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Business Policy
&
Strategic Management
.. Semester III
40 Contact
Hrs.
4 Credits
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Transition from Old to New age Policies
Philosophy of integrating market driven focus elements for continuous
improvement in all work processes of the enterprise becomes necessary
due to:
Customer driven market revolution Fierce global competition
Unpredictable market, changing expectations & moving targets
Need to develop a customer focused culture
Integrate market driven culture
Focus on quality, cost, productivity
Customer loyalty & Change Management
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Evaluation of Competitive Capabilities
Not only how much better than you own history but how muchbetter than your competitors
What is that you do that the customers value better than the
competition
Evaluation of your resources is of no value unless done in
respect to your competitors
If you are not the best in a critical activity, you are sacrificing
the competitive advantage by continuing to do what you aredoing with old practices
Only the firms that are able to continually build new strategic
assets faster and cheaper than the competition will earn superior
customer value and returns over long period
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Focus Elements of a Market Driven Enterprise
Commitment to customer satisfaction
Human Resource Development
Total Quality Culture
Error Prevention Philosophy
Zero Error Solutions
Design & Product Quality
Quality Services
Quality of Management & Services
People Development
Productivity, efficiency and effectiveness
Process & Technologies for continuous improvement
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Total Quality Management
concepts & understanding
TQM is a philosophy that represents a set of guiding
principles that lays the foundation of a continuously
improving and customer driven organization
The first job we have is to turn out quality merchandise that consumers will buy andThe first job we have is to turn out quality merchandise that consumers will buy andkeep on buying. If we produce it efficiently and economically, we will earn a profit, in whichkeep on buying. If we produce it efficiently and economically, we will earn a profit, in which
you will share.you will share.
- William Cooper Procter- William Cooper Procter
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TQM IS
Encompassing and mobilizing entire organization to satisfy the customer
Improving each individual and groups within the organization
Integrating the philosophy and practices in day to day approach to work
Influencing all product, services, systems, process & technology Long term and continuous and is sensitive to the social responsibilities of
the enterprise
Supporting High Performance Culture through teamwork, trust &
leadership
IT IS NOT A program, that has a beginning & an end.
It is a continuous journey.
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History
Craftsmen Early days, generations learning, own inspector.
Early 20th Century Unskilled repetitive, start of interchangeability.
Ford Story.Standardization, concepts for quality, Mass Mfg.
Post War..American Society for Quality 1944
Safety, Public interest producer beware
Dr. Joseph Juran & Dr. Edward Demming story
Pioneering work in Total Quality ( in Japan )
Demming returns to US (1980-1993)
Product Quality to Performance Excellence
Quality of Management as important as Management of Quality
American Society for Quality identifies future challenges Partnering, Learning system, Adaptability and speed of change
Environmental Sustainability, Knowledge Focus, Globalization
Customization & Differentiation, Shifting Demographics
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Some leaders of Quality
Malcom Baldrige
Joseph M Juran
Deming
http://www.google.co.in/imgres?imgurl=http://www.hkbu.edu.hk/~samho/tqm/deming.gif&imgrefurl=http://www.hkbu.edu.hk/~samho/tqm/index.htm&usg=__nCx1BASDOvqKHNZ9_xLG6T9QDzU=&h=367&w=311&sz=34&hl=en&start=12&um=1&itbs=1&tbnid=D4fs65_OGvVnVM:&tbnh=122&tbnw=103&prev=/images%3Fq%3Ddeming%2Baward%26um%3D1%26hl%3Den%26sa%3DN%26tbs%3Disch:1 -
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Jurans Quality management Ideas
. The following table outlines the major points of Dr. Juran's quality management ideas:
Quality Trilogy: Quality Planning
Identify who are the customers. Determine the needs of those customers. Translate those needs into our language. Develop a product that can respond to those needs. Optimise the product features so as to meet our needs and customer needs. Quality Improvement Develop a process which is able to produce the product. Optimise the process.
Quality Control Prove that the process can produce the product under operating conditions with minimal
inspection. Transfer the process to Operations.
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The Baldrige Award is given by the USPresident to businesses (manufacturing as
well as service) and
to education and healthcare organisations
that apply and are
judged to be outstanding in seven areas:
(1) leadership,(2) strategic planning, (3) customer and
market focus,
(4) measurement, analysis and knowledge
management,
(5) human resource focus, (6) process
management and
(7) results
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Edward Deming
International Activities Statistician, Allied Mission to Observe the Greek Elections, January-April 1946; July-
October 1946 Consultant in sampling to the Government of India, January andFebruary 1947; December 1951; March 1971Delegate from the A.A.A.S. to the Indian Science Congress, New Delhi, January 1947Adviser in sampling techniques to the Supreme Command of the Allied Powers,Tokyo, 1947 and 1950
Teacher and consultant to Japanese industry, through the Union of JapaneseScientists and Engineers 1950, 1951, 1952, 1955, 1960, 1965Member of the United Nations Sub-Commission on Statistical Sampling, 1947-52Consultant to the Census of Mexico, to the Bank of Mexico, and to the Ministry ofEconomy, 1954, 1955Consultant., Statistisches Bundesamt, Wiesbaden, 1953Consultant to the Central Statistical Office of Turkey, 1959-1962Lecturer, London School of Economics, March 1964Lecturer, Institut de Statistique de l'Universite de Paris, March 1964Consultant to the China Productivity Center, Taiwan, 1970, 1971Lecturer in Santiago, Crdoba (Argentina), and Buenos Aires, under the auspices ofthe Inter American Statistical Institute, 1971.
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TQM
All Employees involved
Empowerment
TeamworkQuality Strategy
Quality Assurance
Quality Systems ISOQuality Planning
Quality PolicyQuality ControlsProblem Solving
Journey to TQM.
Quality Control
Quality StandardsStatistical ControlsProcess PerformanceTreat Quality Problems
Inspection
Error DetectionRectificationUnhappy Customer
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History of QualityHistory of Quality ( Contd.)( Contd.)History of QualityHistory of Quality ( Contd.)( Contd.)
Quality awareness in U.S. manufacturing industry duringQuality awareness in U.S. manufacturing industry during
1980s: from Little Q to Big Q - Total Quality1980s: from Little Q to Big Q - Total Quality
ManagementManagement
Malcolm Baldrige National Quality Award (1987)Malcolm Baldrige National Quality Award (1987)
Disappointments and criticismDisappointments and criticism
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Emergence of quality management in service industries,Emergence of quality management in service industries,
government, health care, and educationgovernment, health care, and education
Evolution of Six SigmaEvolution of Six Sigma
Current and future challenge: keep progress in qualityCurrent and future challenge: keep progress in quality
management alivemanagement alive
History of QualityHistory of Quality ( Contd.)( Contd.)History of QualityHistory of Quality ( Contd.)( Contd.)
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Contemporary Influences on QualityContemporary Influences on Quality
Partnering
Learning systems
Adaptability and speed of change
Environmental sustainability Globalization
Knowledge focus
Customization and differentiation
Shifting demographics
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Definitions of QualityDefinitions of QualityDefinitions of QualityDefinitions of Quality
Transcendent definitionTranscendent definition: excellence: excellence
Product-based definitionProduct-based definition: quantities of product attributes: quantities of product attributes
User-based definitionUser-based definition: fitness for intended use: fitness for intended use
Value-based definitionValue-based definition: quality vs. price: quality vs. price
Manufacturing-based definitionManufacturing-based definition: conformance to specs: conformance to specs
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Quality PerspectivesQuality Perspectives
CustomerCustomer
DistributionDistribution
productsproducts
andand
servicesservices
needsneeds
transcendent &transcendent &
product-basedproduct-based user-baseduser-based
manufacturing-manufacturing-
basedbased
value-basedvalue-based
MarketingMarketing
DesignDesign
ManufacturingManufacturing
InformationInformationflowflow
ProductProductflowflow
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Paradigm Shift
From.
Management of Quality
to
Quality of Management
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Criteria
Leadership
Strategic Planning
Customer & Market Focus
Information & Analysis
Human Resources Development
& Planning
Process Management
Business Results
Weightage
12%
8%
8%
8%
10%10%
44%
Malcolm Baldrige
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Understanding of Criteria
1. Leadership Leadership System.. How the senior leaders guide the company in setting directions
and in developing and sustaining an effective leadership system.
Company Responsibility & Citizenship How the company addresses the its
responsibility to the public and how it practices good citizenship.
1. Strategic Planning
Strategy Development Process.. How the company sets strategic directions to betterdefine and strengthen its competitive position and how the development process leads
to action plan for deploying and aligning key plan and performance requirements.
Company Strategy.. How the performance requirements and measures align with the
human resource plan and how the plans project the cos future as compared to the
competitors and key benchmarks.
1. Customer & Market Focus Customer & Market Knowledge.. How the company determines the long term
requirements and preference of target and potential customers and market and
anticipate needs to develop business opportunities .
Customer Relationship & Satisfaction Enhancement..How the company determines
and enhances the satisfaction of customers to strengthen relationships to improve
current offerings and to support customer and market related planning.
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4. Information & Analysis
Selection & Use of Information & DataHow the co. selects, manages and uses theinformation and data needed to support key company process and improve the cosperformance.
Selection & use of comparative information & data.. How the company selects,manages and uses comparative information data to improve cos competitive position.
Analysis & Review of Companys Performance..How the co. analyses and reviewsoverall performance to assess the progress relative to plans to identify key areas of
improvement.
5. Human Resources Development & Management
Work Systems.. What is the companys work & job design and its compensation andrecognition approaches to enable and encourage all employees to contribute effectivelyto achieve the cos performance and learning objective.
Employee Education Training & Development.. How the cos training and educationaddresses its plan and needs including building knowledge & capabilities & contribute toimproved employees performance and development.
Employee Well-Being & Satisfaction..How the company maintains its workenvironment and work climate to support the well-being, satisfaction and motivation ofall its employees
Understanding of Criteria (contd.)
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6. Process Management
Management of Product & Service Processes..How the significantly modified and
customized products and services are designed. How the product/services delivery
systems are designed, implemented and improved.
Management of Support Process.. How the cos key support processes are designed,
managed and continuously improved.
Management of Supplier and Partnering..How the cos supplier and partnering
processes, performance and relationships are managed and improved.
7. Business Results
Customer Satisfaction Results..How the co. performance on Customer Satisfaction
Financial & Market Results.Cos key financial & marketplace performance
Human Resource ResultsCos Human Resource results including employee well-being, satisfaction, development and work system performance
Supplier & Partner ResultsCos supplier and partner results
Company-Specific ResultsHow the companys key operational performance and
results significantly contribute to key company goals- customer satisfaction, operational
effectiveness and financial/market place and performance.
Understanding of Criteria ( Contd.)
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LeadershipLeadership
The ability to positively influence people andThe ability to positively influence people and
systems under ones authority to have a meaningfulsystems under ones authority to have a meaningful
impact and achieve important resultsimpact and achieve important results
A it B i S h l
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The Baldrige Leadership TriadThe Baldrige Leadership Triad
Leadership
Strategic
Planning
Customer andMarket Focus
Operations
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Executive LeadershipExecutive Leadership
Defining and communicating business directionsDefining and communicating business directions
Ensuring that goals and expectations are metEnsuring that goals and expectations are met
Reviewing business performance and taking appropriateReviewing business performance and taking appropriate
actionaction Creating an enjoyable work environmentCreating an enjoyable work environment
Soliciting input and feedback from customersSoliciting input and feedback from customers
Ensuring that employees are effective contributorsEnsuring that employees are effective contributors
Motivating, inspiring, and energizing employeesMotivating, inspiring, and energizing employees Recognizing employee contributionsRecognizing employee contributions
Providing honest feedbackProviding honest feedback
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Key IdeaKey Idea
Effective leadership requires five core
leadership skills:
vision
Empowerment
Intuition
self-understanding
and value congruence.
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LeadingLeading Practices LeadershipLeadingLeading Practices Leadership
Create a customer-focused strategic vision and clear qualityvalues
Create and sustain leadership system and environment forempowerment, innovation, and organizational learning
Set high expectations and demonstrate personal commitmentand involvement in quality
Integrate quality values into daily leadership andmanagement and communicate extensively
Review organizational performanceReview organizational performance Create an environment and governance system that fostersCreate an environment and governance system that fosterslegal and ethical behaviorlegal and ethical behavior
Integrate public responsibilities and community support intoIntegrate public responsibilities and community support intobusiness practicesbusiness practices
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Leadership SystemLeadership SystemLeadership SystemLeadership System
Leadership SystemLeadership System
.. how decisions are made, communicated, and.. how decisions are made, communicated, and
carried out at all levels; mechanisms for leadershipcarried out at all levels; mechanisms for leadership
development, self-examination, and improvementdevelopment, self-examination, and improvement
Effectiveness of Leadership SystemEffectiveness of Leadership System
depends in part on its organizational structuredepends in part on its organizational structure
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Key IdeaKey Idea
AnEffective Leadership System respects the
capabilities and requirements of employees
and other stakeholders, and sets highexpectations for performance and
performance improvements.
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GovernanceGovernance
Governance
. The system of management and controls
exercised in the stewardship of an organization.Approving strategic directionMonitoring and evaluating CEO performance
Succession planning
Financial auditingExecutive compensation
Disclosure
Shareholder reporting
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Leadership and SocialLeadership and Social
ResponsibilitiesResponsibilities
EthicsEthics
Health, safety, and environmentHealth, safety, and environment Community supportCommunity support
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Key IdeaKey Idea
Practicing good citizenship refers to
leadership and supportwithin the limits of
an organizations resourcesof publiclyimportant purposes, including improving
education, community health, environmental
excellence, resource conservation,community service, and professional
practices.
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Leadership ..TQM relevance
Definition Traditional
Leadership for Quality Assortment of behaviors
vision, hope, stimulation, mission, transformation dreams toreality, stewardship, Integration, courage, communication,consensual, conviction, empowering
deploying, motivating, motivating and tenacity.
Executive Leadership-not the only one
Changed Business Scenario & New Economy demanding Unit,Team, Project and Transformational Leadership
No more the one or few men show
Strategic Plan Integration
Quality is the key element to strategic planning for Qualitymanagement and Performance Excellence under the currentbusiness environment
Identification of such competitive advantages that is driven bycustomer and market.
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Leadership ..TQM relevance
Effective Leadership
Five Core Skills vision, empowerment, intuition, self-understanding & valuecongruence
Leadership Practices
Customer Focus, Strategic vision, Quality value
Creating sustainable leadership, environment, empowerment, innovate
Setting high expectations, demonstrate substantial personal commitment andinvolvement, missionary zeal and constancy of purpose
Integrating quality values in daily values, extensive communication
Integrate public responsibility and community support in business practices
TQ Leadership Contrasts.. Details
Leadership & Public Responsibilities
Public Health, safety & environment
Compliance
Corporate Citizenship, Community education, welfare, conservation
Industry Obligation to Community
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TQ Leadership Contrasts
Traditional
Plan Projects
Make plans
Organize resource
Preach M.B.O Push Products
Lip service to quality
Sell to customer
Perform R&D
Control People
Control through systems
Reward conformance punishdeviation
Maintain status QUO
TQ Leaders
Practice
Envision the future
Optimize the resource
Participative management Produce
Exemplary quality Service the customer
Innovate
Motivate people Development, talent & system
Reward effort, skilldevelopment and empower
Continuous improvement
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Strategic PlanningThe process of envisioning organizations future and
developing necessary procedures and operations to shape andachieve that future
Concept Plan that integrates an organizations major goals
Policies and actions sequences in alignment and supporting the goals
Marshalling and allocating organizations resources into an uniqueand viable posture
Based on ones relative strengths and competencies and anticipatedchanges in the environment
Counter measures and actions anticipating contingent moves byintelligent opponents
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Leading Practices
Top management, employees & even customers actively participate inthe planning process
Systematic planning process for strategy development and deploymentincluding measurement, feedback and review.
Gathering and analysis of variety of data external & internal factors
Alignment of short-term action plans with long term strategic objectives. Derive human resource plans from strategic objectives and action plansDerive human resource plans from strategic objectives and action plans
Strategic Planning Influence of TQ culture
Vision
Mission
Guiding Principle
Strategies ObjectivesAction
Plans
Environmental
Scan
Strategy Development
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MissionMission
Definition of products and services, markets,Definition of products and services, markets,
customer needs, and distinctive competenciescustomer needs, and distinctive competencies
SolectronSolectron: : to provide worldwide responsiveness to ourto provide worldwide responsiveness to our
customers by offering the highest quality, lowest totalcustomers by offering the highest quality, lowest total
cost, customized, integrated, design, supply chain, andcost, customized, integrated, design, supply chain, andmanufacturing solutions through long-term partnershipsmanufacturing solutions through long-term partnerships
based on integrity and ethical business practices.based on integrity and ethical business practices.
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VisionVision
.Where the organization is headed and.Where the organization is headed and
what it intends to be.what it intends to be. Brief and memorable - grab attentionBrief and memorable - grab attention
Inspiring and challenging - creates excitementInspiring and challenging - creates excitement
Descriptive of an ideal state - provides guidanceDescriptive of an ideal state - provides guidance
Appealing to all stakeholders - employees can identify withAppealing to all stakeholders - employees can identify with
Solectron:Solectron:Be the best and continuously improveBe the best and continuously improve
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Values (Guiding Principles)Values (Guiding Principles)
Defines attitudes and policies for all employees, whichDefines attitudes and policies for all employees, which
are reinforced through conscious and subconsciousare reinforced through conscious and subconscious
behavior at all levels of the organization.behavior at all levels of the organization.
Pepsico:Pepsico: Integrity, Honesty, Teamwork, Balance,Integrity, Honesty, Teamwork, Balance,
AccountabilityAccountability
Whirlpool:Whirlpool: Respect, Integrity, Teamwork, TrustRespect, Integrity, Teamwork, Trust
Leadership, Customer PassionLeadership, Customer Passion
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y
Environmental AssessmentEnvironmental Assessment
TEMPLES or PESTLE
Customer and market requirements, expectations and opportunitiesCustomer and market requirements, expectations and opportunities Technological and other innovationsTechnological and other innovations
Organizational strengths and weaknessesOrganizational strengths and weaknesses
Financial, societal, ethical, regulatory and other potential risksFinancial, societal, ethical, regulatory and other potential risks
Changes in global or national economyChanges in global or national economy
Factors unique to the organization, such as partner and supplyFactors unique to the organization, such as partner and supply
chain needschain needs
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y
Key Idea
Strategies are broad statements that set the direction
for the organization to take in realizing its mission
and vision.
Strategic objectives are what an organization must
change or improve to remain or become competitive.
Action plans are things that an organization must doto achieve its strategic objectives.
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y
Converting the strategies into small doable goals and then ultimately
deployed to the right teams & people in form of SMART objectives
Balance Scorecard Hoshin Kanri or Hoshin Planning or Policy Deployment
Management by Planning
Team based deployment is most suited to TQ environment
Strategic Deployment TQ way
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y
Balance Scorecard
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4646
Policy Deployment
(Hoshin Kanri)
Policy Deployment
(Hoshin Kanri)
Top management vision leading to long-termTop management vision leading to long-term
objectivesobjectives
Deployment through annual objectives and actionDeployment through annual objectives and actionplansplans
Negotiation for short-term objectives and resourcesNegotiation for short-term objectives and resources
(catchball)(catchball) Periodic reviewsPeriodic reviews
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Leadership and OrganizationalLeadership and Organizational
StructureStructure
Basic types of organizational structuresBasic types of organizational structures
Line organizationLine organization
Line and staff organizationLine and staff organization
Matrix organizationMatrix organization
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Key Idea
As more and more companies accept the process view of
organizations, they are structuring the quality organization
around functional or cross-functional teams.
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Strategic Planning Customer & market driven quality integrated into bloodstream
Integrated into the product, operations and service processes
Operational Excellence to deliver on above
Deployment Deployment to the right people with smart objectives
Organizations ability to translate strategic objective into action plans
Caliberations What the auditor will look for
Customer DrivenQuality
Operational
Excellence
TQM way to implement strategy
TQ aspects include
EmpowermentDiffused Leadership
Institutionalized
LearningInnovation and
Experimentation
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Focusing on CustomersFocusing on Customers
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Key IdeaKey Idea
To create satisfied customers, the organization
needs to identify customers needs, design the
production and service systems to meet thoseneeds, and measure the results as the basis for
improvement.
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Importance of CustomerImportance of Customer
Satisfaction and LoyaltySatisfaction and Loyalty
Satisfaction is an attitude; loyalty is a behavior
Loyal customers spend more, are willing to pay higherprices, refer new clients, and are less costly to do businesswith.
It costs five times more to find a new customer than to keep
an existing one happy.
A firm cannot create loyal customers without first creatingsatisfied customers.
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Key IdeaKey Idea
Customer wants and needs drive competitive
advantage, and statistics show that growth in
market share is strongly correlated with
customer satisfaction.
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Customer Satisfaction ModelCustomer Satisfaction Model
Perceived
quality
Customer
complaints
Perceived
valueCustomer
satisfaction
Customer
expectations Customer
loyalty
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5555
Customer-Driven Quality CycleCustomer-Driven Quality Cycle
measurement and feedback
Customer needs and expectations
(expected quality)
Identification of customer needs
Translation into product/service specifications
(design quality)
Output (actual quality)
Customer perceptions (perceived quality)
PERCEIVED QUALITY is a comparison of
ACTUAL QUALITY to EXPECTED QUALITY
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Key IdeaKey Idea
Many organizations still focus more on
processes and products from an internal
perspective, rather than taking theperspective of the external customer.
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Leading PracticesLeading Practices
Define and segment key customer groups andDefine and segment key customer groups andmarketsmarkets
Understand the voice of the customer (VOC)Understand the voice of the customer (VOC)
Understand linkages between VOC and design,Understand linkages between VOC and design,production, and deliveryproduction, and delivery
Build relationships through commitments, provideBuild relationships through commitments, provideaccessibility to people and information, set serviceaccessibility to people and information, set service
standards, and follow-up on transactionsstandards, and follow-up on transactions Effective complaint management processesEffective complaint management processes
Measure customer satisfaction for improvementMeasure customer satisfaction for improvement
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Key Customer Groups
Organization levelOrganization level consumersconsumers
external customersexternal customers
employeesemployees societysociety
Process levelProcess level internal customer units or groupsinternal customer units or groups
Performer levelPerformer level individual internal customersindividual internal customers
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Identifying Internal CustomersIdentifying Internal Customers
What products or services are produced?What products or services are produced?
Who uses these products and services?Who uses these products and services?
Who do employees call, write to, or answerWho do employees call, write to, or answer
questions for?questions for?
Who supplies inputs to the process?Who supplies inputs to the process?
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AT&T Customer-Supplier ModelAT&T Customer-Supplier Model
Requirements
and feedback
Requirements
and feedback
Your
Suppliers
Your
Processes
Your
CustomersInputs Outputs
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Key IdeaKey Idea
The natural customer-supplier linkages among
individuals, departments, and functions build
up the chain of customers throughout anorganization that connect every individual and
function to the external customers and
consumers, thus characterizing the
organizations value chain.
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Customer SegmentationCustomer Segmentation
DemographicsDemographics
GeographyGeography
VolumesVolumes
Profit potentialProfit potential
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Key IdeaKey Idea
Segmentation allows a company to prioritize
customer groups, for instance by considering
for each group the benefits of satisfying their
requirements and the consequences of failing to
satisfy their requirements.
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Key Dimensions of QualityKey Dimensions of Quality
Performance primary operating characteristics
Features bells and whistles
Reliability probability of operating for specific timeand conditions of use
Conformance degree to which characteristicsmatch standards
Durability - amount of use before deterioration orreplacement
Serviceability speed, courtesy, and competence ofrepair
Aesthetics look, feel, sound, taste, smell
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Key Dimensions of Service QualityKey Dimensions of Service Quality
ReliabilityReliability ability to provide what was ability to provide what waspromisedpromised
AssuranceAssurance knowledge and courtesy of knowledge and courtesy ofemployees and ability to convey trustemployees and ability to convey trust
TangiblesTangibles physical facilities and appearance physical facilities and appearanceof personnelof personnel
EmpathyEmpathy degree of caring and individual degree of caring and individualattentionattention
ResponsivenessResponsiveness willingness to help customers willingness to help customersand provide prompt serviceand provide prompt service
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Kano Model of Customer NeedsKano Model of Customer Needs
Dissatisfiers:Dissatisfiers: expected requirementsexpected requirements
Satisfiers:Satisfiers:
expressed requirementsexpressed requirements
Exciters/delighters:Exciters/delighters: unexpected featuresunexpected features
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Key IdeaKey Idea
As customers become familiar with them,
exciters/delighters become satisfiers over
time. Eventually, satisfiers becomedissatisfiers.
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Customer Listening PostsCustomer Listening Posts
Comment cards and formal surveysComment cards and formal surveys
Focus groupsFocus groups
Direct customer contactDirect customer contact
Field intelligenceField intelligence
Complaint analysisComplaint analysis
Internet monitoringInternet monitoring
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Key IdeaKey Idea
Companies use a variety of methods, or
listening posts, to collect information about
customer needs and expectations, theirimportance, and customer satisfaction with the
companys performance on these measures.
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l f Cl if i C
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Tools for Classifying CustomerTools for Classifying Customer
RequirementsRequirements
Affinity diagram Tree diagram
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Moments of TruthMoments of Truth
Every instance in which a customer comes inEvery instance in which a customer comes incontact with an employee of the company.contact with an employee of the company.
Example (airline)Example (airline)Making a reservationMaking a reservation
Purchasing ticketsPurchasing tickets
Checking baggageChecking baggage
Boarding a flightBoarding a flight Ordering a beverageOrdering a beverage
Requests a magazineRequests a magazine
DeplanesDeplanes
Picks up baggagePicks up baggage
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Key IdeaKey Idea
An organization builds customer loyalty by
developing trust, communicating with
customers, and effectively managing the
interactions and relationships with customers
through approaches and its people. Companies
must carefully select customer contact
employees, train them well, and empower them
to meet and exceed customer expectations.
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Customer Relationship ManagementCustomer Relationship Management
Accessibility and commitmentsAccessibility and commitments
Selecting and developing customer contactSelecting and developing customer contact
employeesemployees Relevant customer contact requirementsRelevant customer contact requirements
Effective complaint managementEffective complaint management
Strategic partnerships and alliancesStrategic partnerships and alliances
Exploiting CRM technologyExploiting CRM technology
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Key IdeaKey Idea
To improve products and processes
effectively, companies must do more than
simply fix the immediate problem. They needa systematic process for collecting and
analyzing complaint data and then using
that information for improvements.
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Measuring Customer SatisfactionMeasuring Customer Satisfaction
Discover customer perceptions of businessDiscover customer perceptions of business
effectivenesseffectiveness
Compare companys performance relative toCompare companys performance relative to
competitorscompetitors
Identify areas for improvementIdentify areas for improvement
Track trends to determine if changes result inTrack trends to determine if changes result in
improvementsimprovements
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Key IdeaKey Idea
An effective customer satisfaction
measurement system results in reliable
information about customer ratings ofspecific product and service features and
about the relationship between these ratings
and the customers likely future market
behavior.
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Survey DesignSurvey Design
Identify purposeIdentify purpose
Determine who should conduct the surveyDetermine who should conduct the survey
Select the appropriate survey instrumentSelect the appropriate survey instrument
Design questions and response scalesDesign questions and response scales
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Key IdeaKey Idea
The types of questions to ask in a survey
must be properly worded to achieve
actionable results. By actionable, we meanthat responses are tied directly to key
business processes, so that what needs to be
improved is clear; and information can be
translated into cost/revenue implications to
support the setting of improvement
priorities.
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Performance-Importance AnalysisPerformance-Importance Analysis
Performance
Impor
tance
Low High
Low
High
Who cares? Overkill
Vulnerable Strengths
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Key IdeaKey Idea
Appropriate customer satisfaction measurement
identifies processes that have high impact on
satisfaction and distinguishes between lowperforming processes low performance and
those that are performing well.
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Difficulties withDifficulties with
Customer Satisfaction MeasurementCustomer Satisfaction Measurement
Poor measurement schemesPoor measurement schemes
Failure to identify appropriate quality dimensionsFailure to identify appropriate quality dimensions
Failure to weight dimensions appropriatelyFailure to weight dimensions appropriately
Lack of comparison with leading competitorsLack of comparison with leading competitors
Failure to measure potential and former customersFailure to measure potential and former customers
Confusing loyalty with satisfactionConfusing loyalty with satisfaction
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Customer Perceived ValueCustomer Perceived Value
CPV measures how customers assess benefitsCPV measures how customers assess benefits
such as product performance, ease of use, orsuch as product performance, ease of use, or
time savingsagainst costs, such as purchasetime savingsagainst costs, such as purchase
price,installation cost or time, and so on,inprice,installation cost or time, and so on,in
making purchase decisions.making purchase decisions.
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Loyalty grid
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Loyalty grid
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CUSTOMER LOYALTY RELATIONSHIPS
Non-competitive zone
Regulated, Monopoly or few
substitutes. Dominant Brand
Equity. High cost of
switching. Powerful Loyalty
Prog.
Proprietary Technology.
Highly competitive zone.
Commoditization or low
differentiation. Consumer
Indifference. Many
substitutes. Low cost of
Switching
Relationship of Customer Satisfaction and Profitability
Total Satisfaction for captive customers
Tyranny of Averages
Satisfying Target Segments
Ultimate Source of Focus: affinity Groups
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Customer Loyalty Grid
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Customer Loyalty Grid
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THE IMPORTANCE OF FOCUS
Organization that have not identified the customers they are targeting have a
special handicap in achieving total customer satisfaction and create many merely
satisfieds.
Customer tell about only extra-ordinary experience