 2010, while our Company
Global Package Quality Index has steadily increased since 2007 to a 92.6 rating in 2010, our
highest value to date’. This is an obvious indication this quality system is working well
throughout the organization. This increase of the index shows that the consistency of the
products is being recognized by consumers.

Group 2. Case Study: PepsiCo’s International Marketing Strategy

Pepsi was created by chemist named Caleb Bradham. He was inspired to experiment with
various products and ingredients to create a suitable summer drink that became highly
sought after way back in the summer of 1898. It was this summer inspiration that later
evolved into what we now know as Pepsi Cola. The company was launched officially in the
year 1902. The beginning of Pepsi Cola was in the back room of his pharmacy, but
recognizing its potential, Caleb soon started bottling the product so that people all over can
enjoy it. As the years passed, Caleb started franchising the bottling of the drink to different
people in different locations. Soon Pepsi Cola was being sold in 24 states across the United
States. When World War I broke out, the company went bankrupt and Caleb had to sell the
trademark to a stock broker from North Carolina. But he too could not revive the business.
It was the candy manufacturer, Charles G. Guth, who bought it from the previous owner and
revived it into the global brand it is today. Its marketing plan started even when the
company was in the hands of Caleb and grew with the company. It was during World War II
that the company adopted the red white and blue emblem to depict patriotic America. The
color code still exists today though the emblem has evolved many times.

It was after 65 years after the sale of its first cola that PepsiCo started its diversification
into other foods and beverages. Now the company not only sells Pepsi, its main brand, but
also other items like Quaker Oats, Aquafina, Tropicana, Mountain Dew and Lays. It also had
alliance with companies like Starbucks and Lipton to come out with special coffee and tea.

PepsiCo’s Marketing and Promotional Strategy

The current marketing strategy adopted by PepsiCo Inc. is definitely one that caters to its
global standing. Since Pepsi came out at a time when Coke or Coca Cola already had a head
start in the market, its market strategy and business plan began with differentiation – an
attempt to establish its product as one that is unique in taste and quality. This approach
was successful to a great extend and Pepsi was able to establish itself in the US markets.
Later the plan shifted to comparative marketing and later to diversification.

Pepsi’s promotional campaigns had a lot to do with its success. Pepsi’s market environment
always presented it with a challenge in the form of Coke which had already created a niche
for itself.

In the 1940s to create a niche among the African American, Pepsi created a scholarship
program that awarded 17 African American high school seniors full time scholarships.
During the same time the ad campaigns of Pepsi featured top people from the African
American community and they called it “Leader in their field” campaign. This campaign
was quite a breakthrough and really made an impact. It opened up a whole new market
segment for the company.

In the 1960s, Pepsi’s campaign was aimed at teenagers and young adults – beach bursting
of youngsters having fun and drinking Pepsi was quite a common theme and popular too. It
showed that Pepsi was the drink for partying and hanging out with friends, something the
American youth could easily identify with. The “Pepsi Generation” theme became highly
popular and the drink started creating a niche for itself among the young of the country. At
first it was called “think young” campaign. This later evolved into “come alive” in the year
1965. This is when the term “Pepsi generation” was first introduced to the people.

In the 1970s Pepsi came out something called the “Pepsi Challenge”. This campaign was
aimed at proving Pepsi as a better tasting drink than its rival Coke and involved blind
tasting of the two products to choose the better one. Even though this helped improve the
market share of PepsiCo, Coke still led the market.

Pop icons like Michael Jackson and Lionel Ritchie and youth sensation like Michael J Fox
became part of the Pepsi campaigns in the 1980s where by Pepsi began to beat Coke and
come out the winner. They had a huge fan following and when they were seen endorsing
the brand, the impact was instantaneous. Pepsi also exploited famous movies of the time
like Star Wars to improve their brand image and create interest among the people.
However, Pepsi chose to replace the “Pepsi Generation” campaign with “Gotta Have It” in
the beginning of the 1990s. This turned out to be an erroneous move and Coke again
started to gain market share.

Pepsi and the Cola Wars

The cola wars began somewhere in the mid 1950s. The main players in the war were Pepsi
and Coca Cola. The two companies had been in rivalry ever since Pepsi came out with its
first cola. But the rivalry reached its zenith in the 1980s and 1990s. The main point was
neither company had a cost advantage. Hence promotion was the main way of competing.
In the 80s Pepsi started coming out with campaigns that undermined Coke. For example, a
Pepsi ad came out which showed a group of retirement home people dancing to rock ‘n roll
when they get the wrong delivery of a Pepsi crate instead of Coca Cola. It also used
celebrity advertising vigorously. This gave Pepsi a lead in the market, though short lived. In
the 1990s Coca Cola was beating Pepsi by huge margins again. The war was quite cut throat
with Coca Cola doing everything possible to outrun Pepsi. This included stealing Pepsi’s
bottlers, hoarding of Pepsi bottles and creating ads that hinted at ridiculing the Pepsi
brand. In many countries Coca Cola were forcing retailers and bottlers to boycott the Pepsi
brand. Upon learning about this Pepsi filed several anti-competitive cases out if which they
won around 70. Yet, at one stage of the war Pepsi’s market value fell to less than half of
Coca Cola’s market value. Coca Cola was and is still leading in when it comes to market
share of its cola brand. The only way Pepsi could fight back was through diversification. It
started spreading its wings to include sports beverages, varied versions of the Pepsi drink
and non-carbonated beverages in its portfolio. It started considering itself as a “complete”
beverage company. The diversification further happened to include snacks and food items
like potato chips and oats. Diversification really helped Pepsi to improve its falling stand in
the market not only in the local markets of America and Europe, but also in its international
markets where Coke is leading the show.

Pepsi Goes International – Its Global Marketing Plans

In the 1940’s itself PepsiCo started branching out into the international arena. At first it
was into Latin America, the Middle East and the Philippines. Here too Coke had the early
bird advantage. Yet the product soon gained popularity. With the Arab countries boycotting
Coke, Pepsi enjoyed a monopoly for many years in the Middle East. In the 1950’s Pepsi
went to Europe and this included Russia, with whom there existed a Cold War by USA.
Though there were initial difficulties, getting into Russia was a major breakthrough which
the company exploited. The company posted pictures of the then leaders of the United
States and Russia sipping the drink. Its arch rival, Coca Cola, was able to enter the Russian
markets only after more than 25 years after Pepsi’s entry.

In many of the countries that Pepsi ventured into comparative advertising was prohibited
and in many countries it was not an accepted concept. For example, Pepsi tried its “Pepsi
challenge” promotional gimmick in Japan. However, the country and its people were not
aware of comparative advertising and as such the campaign did more harm than good.
Hence in Japan they had to break their tradition of running with the global campaign and
come up with a campaign that the Japanese would identify with and was more Japanese.
The “Pepsiman” was a superhero like figure that was devised by a Japanese person for the
Japanese market. The commercial was an instant hit and helped improve Pepsi’s share in
the Japanese market by as much as 14%. From Japan Pepsi learned a valuable lesson – the
same ad will not have the same effect everywhere. When it comes to cross national
advertising, there is always the inherent risk of alienating the people.

With the Indian markets, Pepsi had the first mover advantage over Coke. It had coined its
own special slogan for the Indian market too that became quite popular with the crowd. Yet
Coke re-entry into India was a great threat to the company. Coke signing on youth icon and
Indian star Hrithik Roshan to do their campaign was an even bigger threat. However, Pepsi
reverted to the old ploy of showing down the competition. They featured the king of Indian
movies, Shah Rukh Khan and a Hrithik look alike. This comparative ad was effective and
brought Pepsi back into the spot light.

In the USA and European markets Pepsi still uses promotional campaigns that aim to break
the colour barriers with stars like Britney Spears, Beyonce and Haley Berry appearing in its
ads. The brand and its products are highly popular in these areas. In the international
arena, Pepsi has been able to create a niche through its vigorous advertisement and event
sponsorship. In fact more than 45% of the total revenue of the company comes from its
market outside the USA. However the company has experience many setbacks due to its
many blunders have cost it valuable market share.

Marketing Blunders

One of the major blunders that Pepsi did in its marketing runs is the literal translations of
some of its slogans into other languages. For example PepsiCo’s slogan “Come Alive with
the Pepsi Generation” when translated into Taiwanese meant “Pepsi will bring your
ancestors back from the dead” and caused great damage for its image. It was the perfect
example of the wrong market message. Similarly, the goodwill of the company suffered a
heavy blow when its bottle cap campaign (number inside the cap and a few winning
numbers win fabulous prizes) in Chile ended in wreckage of the company. This was caused
by a wrong fax being sent and the wrong number being announced on TV. Almost a similar
incident repeated in the Philippines as well a few months later when, due to a computer
glitch, instead of one winner several winners were announced for the bottle cap
sweepstakes. Instead of learning from a blunder in one country, it was repeated in another,
causing further harm to its brand image.

A more recent marketing blunder happened in the United States of America itself. In 2010,
Pepsi decided not to spend big bucks for sponsoring the Super Bowl. The Super Bowl is a
sporting event in the States that is watched by almost all Americans and hence its wide
reach is indisputable. Instead, it decided to do social marketing through its internet based
“Refresh” campaign. Though the effort was commendable it was a major blunder. Instead of
using the Super Bowl to further give lime light to the Refresh campaign, it completely
missed the opportunity paving way for others to make use of the spot.
Group 3 Case Study: Nestle’s Growth Strategy

Nestle is one of the oldest of all multinational businesses. The company was founded in
Switzerland in 1866 by Heinrich Nestle, who established Nestle to distribute “milk food,” a
type of infant food he had invented that was made from powdered milk, baked food, and
sugar. From its very early days, the company looked to other countries for growth
opportunities, establishing its first foreign offices in London in 1868. In 1905, the company
merged with the Anglo-Swiss Condensed Milk, thereby broadening the company’s product
line to include both condensed milk and infant formulas. Forced by Switzer land’s small
size to look outside’ its borders for growth opportunities, Nestle established condensed
milk and infant food processing plants in the United States and Britain in the late 19th
century and in Australia, South America, Africa, and Asia in the first three decades of the
20th century. In 1929, Nestle moved into the chocolate business when it acquired a Swiss
chocolate maker. This was fol lowed in 1938 by the development of Nestle’s most rev
olutionary product, Nescafe, the world’s first soluble coffee drink. After World War 11,
Nestle continued to expand into other areas of the food business, primarily through a series
of acquisitions that included Maggi (1947), Cross & Blackwell (1960), Findus (1962),
Libby’s (1970), Stouffer’s (1973), Carnation (1985), Rowntree (1988), and Perrier (1992).
By the late 1990s, Nestle had 500 factories in 76 countries and sold its products in a
staggering 193 nations-almost every country in the world. In 1998, the company generated
sales of close to SWF 72 billion ($51 billion), only 1 percent of which occurred in its home
country. Similarly, only 3 percent of its- 210,000 employees were located in Switzerland.
Nestle was the world’s biggest maker of infant formula, powdered milk, chocolates, instant
coffee, soups, and mineral waters. It was number two in ice cream, breakfast cereals, and
pet food. Roughly 38 percent of its food sales were made in Europe, 32 percent in the
Americas, and 20 percent in Africa and Asia.

Management Structure

Nestle is a decentralized organization. Responsibility for operating decisions is pushed

down to local units, which typically enjoy a high degree of autonomy with regard to
decisions involving pricing, distribution, marketing, human resources, and so on. At the
same time, the company is organized into seven worldwide strategic business units (SBUs)
that have responsibility for high-level strategic decisions and business development. For
example, a strategic business unit focuses on coffee and beverages. Another one focuses
on confectionery and ice cream. These SBUs engage in overall strategy development,
including acquisitions and market entry strategy. In recent years, two-thirds of Nestle’s
growth has come from acquisitions, so this is a critical function. Running in parallel to this
structure is a regional organization that divides the world into five major geographical
zones, such as Europe, North America and Asia. The regional organizations assist in the
overall strategy development process and are responsible for developing regional
strategies (an example would be Nestle’s strategy in the Middle East, which was discussed
earlier). Neither the SBU nor regional managers, however, get involved in local operating
or strategic decisions on anything other than an exceptional basis.

Although Nestle makes intensive use of local managers to knit its diverse worldwide
operations together, the company relies on its “expatriate army.” This consists of about
700 managers who spend the bulk of their careers on foreign assignments, moving from
one country to the next. Selected primarily on the basis of their ability, drive and
willingness to live a quasi-nomadic lifestyle, these individuals often work in half-a-dozen
nations during their careers. Nestle also uses management development programs as a
strategic tool for creating an esprit de corps among managers. At Rive-Reine, the
company’s international training center in Switzerland, the company brings together,
managers from around the world, at different stages in their careers, for specially targeted
development programs of two to three weeks’ duration. The objective of these programs
is to give the managers a better understanding of Nestlé’s culture and strategy, and to give
them access to the company’s top management.

The research and development operation has a special place within Nestle, which is not
surprising for a company that was established to commercialize innovative food stuffs.
The R&D function comprises 18 different groups that operate in 11 countries throughout
the world. Nestle spends approximately 1 percent of its annual sales revenue on R&D and
has 3,100 employees dedicated to the function. Around 70 percent of the R&D budget is
spent on development initiatives. These initiatives focus on developing products and
processes that fulfill market needs, as identified by the SBUs, in concert with regional and
local managers. For example, Nestle instant noodle products were originally developed by
the R&D group in response to the perceived needs of local operating companies through
the Asian region. The company also has longer-term development projects that focus on
developing new technological platforms, such as non-animal protein sources or agricultural
biotechnology products.

A Growth Strategy for the 21st Century

Despite its undisputed success, Nestle realized by the early 1990s, that it faced significant
challenges in maintaining its growth rate. The large Western European and North
American markets were mature. In several countries, population growth had stagnated
and in some, there had been a small decline in food consumption. The retail environment in
many Western nations had become increasingly challenging and the balance of power was
shifting away from the large-scale manufacturers of branded foods and beverages, and
toward nationwide supermarket and discount chains. Increasingly, retailers found
themselves in the unfamiliar position of playing off against each other – manufacturers of
branded foods, thus bargaining down prices. Particularly in Europe, this trend was
enhanced by the successful introduction of private-label brands by several of Europe’s
leading supermarket chains. The results included increased price competition in several
key segments of the food and beverage market, such as cereals, coffee and soft drinks.

At Nestle, one response has been to look toward emerging markets in Eastern Europe, Asia
and Latin America for growth possibilities. The logic is simple and obvious – a
combination of economic and population growth, when coupled with the widespread
adoption of market-oriented economic policies by the governments of many developing
nations, makes for attractive business opportunities. Many of these countries are still
relatively poor, but their economies are growing rapidly. For example, if current economic
growth forecasts occur, by 2010, there will be 700 million people in China and India that
have income levels approaching those of Spain in the mid-1990s. As income levels rise, it
is increasingly likely that consumers in these nations will start to substitute branded food
products for basic foodstuffs, creating a large market opportunity for companies such as
Nestle.

In general, Nestle’s growth strategy had been to enter emerging markets early – before
competitors – and build a substantial position by selling basic food items that appeal to the
local population base, such as infant formula, condensed milk, noodles and tofu. By
narrowing its initial market focus to just a handful of strategic brands, Nestle claims it can
simplify life, reduce risk, and concentrate its marketing resources and managerial effort on
a limited number of key niches. The goal is to build a commanding market position in each
of these niches. By pursuing such a strategy, Nestle has taken as much as 85 percent of the
market for instant coffee in Mexico, 66 percent of the market for powdered milk in the
Philippines, and 70 percent of the markets for soups in Chile. As income levels rise, the
company progressively moves out from these niches, introducing more upscale items, such
as mineral water, chocolate, cookies, and prepared foodstuffs.

Although the company is known worldwide for several key brands, such as Nescafe, it uses
local brands in many markets. The company owns 8,500 brands, but only 750 of them are
registered in more than one country, and only 80 are registered in more than 10 countries.
While the company will use the same “global brands” in multiple developed markets, in the
developing world it focuses on trying to optimize ingredients and processing technology to
local conditions and then using a brand name that resonates locally. Customization rather
than globalization is the key to the Nestle’s growth strategy in emerging markets.

Executing the Strategy

Successful execution of the strategy for developing markets requires a degree of flexibility,
an ability to adapt in often unforeseen ways to local conditions, and a long-term
perspective that puts building a sustainable business before short-term profitability. In
Nigeria, for example, a crumbling road system, aging trucks, and the danger of violence
forced the company to re-think its traditional distribution methods. Instead of operating a
central warehouse, as is its preference in most nations, the country. For safety reasons,
trucks carrying Nestle goods are allowed to travel only during the day and frequently
under-armed guard. Marketing also poses challenges in Nigeria. With little opportunity
for typical Western-style advertising on television of billboards, the company hired local
singers to go to towns and villages offering a mix of entertainment and product
demonstrations.

China provides another interesting example of local adaptation and long-term focus. After
13 years of talks, Nestle was formally invited into China in 1987, by the Government of
Heilongjiang province. Nestle opened a plant to produce powdered milk and infant
formula there in 1990, but quickly realized that the local rail and road infrastructure was
inadequate and inhibited the collection of milk and delivery of finished products. Rather
than make do with the local infrastructure, Nestle embarked on an ambitious plan to
establish its own distribution network, known as milk roads, between 27 villages in the
region and factory collection points, called chilling centers. Farmers brought their milk –
often on bicycles or carts – to the centres where it was weighed and analyzed. Unlike the
government, Nestle paid the farmers promptly. Suddenly the farmers had an incentive to
produce milk and many bought a second cow, increasing the cow population in the district
by 3,000 to 9,000 in 18 months. Area managers then organized a delivery system that
used dedicated vans to deliver the milk to Nestle’s factory.

Although at first glance this might seem to be a very costly solution, Nestle calculated that
the long-term benefits would be substantial. Nestlé’s strategy is similar to that undertaken
by many European and American companies during the first waves of industrialization in
those countries. Companies often had to invest in infrastructure that we now take for
granted to get production off the ground. Once the infrastructure was in place, in China,
Nestlé’s production took off. In 1990, 316 tons of powdered milk and infant formula were
produced. By 1994, output exceeded 10,000 tons and the company decided to triple
capacity. Based on this experience, Nestle decided to build another two powdered milk
factories in China and was aiming to generate sales of $700 million by 2000.

Nestle is pursuing a similar long-term bet in the Middle East, an area in which most
multinational food companies have little presence. Collectively, the Middle East accounts
for only about 2 percent of Nestlé’s worldwide sales and the individual markets are very
small. However, Nestlé’s long-term strategy is based on the assumption that regional
conflicts will subside and intra-regional trade will expand as trade barriers between
countries in the region come down. Once that happens, Nestlé’s factories in the Middle
East should be able to sell throughout the region, thereby realizing scale economies. In
anticipation of this development, Nestle has established a network of factories in five
countries, in the hope that each will, someday, supply the entire region with different
products. The company currently makes ice-cream in Dubai, soups and cereals in Saudi
Arabia, yogurt and bouillon in Egypt, chocolate in Turkey, and ketchup and instant noodles
in Syria. For the present, Nestle can survive in these markets by using local materials and
focusing on local demand. The Syrian factory, for example, relies on products that use
tomatoes, a major local agricultural product. Syria also produces wheat, which is the main
ingredient in instant noodles. Even if trade barriers don’t come down soon, Nestle has
indicated it will remain committed to the region. By using local inputs and focusing on local
consumer needs, it has earned a good rate of return in the region, even though the
individual markets are small.

Despite its successes in places such as China and parts of the Middle East, not all of Nestlé’s
moves have worked out so well. Like several other Western companies, Nestle has had its
problems in Japan, where a failure to adapt its coffee brand to local conditions meant the
loss of a significant market opportunity to another Western company, Coca Cola. For
years, Nestlé’s instant coffee brand was the dominant coffee product in Japan. In the
1960s, cold canned coffee (which can be purchased from soda vending machines) started
to gain a following in Japan. Nestle dismissed the product as just a coffee-flavored drink
rather than the real thing and declined to enter the market. Nestlé’s local partner at the
time, Kirin Beer, was so incensed at Nestlé’s refusal to enter the canned coffee market that
it broke off its relationship with the company. In contrast, Coca Cola entered the market
with Georgia, a product developed specifically for this segment of the Japanese market. By
leveraging its existing distribution channel, Coca Cola captured a 40 percent share of the $4
billion a year, market for canned coffee in Japan. Nestle, which failed to enter the market
until the 1980s, has only a 4 percent share.

While Nestle has built businesses from the ground up, in many emerging markets, such as
Nigeria and China, in others it will purchase local companies if suitable candidates can be
found. The company pursued such a strategy in Poland, which it entered in 1994, by
purchasing Goplana, the country’s second largest chocolate manufacturer. With the
collapse of communism and the opening of the Polish market, income levels in Poland have
started to rise and so has chocolate consumption. Once a scarce item, the market grew by
8 percent a year, throughout the 1990s. To take advantage of this opportunity, Nestle has
pursued a strategy of evolution, rather than revolution. It has kept the top management of
the company staffed with locals – as it does in most of its operations around the world –
and carefully adjusted Goplana’s product line to better match local opportunities. At the
same time, it has pumped money into Goplana’s marketing, which has enabled the unit to
gain share from several other chocolate makers in the country. Still, competition in the
market is intense. Eight companies, including several foreign-owned enterprises, such as
the market leader, Wedel, which is owned by PepsiCo, are vying for market share, and this
has depressed prices and profit margins, despite the healthy volume growth.

Group 4. Case Study of KFC: Establishment of a Successful Global Business Model

By mid 1950s, fast food franchising was still in its infancy when Harland Sanders began his
cross-country travels to market “Colonel Sanders’ Recipe Kentucky Fried Chicken.” He had
developed a secret chicken recipe with eleven herbs and spices. By 1963, the number of
KFC franchises had crossed 300. Colonel Sanders, at 74 years of age was tired of running
the daily operations and sold the business in 1964 to two Louisville businessmen — Jack
Massey and John Young Brown, Jr. — for $2 million. Brown, who later became the governor
of Kentucky, was named president, and Massey was named chairman. Colonel Sanders
stayed in a public relations capacity.

In 1966, Massey and Brown made KFC public, and the company was enlisted on New York
Stock Exchange. During late 1960s, Massey and Brown turned their attention to
international markets and signed a joint venture with Mitsuoishi Shoji Kaisha Ltd. in Japan.
Subsidiaries were also established in Great Britain, Hong Kong, South Africa, Australia,
New Zealand, and Mexico. In the late 1970s, Brown’s desire to seek a political career led
him to seek a buyer for KFC. Soon after, KFC merged with Heublein, Inc., a producer of
alcoholic beverages with little restaurant experience and conflicts quickly arose between
the Heublein management and Colonel Sanders, who was quite concerned about the
quality control issues in restaurant cleanliness. In 1977, Heublein sent in a new
management team to redirect KFC’s strategy. New unit construction was discontinued
until existing restaurants could be upgraded and operating problems eliminated. The
overhaul emphasized cleanliness, service, profitability, and product consistency. By 1982,
KFC was again aggressively building new restaurant units.

In October 1986, KFC was sold to PepsiCo. PepsiCo had acquired Frito-Lay in 1965, Pizza
Hut in 1977 with its 300 units, and Taco Bell in 1978. PepsiCo created one of the largest
consumer companies in the United States. Marketing fast food complemented PepsiCo’s
consumer product orientation and followed much the same pattern as marketing soft
drinks and snack foods. Pepsi soft drinks and fast food products could be marketed
together in the same restaurants and through coordinated national advertising.

The Kentucky Fried Chicken acquisition gave PepsiCo the leading market share in three of
the four largest and fastest growing segments in the U.S., quick-service industry. By the end
of 1995, Pizza Hut held 28 per cent share of $18.5 billion, U.S pizza segment. Taco Bell held
75 per cent of $5.7 billion Mexican food segment, and KFC held 49 per cent of the $7.7
billion, U.S chicken fast food segment.

Japan, Australia, and United Kingdom accounted for the greatest share of the KFC’s
international expansion during the 1970s and 1980s. During the 1990s, other markets
became attractive. China with a population of over 1 billion, Europe and Latin America
offered expansion opportunities. By 1996, KFC had established 158 company-owned
restaurants and franchises in Mexico. In addition to Mexico, KFC was operating 220
restaurants in the Caribbean, and in the Central and South America.

In some countries of the world such as, Malaysia, Indonesia and some others, it is illegal to
import poultry, a situation that has led to product shortages. Another challenge facing KFC
is to adapt to foreign cultures. The company has been most successful in foreign markets
when local people operate restaurants. The purpose is to think like a local, not like an
American company.

As KFC entered 1996, it grappled with a number of important issues. During 1980s,
consumers began demanding healthier foods, and KFC’s limited menu consisting mainly of
fried foods was a difficult liability. In order to soften its fried chicken chain image, the
company in 1991, changed its name and logo from Kentucky Fried Chicken to KFC. In
addition, it responded to consumer demands for greater variety by introducing several new
products, such as Oriental Wings, Popcorn Chicken, and Honey BBQ Chicken as alternatives
to its Original Recipe fried chicken. It also introduced a dessert menu that included a
variety of pies and cookies.

Soon after KFC entered India, it was greeted with protests of farmers, customers, doctors,
and environmentalists. KFC had initially planned to set up 30 restaurants by 1998, but was
not able to do so because its revenues did not pick. In early 1998, KFC began to investigate
the whole issue more closely. The findings revealed that KFC was perceived as a restaurant
serving only chicken. Indian families wanted more variety, and the impression that KFC
served only one item failed to enhance its appeal. Moreover, KFC was also believed to be
expensive. KFC’s failure was also attributed to certain drawbacks in the message it sent out
to consumers about its positioning. It wanted to position itself as a family restaurant and
not as a teenage hangout. According to analysts, the ‘family restaurant’ positioning did not
come out clearly in its communications. Almost all consumers saw it as a fast food joint
specializing in a chicken recipe.

KFC tried to revamp its menu in India. Cole Slaw was replaced with green fresh salads. A
fierier burger called Zinger Burger was also introduced. During the Navaratri festival, KFC
offered a new range of nine vegetarian products, which included Paneer burgers. Earlier,
KFC offered only individual meals, but now the offerings include six individual meals, two
meal combos for two people, and one family meal in the non-vegetarian category. For
vegetarians, there are three meal combos for individuals and meals for couples, and for
families.

KFC also changed its positioning. Now its messages seek to attract families who look not
only, for food, but also some recreation. Kids Fun Corner is a recreational area within the
restaurant to serve the purpose. Games like ball pool, and Chicky Express have been
introduced for kids. The company also introduced meal for kids at Rs. 60, which was served
with a free gift.

Over the years, KFC had learned that opening an American fast food in many foreign
markets is not easy. Cultural differences between countries result in different eating habits.
For instance, people eat their main meal of the day at different times throughout the world.
Different menus must also be developed for specific cultures, while still maintaining
the core product — fried chicken. You can always find original recipe chicken, cole slaw,
and fries at KFC outlets, but restaurants in China feature all Chinese tea and French
restaurants offer more desserts. Overall, KFC emphasizes consistency and whether it is
Shanghai, Paris, or India, the product basically tastes the same.

Group 5 Case Study: Kraft’s Takeover of Cadbury

Cadbury’s origins date back to almost two centuries when it was founded by John Cadbury
who started the business by selling cocoa and tea in Birmingham, UK. Later he expanded by
starting a line of beverages after a merger with Indian Schweppes changing the company
name to Cadbury Schweppes. Successful product developments and launches have enabled
Cadbury to boast of an extensive confectionery line consisting of Cocoa Essence, Easter
Eggs, Milk Chocolate, Cadbury Fingers, Dairy Milk, Bourneville Chocolate, Milk Tray, Flake
Creme Egg, Crunchie, Picnic, Curly windy, Wispa boost, Twirl and Time Out.

Kraft, on the other hand, is a US company about a century old, which started off as a door to
door cheese business but expanded into other confectionery items through many takeovers
previously such as Ritz Crackers, Nabisco (Oreos) and Phoenix Cheese Corporation
(Philadelphia Cheese) to achieve success. It is second in terms of sales and popularity in the
confectionery industry with annual revenues of $42 billion, operating in more than 150
countries.

Cadbury and Kraft are both multinational operations with activities in both developed and
developing countries. Cadbury is however the market leader in UK and Ireland’s
confectionery where consumers have a liking for British chocolate containing vegetable oil
having a richer taste in milk and also sweeter as opposed to continental chocolate having
cocoa fat content; hence Kraft has a low share in such markets. Also, Cadbury’s strong
standing in the Indian (Schweppes) and North American Markets was cleverly identified by
Kraft who wanted to tap it and exploit under its own name now to add to its success story.

Inside Story of Cadbury and Kraft before Takeover

Cadbury has faced many ups and downs throughout its journey especially under the
visionary leadership of Todd Stitzer. Todd Stitzer working successfully for 20 years for
Cadbury Schweppes has played a key role as a master mind behind the acquisitions of soft
drinks industries made by Cadbury in US. He was later appointed as the chief strategy
officer by John Sunderland to the confectionery side to achieve the similar success. The
then competitors in the chocolates and sweets industry were the international companies
Nestle, Mars, Kraft, Wrigley, Ferrero and Hershey. Stitzer said that acquisitions alone would
not solve the problems of Cadbury. He said that the revenue growth model has to be
revitalized to gain in the financial performance. Stitzer had developed many strategies,
took some visionary steps and led Cadbury gain the business world with his strategic
thinking. Stitzer and his management team aimed at the global domination in the
Confectionery world, while the stakeholders were much worried about the financial
performance. Overall with all his visionary leadership abilities and strategic decision
making capabilities, Cadbury Schweppes split into pure confectionery leader Cadbury.
Nelson Peltz, founder of the hedge fund Trian Fund Management also had his own role in
the business of Cadbury.

Irene Rosenfield, CEO, Kraft Food Industries Inc. had a keen interest in the confectionery
business and proposed an offer to buy Cadbury to Carr, Chairman of Cadbury after
Sunderland. Carr without consulting the stakeholders had refused the offer but Peltz who
still owned the shares in the Cadbury with discussion and negotiation with Kraft finally
made Cadbury lose its independence in January 2010.

The Idea of a Takeover

Due to recessionary times following fall in sales, many companies in the confectionery
industry recognized the potential of merging with their competitors to become competitive
and enjoy economies of scale. Cadbury had continued to be a strong performer in the
confectionery industry and shown steady performance and growth in light of the turbulent
economic times. Much of Cadbury’s growth was due to its presence in emerging global
markets. Kraft was attracted to Cadbury due its strong performance during the economic
crisis. This led to Kraft’s proposal to Cadbury of a takeover.

The initial offering of $16.3 billion or 740 pence per share by Kraft to Cadbury was outright
rejected as derisory and an attempt by Kraft to take over Cadbury for cheap. Cadbury has
had strong brands whose icons are etched in the minds all over the world, an impressive
category line and extensive worldwide consumer base. Successful financial overview and
steady business model reinforced Cadbury’s belief that it should be an independent
company. Kraft’s bid did not come remotely close to reflecting the company’s true worth.

Kraft proposed another bid shortly. This comprised of an offer of £10.1 billion ($17 billion,
same terms as the first bid in September-300 pence in cash and 0.2589 Kraft shares per
Cadbury shares. The closing price of 9th November reflected the bid valuation of Cadbury
at 710 pence which was lower than the share price of 761p on that day.

Kraft’s share price: $26.53; Exchange rate (as agreed): $1.66 / GBP. Ratio: 0.2589 Kraft
shares per every Cadbury share (26.53/1.66 * 0.2589 = £ 4.133 + 4.13 = £ 7.13). This was
less than the price of Cadbury on that day and even the initial level of £ 7.45.

Cadbury rejected the offer on the basis of undervalued Cadbury which was now of a lesser
value. It was in fact even lower than the current Cadbury share price. The Cadbury
chairman said: “Under your proposal, Cadbury would be absorbed into Kraft’s low
growth, conglomerate business model, an unappealing prospect which contrasts sharply
with our strategy to be a pure play confectionery company.”

The hype created by rumors of takeover figures led to exciting speculations. Media
reported Ferrero to be considering a rival bid. Hershey’s confirmed its own interest for
same purpose. There were not only speculations of a joint bid but also of Kohlberg Kravis
Roberts & Co. joining the bidding race. All this favored Cadbury whose share price
witnessed new highs. Hershey’s and Ferrero would struggle to bid alone and only their
combined offer could beat Kraft’s offer.

On January 18, Kraft finally managed to take over one of the world’s second largest
confectionery manufacturer in a hostile bid of an enormous 11.5billion (US$19.5billion).
This deal will be remembered in history as one of the largest transnational deals, especially
in the aftermath of credit crunch. After four months of continuous resistance, Cadbury
shareholders agreed to Kraft’s offering of $19.5 billion, (840 pence per share). This was
agreed upon with the spirit of creating the world’s largest confectioner. This consisted of
500 pence in cash per share and the remaining amount paid to Cadbury shareholder in the
form of Kraft shares. The shareholders had the power to decide the mix of amount they
wanted in cash and shares. According to estimations, the finals offer presented a multiple
of 13 times Cadbury’s earnings in 2009 (after interest, taxes and debt were paid).

The high bid price overruled the threat of Hershey’s or Unilever offering a price for the
same strategy, that is take over. The only rival left was Nestle which too was reduced
significantly when Cadbury’s Director signed the agreement that if Cadbury were to change
its mind about the takeover, it would pay a handsome penalty for it, hence such a situation
arising became highly unlikely. The Kraft management, led by Irene Rosenfeld also assured
that Kraft had a great respect for Cadbury’s brands, employees and reputable history and
therefore the employees of Cadbury would do well in the new environment. Also, she
verbally assured that under the new agreement the previous contractual rights of the
employees would remain the same as before.

Advantages of the Takeover for Kraft

It was the biggest cross-border acquisition of that year. Such a deal clearly pushed Kraft as
number 1 dealer in confectionery. A merger allowed Kraft to gain a footing in the fast
growing chewing gum category.

Kraft management believes that the combination of the two companies is both a strategic
as well as complimentary fit, boasting a portfolio of over 40 confectionery brands each
having the ability to yield annual sales of over $100 million. A combination of Kraft
products like Toblerone, Oreos and Ritz crackers with Trident gum and Dairy Milk
chocolates from Cadbury would result in $625 million annual pretax cost savings on annual
company costs of research and development, advertising, branding and procurement.
There would also be a significant level of revenue synergy ($50 billion annually) that would
subsequently result in higher earnings per share. After the takeover, Kraft would have a
greater ability to compete with the giant Nestle on confectionery grounds by increasing its
market share in Britain and enjoying the benefits of Cadbury’s strong geographical
networking in Asia.

Kraft’s growth prospects would brighten through access to new brands particularly in the
confectionary department along with new distribution channels for the existing products
which are outside US. These constitute about one third of the market in developing
countries such as Africa, China and India.

Advantages of the Takeover for Cadbury

Cadbury would profit from Kraft’s extensive distribution network around the globe.
Cadbury had been vulnerable to a takeover ever since it demerged its US soft drinks
business. This high takeover bid was an attractive opportunity to do away with such a fear.
A combined Kraft and Cadbury would significantly expand the global reach of both
businesses and create synergies worth in the region of $625m. Since a stand-alone Cadbury
had limited opportunities for value creation, agreement to the contract for takeover
seemed like a wise decision.

Negatives of the Takeover

Along with the obvious benefits come the many challenges and ethical issues. These are
primarily high debt issues and employee layoffs. The high debt position of Kraft has
further worsened with the takeover as funds were borrowed to pay the Cadbury
shareholders a higher yield. Kraft also sold off its frozen Pizza line in order to make the
takeover happen.

The unions are worried that the jobs of hundreds would be at stake (estimated 9000 plus)
as Kraft would try to reduce costs to operate efficiently and pay back its debts. The
company has also not given any formal assurance that it would protect 4500 UK jobs. Also
it is a known fact that when a company needs to cut costs, jobs and job conditions suffer.

The British Government also opposes takeovers of British companies by foreign giants as it
nearly always leads to job losses. This takeover too was met with resistance including
Gordon Brown’s advice and insistence against its happening but the shareholders
overruled it and still went ahead with the deal. According to a Union head, “This is a very
sad day for U.K. manufacturing. A successful, iconic, independent U.K. brand will now be
owned by a giant company with massive debt.”

In the face of such a scenario, even if employees are laid off it will not affect those who are
rich and/ or are major shareholders in the company. For example, if the chairman, Roger
Carr gets axed, he would still walk away with $30 million! This proves that it is the low
level managers and employees who feel the vulnerability of such an action. According to
David Bailey, professor at Coventry University Business School; “Serious questions need to
be asked about Kraft’s intentions… Kraft already has a track record of cutting production
and moving production abroad… There’s no guarantee that they’ll keep production in the
UK in the long run.”

When employees of both companies were interviewed to ask about their view points, most
expressed fear and uncertainty. They were resistant to the idea of such a large company
where their positions and titles might be reduced or lost due to the massive structure. They
are also despondent of their lack of involvement in this decision. According to one
employee, “nobody really knows what is going to happen, but it is definitely not going to be
pleasant.”

A disadvantage for Kraft’s shareholders of the takeover is that they now mentally feel less
financially strong as assets were being sold and the entire pizza production plant worth
$3.7 billion was sold to raise money for the takeover.

6. Case Study of McDonalds: Strategy Formulation in a Declining Business

McDonald’s Corporation or rather the CEO, Mr. Greenberg realized there was a major
problem arising within their corporation when their earnings declined in the late 1990s till
the early 2000s. Their net income not only shrunk to 17%, but also suffered from slow
sales growth below the industry average during that period of time. Although their market
share was well above their competitors such as Burger King and Wendy’s nevertheless
there was a slow share growth.

Therefore the question of what caused the Big Mac Attack is raised. It is observed that there
was a growing trend of customers moving to non hamburger meals which is being offered
by indirect competitors such as KFC, Subway (dominating the market with more than
13,200 US outlets) and Pizza Hut as an alternative choice. Sandwiches and a variety of
microwaveable meals are being offered at supermarkets, convenience stores and even at
petrol stations. This convenience has caused many patrons to switch away from the fast
food outlet.

Besides that, there seems to be an increasing trend in fast casual dining which has affected
sales for McDonald’s. Patrons are now more willing to spend extra for the traditional fast
serving but with a better and classy ambience. Due to this ‘phenomenon’, the growth for
fast casual segments grew from 15 to 20% compared to only 2% growth from fast food
chains. Taco Bell for instance had an outstanding 19% increases in their profit which
proves that higher priced outlets are still in demand.

McDonald’s is also facing a stiff competition among the hamburger eateries such as
Wendy’s and Burger King. These major competitors are catching up fast by recognizing the
importance of drive-through customers. In order to rope in the 65% of sales which is
derived from drive-through delivery, these competitors are enhancing their preparation
methods as well as the facility and speeding up their delivery process. Innovative
approaches such as windshield responders that automatically bill customers are being
introduced, to achieve the estimated 10% efficiency increase in drive-through which brings
in an average sale by $54,000. Besides upgrading the drive-through services, these
competitors have also understood the market preferences and have taken the risk as
hamburgers outlets to offer new product lines ranging from healthy salads to chicken
based products prepared in a healthy manner.

Furthermore, the eating trend among the youth and the older generations has undergone
significant changes. Many patrons are becoming more health conscious and tend to be
picky in determining their daily consumptions. This group of people has also expressed
their dissatisfaction on the quality of food which is being served by both McDonald’s and
Burger King. It is an obvious fact that burgers served soaking with fat and oil is bound not
only to affect patron’s health but their conscience as well. Besides health reasons, many
Americans’ eating habits have changed towards the concept of eating out. Recession during
that era has taken a heavy toll on many citizens causing them to be thrifty and have
returned to home cooked meal instead.
Upon analyzing the causes to the problem, it is noted that these problem are vital to be
addressed in order to sustain the life span of McDonald’s. The decline of sales within
McDonald’s in USA can lead to a chain reaction and in the long run and cause declines in the
group’s worldwide annual sales and growth. Once the root cause has been identified,
McDonald’s will be able to re-strategies and develop new and innovative product
line, promotions, facilities and even to venture into new market segments. In order to re-
capture the lost patron segments, the need to shed the cheap and greasy image with a
revamped store design may arise. However the drawback of this is when additional cost
may be incurred in order to compensate the eating trends.

Group 7 Case Study: The Enron Accounting Scandal

As 2002 began, energy trader Enron Corp. found itself at the center of one of corporate
America’s biggest scandals. In less than a year, Enron had gone from being considered one
of the most innovative companies of the late 20th century to being deemed a byword for
corruption and mismanagement.

Enron was formed in July 1985 when Texas-based Houston Natural Gas merged with
InterNorth, a Nebraska-based natural gas company. In its first few years, the new company
was simply a natural gas provider, but by 1989 it had begun trading natural gas
commodities, and in 1994 it began trading electricity.

The company introduced a number of revolutionary changes to energy trading, abetted by

the changing nature of the energy markets, which were being deregulated in the 1990s and
thus opening the door for new power traders and suppliers. Enron tailored electricity and
natural gas contracts to reflect the cost of delivery to a specific destination–creating in
essence, for the first time, a nationwide (and ultimately global) energy-trading network. In
1999 the company launched Enron Online, an Internet-based system, and by 2001 it was
executing on-line trades worth about $2.5 billion a day.

By century’s end Enron had become one of the most successful companies in the world,
having posted a 57% increase in sales between 1996 and 2000. At its peak the company
controlled more than 25% of the “over the counter” energy-trading market–that is, trades
conducted party-to-party rather than over an exchange, such as the New York Mercantile
Exchange. Enron shares hit a 52-week high of $84.87 per share in the last week of 2000.

Much of Enron’s balance sheet, however, did not make sense to analysts. By the late 1990s,
Enron had begun shuffling much of its debt obligations into offshore partnerships–many
created by Chief Financial Officer Andrew Fastow. At the same time, the company was
reporting inaccurate trading revenues. Some of the schemes traders used included serving
as a middleman on a contract trade, linking up a buyer and a seller for a future contract,
and then booking the entire sale as Enron revenue. Enron was also using its partnerships to
sell contracts back and forth to itself and booking revenue each time.

In February 2001 Jeffrey Skilling, the president and chief operating officer, took over as
Enron’s chief executive officer, while former CEO Kenneth Lay stayed on as chairman. In
August, however, Skilling abruptly resigned, and Lay resumed the CEO role. By this point
Lay had received an anonymous memo from Sherron Watkins, an Enron vice president who
had become worried about the Fastow partnerships and who warned of possible
accounting scandals.

As rumors about Enron’s troubles abounded, the firm shocked investors on October 16
when it announced that it was going to post a $638 million loss for the third quarter and
take a $1.2 billion reduction in shareholder equity owing in part to Fastow’s partnerships.
At the same time, some officials at Arthur Andersen LLP, Enron’s accountant, began
shredding documents related to Enron audits.

By October 22 the Securities and Exchange Commission had begun an inquiry into Enron
and the partnerships; a week later the inquiry had become a full investigation. Fastow was
forced out, while Lay began calling government officials, including Federal Reserve
Chairman Alan Greenspan, Treasury Secretary Paul O’Neill, and Commerce Secretary
Donald Evans. In some cases, officials said, Lay was simply informing them of Enron’s
troubles, but Lay reportedly asked for Evans to intervene with Moody’s Investors Service,
which was considering downgrading Enron bonds to noninvestment-grade status. Evans
declined.

On November 8 Enron revised its financial statements for the previous five years,
acknowledging that instead of taking profits, it actually had posted $586 million in losses.
Its stock value began to crater–it fell below $1 per share by the end of November and was
delisted on Jan. 16, 2002.

On Nov. 9, 2001, rival energy trader Dynegy Inc. said it would purchase the company for $8
billion in stock. By the end of the month, however, Dynegy had backed out of the deal, citing
Enron’s downgrade to “junk bond” status and continuing financial irregularities–Enron had
just disclosed that it was trying to restructure a $690 million obligation, for which it was
running the risk of defaulting.

On December 2 Enron, which a year before had been touted as the seventh largest company
in the U.S., filed for Chapter 11 bankruptcy protection and sued Dynegy for wrongful
termination of the failed acquisition. A month later Lay resigned, and the White House
announced that the Department of Justice had begun a criminal investigation of Enron.
y mid-2002 the once-mighty company was in tatters. Enron’s energy-trading business had
been sold off to the European bank UBS Warburg in January. Throughout the spring top
Enron officials were subpoenaed to testify before congressional hearings. The majority of
Enron’s employees were unemployed, and their stock plans had become almost worthless.
In June Arthur Anderson was convicted in federal court of obstruction of justice, while
many other American companies scrambled to reexamine or explain their own accounting
practices. As investigations continued into Enron’s financial dealings, government
connections, and possible involvement in California’s energy problems, it appeared likely
that the political and economic fallout would be making headlines for some time.

Group 8-Enron Scandal – The Evolution of Business Ethics

Aristotle said, “The end and purpose of the polis is the good life”. Adam Smith categorized
the good life in terms of material goods and intellectual and moral excellence of character.
Smith in his The Wealth of Nations commented, “All for us, and nothing for other people,
seems, in every age of the world, to have been the vile maxim of the masters of mankind.”
Ethical misconduct has become a key concern in business today. Ethics is the main area of
corporate governance, and management must take responsibility for their actions on global
community scale. Ethics in business and shareholders desires for profitability are not
always put on the same pedestal, and it is the responsibility of the executive management
to ensure ethics surpass profitability. The 2008 financial crisis initiated critics to inquire
about the ethics of the executives who were put in charge of large financial institutions
around the world and financial regulatory bodies. Finance ethics is usually not looked into
because issues in finance are often seen as matters of law rather than ethics. In the simplest
way corporate ethics is a lawful matter. Laws such as protecting workers’ rights and
suitable compensations must be top priority for management. Ethics becomes more
difficult with the way things are done in particular practices, which makes it important to
be aware of how certain steps may affect the community in a bad way. Managers are the
key decision-makers, which is why they must be held responsible for the way the business
is run and the affect it will have on shareholders, employees and the community in which it
operates.

Business ethical customs reflect the customs of each historic period. As time passes
customs evolve, causing accepted behaviors to become intolerable. Business ethics and the
subsequent behavior evolved as well. Business was involved in what drove slavery,
colonialism, and the cold war. Before 1960, the United States went through several difficult
phases of wondering what the concept of capitalism was. In the 1930’s came the New Deal,
which blamed businesses for the country’s fiscal woes. Businesses were asked to work
more thoroughly with the government to help increase family income. Through the 1950s,
the New Deal advanced into the Fair Deal which was an ambitious set of proposals put
forward by President Harry S Truman. This program made clear matters such as civil rights
and environmental responsibility as ethical issues that needed to be addressed by
businesses.

Up until the 1960s ethical issues associated to business were often discussed within the
field of theology or philosophy. Moral issues that were related to business were now
addressed in churches and mosques. Religious leaders started to speak out about fair
wages, labor practices, and the morality of capitalism. During the 1960s, the American
society turned to causes about social issues. Anti-business attitude developed as people
attacked the individuals in power that got benefits from the economic and political sides of
society that they controlled. The 1960s saw the deterioration of inner cities and the
beginning of ecological problems such as pollution and the disposal of toxic and nuclear
wastes. This era also saw the rise of consumerism.

The word ‘business ethics’ came into common use in the early 1970s in the United States. It
was developed as a course to study in the 1970s. The foundation that certain principles
could be applied to business activities which were laid down by theologians and
philosophers led to business lecturers start teaching and writing about corporate social
responsibility (CSR) which can be defined as a form of corporate self-regulation integrated
into a business model. Philosophers increased their participation, putting together ethical
theory that will help to build the discipline of business ethics. Companies became more
concerned with their public images and as social demands grew, many businesses realized
that they had to address ethical issues more directly. Conferences where scheduled to
discuss the responsibilities that businesses had socially and also ethical aspect of business.
By the end of the 1970s, key ethical issues such as bribery, misleading advertising and price
collusion had formed in the business. Business ethics became a common expression thanks
to the media and it was no longer considered as an oxymoron. Limited efforts were made to
explain the way the ethical decision-making process would work and also the things that
would influence this process in organizations.

Firms started emphasizing their ethical standing in the late 1980s and early 1990s,
probably trying to distance themselves from the business scandals of the day. Academics
and practitioners started to acknowledge ‘business ethics’ as a field of study. In the 1980s,
the Defense Industry Initiative on Business Ethics and Conduct (DII) which was developed
to give a guide to organizations about support for ethical conduct. This era was the Reagan-
Bush era where the belief of self-regulation was seen to be in the public’s interest.

In the 90s it was all about the institutionalization of business ethics. President Bill Clinton
and his administration continued to show support for self-regulation and free trade.
Unprecedented actions such as teenage smoking were dealt with by the government.
Proposals included prohibition of cigarette advertising, and stopping sports events from
using cigarette logos during advertisement. President Clinton chose Arthur Levitt to be the
chairman of the Securities and Exchange Commission in 1993. Levitt who ineffectively
pushed many reforms which could have prevented the accounting ethics scandals
demonstrated by Enron and WorldCom.

The 2000s had a new focus on business ethics. This era brought in the many scandals that
shook the business world to this day. Although business ethics was seen to have become
more institutionalized in the 1990s, in the 2000s evidence came out that more than a few
business executives and managers had not been compiling with the public’s desire for high
ethical standards. For example, the former CEO of Tyco Dennis Kozlowski was indicted on
thirty-eight counts of misappropriating $170 million of Tyco funds and netting $430
million from inappropriate sales of stock. Dennis Kozlowski pleaded not guilty to all the
charges. He allegedly used the funds to purchase personal luxuries such as art for $14.725
million, also throw his wife a $2 million birthday party and also bought a $30 million
apartment in New York City. He was found guilty and sentenced to serve eight years and
four months to twenty-five years in prison for his role in the scandal.

Arthur Andersen, which was a holding company and formerly one of the “Big Five”
accounting firm. In its role as Enron’s auditor, they were responsible for make sure that
Enron’s financial statements and internal bookkeeping were accurate. The firm after been
found guilty of criminal charges in the way the auditing of Enron was conducted gave up
their licenses to practice in the US. The reputation of the accounting firm disappeared over
night, also most of its clients left, and the firm went out of business, but it still exists in a
small way today. The verdict was overruled by the Supreme Court of the United States.
Most of the other accounting firms bought most of the practices of Arthur Andersen. Other
companies such as Halliburton, WorldCom, Dynegy and Sunbeam where faced with charges
about employing certain accounting practices and they were also audited by Arthur
Andersen. One of the few revenue-generating assets that the Andersen firm still has is Q
Centre, which is a conference and training facility outside of Chicago. Accenture which is a
consultancy firm separated from the accountancy side of Arthur Andersen in 1987 and
renamed themselves after splitting in 2000, still continues to operate and it is one of the
largest multinational corporations in the world. These accounting scandals really
confirmed to the public that falsifying financial reports and reaping questionable
benefits had become part of the culture of many companies. Firms outside the United States
such as Royal Ahold in the Netherlands and Parmalat in Italy, also were caught out in
practicing accounting misconducts from a global perspective. Such scandals increased
public and political demands for accountability and to also improve ethical standards in
business..

The Enron Corporation was created in 1985 out a merger of two major gas pipeline
companies. Through its subsidiaries the company provided products and services
associated with natural gas, electricity, and communications for its wholesale and retail
customers. It was based in Houston, Texas. It generated, transmitted and distributed
electricity to the north-western United States and marketed other commodities such as
natural gas globally. It was also involved in the growth, construction, and operation of
plants, pipelines, and other energy-related projects all over the world. Throughout the
1990s, Chairman Kenneth Lay, chief executive officer (CEO) Jeffrey Skilling, and chief
financial officer (CFO) Andrew Fastow transformed Enron from an old-style electricity and
gas company into a $150 billion energy company and Wall Street favorite that traded
power contracts in the investment markets. From 1998 to 2000, Enron’s revenues grew
from about $31 billion to more than $100 billion, making it the seventh-largest company of
the Fortune 500. The wholesale energy income represented about 93 percent of 2000
revenues for Enron, with another 4 percent coming from natural gas and electricity. The
remaining 3 percent came from broadband services and exploration. The company’s
worldwide internet trading platform Enron Online completed on average over five
thousand transactions per day, buying and selling over eighteen hundred separate
products online that brought in over $2.5 billion in business every day.

For the third quarter of 2001, Enron’s whole-sale business generated a potential $754
million of earnings (before interest and tax). This was an increase of 35 percent from the
previous year. This represented over 80 percent of Enron’s worldwide sales. There was no
reason to doubt that Enron was not financially stable in the third quarter of 2001 but it was
later reported after a bankruptcy examiner examined their financial reports that there was
a discrepancy in their net income and cash flow accounts. On October 22, 2001 Enron
announces that the Securities and Exchange Commission (SEC) has launched a formal
investigation into its related party’s transactions. Enron’s corporate culture was described
by people using words such as arrogant or prideful. Enron only employed competent,
creative and hardworking employees who were the best and brightest graduates and they
were recruited from top universities. Enron employees had thus belief that competitors
had no chance against it. There was an overwhelming confidence among Enron’s people
that they could handle the increasing risk and pressure that came with the job.

The culture of Enron was about a focus on how much money could be made for the people
at the top, at many levels, that shared in a stock option incentive program. Enron’s
aggressive employee culture was motivated by the desire to improve their financial
position. Skilling brought in a system where employees were appraised every six months
and if the employees ranked in the bottom 20 percent they were let go. This system called
the ‘rand-and-yank’ helped create a fierce environment in which employees didn’t only
compete with rivals outside the company but also the rivals at the next desk to them.
Problems in the trading operation were covered up and not told to management because of
the fear of losing their jobs. Lay who was the chairman always maintained that he was
concerned with ethics. In his indictment the business ethics issue was that he lied about the
financial conditions of Enron, but he maintained that he openly dealt with all issues that
were brought to his attention.

During 2001, when a series of revelations were revealed involving improper accounting
procedures bordering on fraud committed throughout the 1990s involving Enron and its
accounting company Arthur Andersen, Enron suffered the largest bankruptcy in
history which has been surpassed by those of WorldCom during 2002 and Lehman
Brothers during 2008. Off-balance-sheet financing called ‘special-purpose entities’ (SPEs)
which were the write-offs and the losses not disclosed were the main thing that turned
Enron into a disaster. Fastow the company’s then CFO said that Enron established the SPEs
to help in the moving of assets and debt off its balance sheet so as to increase cash flow by
showing that funds were flowing through its books when it sold assets, while in a meeting
with Enron’s lawyers in August 2001. Critics believed they might constitute fraudulent
financial reporting because they didn’t accurately represent the company’s true financial
condition. Most of the SPEs at Enron were alleged to be entities in name only, and that
Enron funded them with its own stock and maintained control over them. After the crash of
Enron’s stock price, assets that were associated with the SPE system had to be written off.

This cost Enron over $1.2 billion in equity in late 2001. Enron filed for bankruptcy and
faced twenty-two thousand claims totaling $400 billion. For some time it appeared that
Dynegy might save the day by providing $1.5 billion in cash but when Standard & Poor
downgraded Enron’s debt below investment grade on November 28, $4 billion in off-
balance-sheet debt came due and Enron didn’t have the resources to pay. Dynegy
terminated the deal.

Fastow and his wife, Lea, both pleaded guilty to charges against them. Fastow pleaded
guilty to two charges of conspiracy and was sentenced to ten years with no parole in a plea
bargain to testify against Lay and Skilling. Lea was indicted on six felony charges, but
prosecutors later dismissed them in favor of a single misdemeanor tax charge. Lea was
sentenced to one year for helping her husband hide income from the government.

Group 9- Total Quality Management in Service Sector: Case Study of Academic Libraries
Sribatsa Pradhan* Xavier University Bhubaneswar, Odisha, India Corresponding author:
sribatsa@[Link] Received August 30, 2014; Revised August 30, 2014; Accepted October
22, 2014

Quality normally focuses on fulfilling needs, and preferences of customers. Customer-

driven quality product and service ensure to satisfy the requirements of customer beyond
their expectations. As the organizations improve the quality standard of their product and
services the customers’ expectations change eventually. Keep this in mind, the fast growing
organization anticipates the change and improves its quality product and services
continuously. This aspect encourages widespread use of quality management tools,
including cost of quality, process integrity, and various measurement techniques for the
survival of the organization. Total Quality Management (TQM) acts as one of the powerful
management tool which integrate both internal and external customer and able to provide
quality services with limited resources. Present paper deals with TQM in academic libraries
and aims to focus on how they can provide better quality products and services to stake
holders. Since continuous change is occurring in the field of library and information
services, academic libraries have to offer learning materials in all format, i.e. print (books
and Journals, reports) as well as electronics medium(through digital networked
information services). Attempt has been made in this paper to examine how academic
libraries can able to provide quality services to their customers with limited resources by
adopting quality management tool like TQM.

1. Introduction

For survival of an organization quality plays a vital role. The product or services provided
by an organization satisfy its customers. While buying a product customers have certain
expectation about the product and services. If product and services meets or exceed these
expectations from time to time, this will be called as quality products and services. Cost
reduction, productivity, team work, communication, problem solving are some of the
dynamic skills which are necessary for quality revolution. The process of globalization
brought significant changes in the world economy. Service sector is contributing more to
the growth of world economy as compared to manufacturing sector. Now a day’s service
sector accounts for around 50 percent of the GDP of a country.

At present service sector in not limited to one nation, it crosses the national boundaries
encompassing the entire globe. So service excellence is essential in the global market place.
Academic libraries have always committed to provide quality product and service to its
users. To provide right information to a right user at right time is the main objective of a
library especially academic library, the heart of higher education. This encourages the
implementation of TQM approach in academic libraries.

2. Literature Review

As per the Juran Institute, Inc. TQM is the set of management process that creates an
accountable top management, satisfied customers, empowered employees, high quality
product with low cost. This leads to long term sustainability and good economic return.
TQM is an effective system for integrating the quality development, quality maintenance
and quality improvement efforts of various groups in an organization so as to enable
production and service at the most economical level which allows for full customer
satisfaction Feigenbaum (1983) [3]. Feigenbaum (1983) [3] advocates that the
development, maintenance and improvement of quality in any type of organization depend
on satisfied customer.
According to Oakland (1993) [12] TQM is an approach to improve the effectiveness and
flexibility of business completely. It is an essential way of putting the entire process in
order at every level i.e. individual level, department level and the organization level. As
advocated by Tobin (1990), TQM is the totally integrated effort for gaining competitive
advantage by continuously improving every facet of the organizational culture. TQM is a
total process in which one recognizes that everyone in the organization contributes in
some form or the other to achieve the end result i.e. the product. Horwitz (1990) [5]. TQM
is not a destination, but a journey towards improvement of the process Hunt (1991).
According to Mohanty and Lekhi (2002) [11] TQM is a programmatic long-term systems
approach initiated and driven by the top management to bring about a total culture change
to meet the dynamic needs of the customer and create a loyal and diversified customer
base.

According to Kanji et al. (1999) [9] TQM is a process of continuously satisfying customer
requirements at the lowest possible cost by harnessing the capabilities of everyone. 3.
Elements of TQM The elements of TQM is based on the following four major Components
like Continuous improvement, Customer Focus, Universal responsibility & Prevention.

3. Elements of TQM

Continuous improvement is one of the inherent processes of TQM. It aims at measuring key
quality and process areas activities. Once the key areas activities have been noted, the same
has been assigned to people to work on it for its continuous improvement through
empowerment policy.

Continuous improvement aims at finding the shortfalls and its improvements to eliminate
undesirable outputs. Everyone has a customer who needs quality products and services. No
organization survives without a customer. There are internal as well as external customers
in every system. The internal customers who are working in the system can only provide
quality products and services to external customers. To produce quality product and
services there is a need to develop the internal customers. Universal responsibility is
essential in an ideal organization. This philosophy is not only the job of quality assurance
department but also job of all the people working in the system. If each one of the system
thinks that they have certain responsibility towards their organization then the objective of
the organization will be fulfilled. TQM aims to prevent poor quality in products and
services, rather than detect and sort out defects.

Prevention rather than detection is one of the philosophies of TQM. In order to improve
efficiency, the conventional methodology adopted is to find the problem areas and to
correct the same.

4. Academic Libraries:
An Over View Academic libraries are considered to be the lifeline of academic institutions
which support teaching and learning, research and development, generation and
dissemination of new knowledge. Libraries in Schools, Colleges, Universities and Research
Institutions are the repositories of knowledge. People call this repository of knowledge, the
heart of higher education. Conservation and preservation of knowledge, expansion of ideas
and dissemination of knowledge are the prime objectives of academic libraries. Faculty,
students and staff members are the primary users of an academic library.

With the introduction of information technology the nature and scope of library collections
and services have changed significantly. Academic libraries no longer restrict themselves to
print resources like books, magazines, journals, cataloguing, classification, circulation and
reference services. They have extended their collection development policy in the field of
Audio Visuals, CDs, e-resources, Database and other on-line resources. The academic
librarianship is being challenged at every moment and every step due to rapid
technological advances. To retain the traditional value of the library as well as to integrate
between teaching and learning, the academic librarian needs to make them technology
savvy. A study by OCLC in 2012 says that, in United Kingdom 71 percent academic library
professionals read journals and 50 percent read blogs to keep them updated with library
trends. This is a very good practice for all library professionals. Conservation and
preservation of knowledge, dissemination of information, sharing of information to a wider
extent, quality information products and services, create atmosphere for self learning for
the users community, and participate in the academic activities are the major function of
academic libraries.

5. TQM in Service Sector

American Marketing Association defines service as activities, benefits or satisfactions,

which are offered for sale, or are provided in connection with the sale of goods. “Services
are economic activities offered by one party to another: often time-based, performances
bring about desired results to receipts, objects, or other assert for which purchaser have
responsibility. In exchange for money, time, and effort, service customers expect value from
access to goods, labor, professional skills, facilities, networks, and systems; but they do not
normally take ownership of any of the physical elements involved Lovelock et al. (1996)”.
Stanton, 1986 says services are those separately identified, and essentially intangible,
activities that provide want of satisfaction and that are not necessarily tied to the sale of a
product or another service. Kotler (1993) defines services as any kind of performance that
one party can offer to another that is essentially intangible and does not results in the
ownership of anything.
As observed by Mohanty and Lekhi (2002) [11] there are four important characteristics of
services i.e., intangibility, perishability, inseparability and heterogeneity. On the whole
service sector integrates all the above components, involving a large number of staffs
working with a definite purpose to satisfy different needs of the customers.

6. Principles of TQM for Academic Libraries

TQM aims at achieving quality in everything one does. TQM is not sudden. It is a changing
way towards continuous improvement. Customer focus, Continuous improvement,
Prevention verse inspection, people based management, fact based decision making, strong
leadership, quality corporate culture, people oriented technology, feedback, empowerment,
benchmarking, good governance, are the major principles of TQM for academic libraries
are as follows: As discussed the main objective of an academic library is to support the
academic communities. Like other service organization academic library delivers product
and services to its customers. Here producers and customers meet and interact face to
face.

The library professionals should understand the user’s want and expectations and give
more emphasis to satisfy their wants in a systematic way. Priority should be given for
user’s education by which the users can get his relevant information without wasting time.
The collection development policy should be update to the latest curriculum. The service
quality needs to be improved from time to time to cope with the technological innovation.
Training and development is essential to upgrade the skill and competency of library
professionals. Teamwork plays vital role for library collection development policy as well
as quality service for the users communities.

By the help of flow chart the quality acquisition is possible in a library. Leadership skill of
library managers and continuous improvement will definitely improve the service quality
of an academic library. Benchmarking is one of the powerful tool for improving the process
and service quality in the academic libraries. It helps the library to measure and compare
its process and services with similar libraries and also able to find some better process
through which they can able to provide world-class services to the users.

There are three types of benchmarking process like, internal, competitive and best practice
benchmarking. Planning, analysis, integration, action & maturity are the five major process
of benchmarking. The service quality of a library can definitely improved by the help of
benchmarking process and practices. It is not enough to provide good services in a library.
It needs to be improved continuously. Employee must be involved and empowered in a
TQM process. Every employee is recognized as a unique human being and should involve in
helping the organization to achieve its goal. Employees and management should join their
hands to face the TQM obstacles to achieve organizational goal.
Empowered employee is a new concept. Empowered employees are in self-control. They
have the means to measure the quality of their own work processes, to interpret the
measurement and compare the measurement to goal and take action when the process
required and so on. Successful TQM is possible when the entire manpower is engaged and
produces product and services in low cost. Lower cost and higher return is possible by
effective utilization of manpower. When number of people gathered together with common
vision and dedication, with mutual understanding and help among themselves and work
interdependently to complete an assignment is called it team work. Each employee of the
library should understand the importance of mutual cooperation in this age of globalization
which will a part of TQM philosophy. By proper training and development people learn
advantage of team work.

Training is the basic tool of application of TQM process in modern libraries. Several
concepts and techniques are essential for TQM. It is important to improve employees
understand the process. The employees must also learn to apply problem the solving
techniques. Library should locate all its customers and identify what do they want? Assess
their capabilities that what they can provide? What they can do to full fill the customers’
expectation o? Like other service industries libraries practice of TQM provide quality
product and services with low cost to the user/ customer. Academic libraries now should
manage their services to meet increasing demand from variety of users. Thus TQM helps
the libraries to change organizational culture, have proper planning, integrate isolated
individuals and department, improve organizational structure, have continuous training
and education, have effective measurement techniques, good customer care, and continues
improvement of service quality.

Every top management should take interest to implement TQM as it will bring greater
returns. But wholehearted commitment of the top management is essential for effective
TQM. This commitment has to be reflected in the governance process and should be explicit
to everyone in the organization. Everyone should feel that the top management is
dedicated to the organization. They are accountable and transparent in their action. So
TQM is not possible without the support of top management.

7. Conclusion

Libraries act as the integral parts of higher education aims at quality service. The
reputation of a library can be enhanced by improving quality products and services for its
users. The indicators, principles, of TQM helps the library professionals as well as library
managers to compare their service with similar types of libraries and helps them to adopt
best as well as world-class services to their users. Factors such as customers need,
designing new services, good housekeeping, feedback, courteous staff, best automation
facilities etc. will definitely improve the service quality of a library. The quality of an
academic library can be judged by the number of satisfied members. Sufficient
infrastructure facilities, good use of books, journals and other e-resources helps the
libraries to achieve its goal and able to provide the quality information at users doorstep.

Leadership and Change

MAJOR TOPICS

 Leadership Defined
 Leadership for Quality
 Leadership Skills: Inherited or Learned?
 Leadership, Motivation, and Inspiration
 Leadership Styles
 Leadership Styles in a Total Quality Setting
 Building and Maintaining a Following
 Leadership Versus Management
 Leadership and Ethics
 Leadership and Change
 Employees and Managers on Change
 Restructuring and Change
 How to Lead Change
 Lessons from Distinguished Leaders
 Servant Leadership and Stewardship
 Negative Influences on Leaders: How to Counter Them
Leadership is the ability to inspire people to make a total, willing, and voluntary
commitment to accomplishing or exceeding organizational goals. Good leaders overcome
resistance to change, broker the needs of constituent groups inside and outside the
organization, and establish an ethical framework. Good leaders are committed to both the
job to be done and the people who must do it. They are good communicators and they are
persuasive.

Characteristics of Well-led Organizations

 High Levels of Productivity

 Positive, can do attitudes
 Commitment to accomplishing organizational goals
 Effective, efficient use of resources
 High levels of quality
 Mutually supportive teamwork approach to getting work done
What Leaders Must Do

Overcome resistance to change.

Broker the needs of constituency groups inside & outside of the organization.

Establish an ethical framework within which all employees & the company as a whole
operate by:

- Setting an example of ethical behavior

- Choosing ethical people as team members

- Communicating a sense of purpose for the organization

- Reinforcing appropriate behaviors within the organization & outside of it

- Articulating ethical positions, internally & externally

Characteristics of Good Leaders

 Balanced commitment
 Positive role model
 Good communication skills
 Positive influence
 Persuasiveness

Difference Between Leaders & Misleaders by Drucker

 Leaders define & clearly articulate the organization’s mission.

 Leaders set goals, priorities, & standards.
 Leaders see leadership as a responsibility rather than a privilege of rank.
 Leaders surround themselves with knowledgeable, strong people who can make a
contribution.
 Leaders earn trust, respect, & integrity.

Myths About Leadership

 Leadership is a rare skill.

 Leaders are born, not made.
 Leaders are charismatic.
 Leaders exists only at the top.
 leaders control, direct, prod, & manipulate.
 Leaders don’t need to be learners.
Leadership for quality-applying the principles of leadership to continually improve work
methods & processes which will in turn improve quality, cost, productivity, & return of
investment.

According to Edwards Deming, each improvement in work methods & processes will
initiate a chain reaction that will result in the following:

 Improved quality
 Decreased costs
 Improved productivity
 Increased market share
 Longevity in business
 More jobs
 Improve return on investment

Principles of Leadership for Quality

 Customer focus
 Obsession with quality
 Recognizing the structure of work
 Freedom through control
 Unity of purpose
 Teamwork
 Continuing education & training

Juran’s Trilogy

 Quality Planning

Steps:

1. Develop products based on customer needs.

2. Quality control

 Quality Control

Steps:

1. Evaluate actual performance.

2. Compare actual performance with performance goals.

 3. Take immediate steps to resolve difference between planned performance &
actual performance

Leadership and Change

Leadership for quality is based on the following principles: customer focus, obsession with
quality, recognition of the structure of work, freedom through control, unity of purpose,
looking for faults in the systems, teamwork, and continuing education and training.

Common leadership styles include the following:

 democratic,
 participative,
 goal-oriented,
 and situational.
The appropriate leadership style in a total quality setting is participative taken to a higher
level.
Leadership Characteristics That Build & Maintain Followership

 Sense of purpose
 Self-discipline
 Honesty
 Credibility
 Common sense
 Stamina
 Steadfastness
 Commitment.

Pitfalls That Can Undermine Followership

 Trying to be buddy.
 Having an intimate relationship with an employee.
 Trying to keep things the same when supervising former peers.

Paradigms of Interaction-Stephen Covey (The 7 Habits of Effective People)

 Win/Win –best way solution

 Win/ Lose – “Go ahead & have things your own way, I never get what I want
anyway”
 Lose/ Lose-both parties are so stubborn, ego drive, & vindictive that they both lose
regardless of any decision.
 Lose/ Win-”I don’t want you to lose, but I definitely want to win”
 - “ You take care of yourself & I’ll take care of myself”

Comparisons Between Leaders & Managers

 Managers are copies; leaders are originals.

 Managers administer; leaders innovate.

 Managers maintain; leaders develop.

 Mangers focus on systems & structure; leaders focus on people.

 Managers rely on control; leaders inspire.

 Managers take the short view; leaders take the long view.

 Managers ask how & when; leaders ask what & why.

 Managers accept the status quo; leaders challenge it.

 Mangers do things right; leaders do the right things.

Trust Building Strategies

 Taking the blame but sharing the credit.

 Pitching in & helping.
 Being consistent.
 Being equitable.
Positive Roles of Leaders in the Change Process
 Have a clear vision & corresponding goals.
 Exhibit a strong sense of responsibility.
 Be an effective communicator.
 Have a high energy level.
 Have the will to change.

Leaders can build trust by applying the following strategies:

 Taking the blame

 Sharing the credit
 Pitching in and helping
 Being consistent
 Being equitable.
  To facilitate change in a positive way, leaders must have a clear vision and
corresponding goals, exhibit a strong sense of responsibility, be effective
communicators, have a high energy level, and have the will to change.

 When restructuring, organizations should show that they care, let employees vent,
communicate, provide outplacement services, be honest and fair, provide for change
agents, have a clear vision, offer incentives, and train.

The change facilitation model contains the following steps:

Establish the reality of change

Reasons why employees may not understand the reality of & need of change:

1. Absence of a major crisis.

2. Low overall performance standards.

3. No view of the big picture.

4. Internal evaluation measures that focus on the wrong benchmarks.

5. Insufficient external feedback.

6. A “kill the messenger” among managers.

7. Over focus among employees on the day-to-day stresses of the job.

8. Too much “happy talk” from executive managers.

Charter the steering committee

Success cannot just be attributed to a single individual; rather it’s the end-product of
teamwork among people. Every member of the team must have the following
characteristics:

 Authority
 Expertise
 Credibility
 Leadership

Develop a change vision

Characteristics of an effective vision:

 Imaginable
 Desirable
 Feasible
 Flexible
 Communicable

 Establish antenna mechanisms

 Communicate, implement, and incorporate change.

Steps in implementing change:

1. Remove structural inhibitors to change.

2. Enable employees through training.

3. Confront managers & employees who resist change.

4. Plan & generate short-term wins to get the ball rolling.

5. Eliminate unnecessary interdependencies among functional components of the

organization.

Strategies for Anchoring a Change in Culture

 Showcase the results.

 Communicate constantly.
 Remove resistant employees.

Leadership and Change

 Servant leadership and stewardship go beyond employee empowerment to

employee autonomy and seek to create an environment in which employees
perform out of the spirit of ownership and commitment.

 Leaders can counter the negative influence of followers by:

 Keeping vision and values uppermost in their minds

 Looking for disagreement among the advisors
 Encouraging truth-telling
  Setting the right example
 Following their intuition
 Monitoring delegated work.

Lessons From Distinguished Leaders

 Abraham Lincoln

- Get out of the office & circulate among the troops.

- Persuade rather than coerce.

- Honesty & integrity are the best policies.

- Have the courage to handle unjust criticism.

- Have a vision & continually reaffirm.

 Harry Truman

- Make hard decisions & stick with them.

- Take responsibility.

- Believe in yourself when no one else.

 Winston Churchill

- Steadfast courage, optimism, & perseverance.

Benefits of Servant Leadership & Stewardship:

1. Doing more with less.

2. Learning to adapt to customers & the marketplace.

3. Creating passion & commitment in employees.

Strategies to Counter Negative Influences of Followers

 Keep the organization’s vision & values uppermost in your mind.

 Look for disagreement among your advisors.
 Encourage, promote, & reinforce truth telling.
  Set the right example.
 Follow your intuition.
 delegate, don’t abdicate.

Team Building and Teamwork

MAJOR TOPICS

 Overview of Team Building and Teamwork

 Building Teams and Making Them Work
 Four-Step Approach to Team Building
 Character Traits and Teamwork
 Teams Are Not Bossed—They are Coached
 Handling Conflict in Teams
 Structural Inhibitors of Teamwork
 Rewarding Team and Individual Performance
 Recognizing Teamwork and Team Players
 Leading Multicultural Teams

A team is a group of people with a common, collective goal. The rationale for the team
approach to work is that “two heads are better than one.” A group of people becomes a
team when the following conditions exist:

 There is agreement as to the mission

 Members adhere to ground rules
 There is a fair distribution of responsibility and authority
 People adapt to change.

Teams can be classified as department, process improvement, and task force teams.
Factors that can promote the success of a team are:

 Personal identity of team members

 Relationships among team members
 The team’s identity within the organization.

To be an effective team leader, one should apply the following strategies:

 Be clear on the team’s mission.

 Identify success criteria.
 Be action centered.
  Establish ground rules.
 Share information
 Cultivate team unity.

One can be a good team member by applying the following strategies:

 Gain entry.
 Be clear on the team’s mission.
 Be well prepared and participate.
 Stay in touch.

The Ten Team Commandments are:

 Interdependence
 Stretching tasks
 Alignment
 Common language
 Trust/respect
 Shared leadership/followership
 Problem-solving skills
 Confrontation/Conflict handling skills
 Assessment/action
 Celebration

 After a team has been formed, a mission statement should be drafted. A good
mission statement summarizes the team’s reason for being. It should be broad
enough to allow for the measure of progress.

 Character traits that promote successful teamwork are:

o Honesty
o Selflessness
o Dependability
o Enthusiasm
o Responsibility
o Cooperativeness
o Initiative
o Patience
o Resourcefulness
o Punctuality
 o Tolerance/Sensitivity
o Perseverance

 Teams are not bossed. They are coached. Coaches are facilitators and mentors.
They promote mutual respect among team members and foster cultural diversity.

 Employees will not always work well together as a team just because it’s the right
thing to do. Employees might not be willing to trust their performance, in part, to
other employees.

Common structural inhibitors in organizations are:

 Unit structure
 Accountability
 Unit goals
 Responsibility
 Compensation
 Recognition
 Planning
 Control

Team and individual compensation systems can be developed in four steps:

1. Decide what performance to measure.

2. Determine how to measure the performance.
3. Identify the rewards to be offered.
4. Integrate related processes.

Challenges faced when leading multicultural teams include differing:

1) approaches to decision making, 2) attitudes toward authority, 3) attitudes

toward work, and 4) approaches to communicating.

Chapter 7: Analyzing Business Markets

Business vs. Consumer Markets

 Fewer buyers
 Larger buyers
 Close supplier-customer relationship
  Geographically concentrated
 Derived demand
 Inelastic demand
 Fluctuating demand

BUSINESS BUYER

Environmental

• Level of demand

• Economic outlook

• Interest rate

• Rate of technological change

• Political and regulatory developments

• Competitive developments

• Social responsibility concerns

Organizational

• Objectives

• Policies

• Procedures

• Organizational structures
 • Systems

Interpersonal

• Interests

• Authority

• Status

• Empathy

• Persuasiveness

Individual

• Age

• Income

• Education

• Job position

• Personality

• Risk attitude

• Culture
Identifying Market Segments and Selecting Target Markets

Objectives

 Identifying Market Segments

 Choosing Target Markets

Steps in Market Segmentation, Targeting,and Positioning

Market Segmentation

1. Identify segmentation variables and segment the market

2. Develop profiles of resulting segments

Market Targeting

3. Evaluate attractiveness of each segment

4. Select the target segment(s)

Market Positioning
5. Identify possible positioning concepts for each target segment

6. Select. develop, and communicate the chosen positioning concept

Market-Segmentation Procedure

 Survey
o Motivations
o Attitudes
o Behavior
 Analysis
o Factors
o Clusters
 Profiling

Bases for Segmenting Consumer Markets

Geographic - Region, City or Metro Size, Density, Climate

Demographic - Age, Gender, Family size and Fife cycle, Race, Ocompation, or Income

Psychographic - Lifestyle or Personality

Behavioral - Occasions, Benefits, Uses, or Attitudes

Bases for Segmenting Business Markets

 Demographic
 Operating Variables
 Purchasing Approaches
 Situational Factors
 Personal Characteristics

Effective Segmentation

Measurable - Size, purchasing power, profiles of segments can be measured.

Substantial - Segments must be large or profitable enough to serve.

Accessible - Segments can be effectively reached and served.

Differential - Segments must respond differently to different marketing mix elements &
actions

Actionable - Must be able to attract and serve the segments.

Additional Segmentation Criteria

 Ethical Choice of Market Targets

 Segment Interrelationships & Supersegments
 Segment-by-Segment Invasion Plans
 Intersegment Cooperation

Review
 Identifying Market Segments
 Choosing Target Markets