Written by SYED MUHAMMAD IMRAN

STUDENT OF MBA
QUALITY COSTS MONEY
The concept of quality in today’s era became a common practice in many organizations. (Quality
as an approach to do business in the modern competitive environment
is to maximize organizational capabilities through continual improvement of the quality of its
products, services, people, and processes) Yes it’s also true in some extent that quality costs
money to any organization, But the benefits which accrue with the quality are elusive and hard to
quantify but in this discussion I will try to convey my massage with the help of example which I
encounter while my studies.

As I mentioned in the previous talk that quality costs money to any organization who try to bring
quality in their systems, operations, product, services etc. The organizations generally do not
hear about or care about the quality in business, expect when things go wrong and due to that
concept management don’t want to spend money on the quality systems because they think
quality is costly and waste of money. Those Businesses who do not focus on quality will quickly
find that there are costs to be paid. Examples of these costs include waste due to products being
badly made and therefore not being able to sell them. The reputation of a business will quickly
deteriorate as a result of poor quality work. I think good and reputed organizations tell their
employees that the first job we have is to turn out quality merchandise that consumers will buy
and keep on buying, if we produce it efficiently and economically, we will earn a profit. And that
should be the thinking of all organizations to be a success in today’s era.

According to my point of view these things value a lot in today business “productivity, cost of
operations, quality of the goods and services” that create customer satisfaction all contribute to
profitability. Of these determinants of profitability, the most significant factor in determining the
long-run success or failure of any organization is quality. So any organization which spends
money to bring quality in their working environment (operations, systems, product, services etc)
is usually investing to secure his existence in the market place, to gain competitive advantage
and as well as future growth. High-quality goods and services can provide organization with a
competitive edge in the market place and high quality reduces costs due to returns, rework and
scrap. It also increases productivity, profit and other measures of success which is an ultimate
goal of any organization. Most important, high quality generates satisfied customers, who reward
the organization with continued favorable word-of- mouth advertising. So if we see the topic in
this angle then we can say “QUALITY IS FREE” with lot of advantages.

To create a better understanding of my point of view I will like to cot an

example which I encounter while reading a case study on “FORD MOTOR
COMPANY” in my first semester of MBA at IB&M. I will only high light the
main point which also conveys my point to my readers. “During the 1980s
Ford fought its way from the bottom of Detroit’s big three automakers to the
top of the pack though a concerted efforts to improve quality and better
Written by SYED MUHAMMAD IMRAN

STUDENT OF MBA
meet customers needs and expectations. It quickly became a highly
profitable business. However on January 12,2002, a newspaper headline
read, ”Ford to cut 35000 job, close 5 plants ”. CEO William Ford is cited as
stating “we wander off from what got us to the top of the mountain, and it
cost us greatly..” we underestimated the challenges, poor strategies and
don’t improve our current operations according to the requirement, we just
execute on the basis of our business”. The main cause of this disaster was
found to be not applying the quality system. They were trying to follow the
old business strategies and they under estimate the competitors. The flaw
was the lack of continues quality improvement which also require money to
be spend on it to make the system more quality focus, but due to their lack
of interest in quality aspect they face this big disaster. So we can see from
this example cost of the brining quality is 1000 times lesser than facing is
consequence. Now Ford is again one of the top automakers and now the top
two vital few priorities set by Ford’s president for North America are
“Improve quality” and “Improve quality” at any cost. With this example I try
to convey my massage, that the quality costs money but for a shorter time
but in the longer run it is the only shield we have to be protected from
competitors in the market and this will also ensure our future growth.
Because according to my knowledge

No Quality No Sale No Sale No Profit No Profit

No Job

In spite of that the companies who invest in the quality management efforts
experience outstanding returns and improvements in performance. Various
research studies show that quality-focused companies achieved better
employee participation and relations, improved product and service quality,
higher productivity, greater customer satisfaction, increased market share,
and improved profitability. These benefits come with quality so we can say
“QUALITY IS FREE”.

If we specifically talk about the quality in production. Then Quality improves

conformance in production or service the delivery leads to lower costs
though savings in rework, scrap, resolution of errors and warranty expenses.
Here I like to cot the saying of “Crosby”

“Quality is not only free, it is an honest-to-everything profit maker. Every

penny you don’t spend on doing things wrong, over or instead of becomes
half a penny right on the bottom line. In these days of “who knows what is
going to happen to our business tomorrow” there aren’t many ways left to
Written by SYED MUHAMMAD IMRAN

STUDENT OF MBA
make profit improvement. If you concentrate on making quality certain, you
can probably increase your profit by an amount equal to 5 percent to 10
percent of your sales. That is a lot of money for free ”

So I think its now clear that the Quality do not cost money the QUALITY
IS FREE.