Quality has become imperative as the economy has globalized. At each successive level and scale of competition, the quality of competing goods and services increases as competitors “one-up” each other to gain market share. Companies that used to compete only on a local, regional, or national level now find themselves competing against companies across the world, and many companies find the competition to be more intense than anything ever encountered. Today, only those who are able to produce world-class quality goods/services can compete; thus, it is imperative that an organization incorporates a vision of overall quality, known as Total Quality Management, or “TQM,” that permeates throughout its entire organization and contributes to a sustainable competitive advantage.
Competitive advantage denotes a firm’s ability to achieve market superiority over its competitors. In the long run, a sustainable competitive advantage provides above-average performance. Typically, a company’s competitive advantage and the strategy to attain one are achieved through two main components:
• Cost Leadership: Many firms gain competitive advantage by establishing themselves as the low-cost leader in an industry. They emphasize achieving economies of scale and finding cost advantages from all sources. A cost leader can achieve above-average performance if it can command prices at or near the industry average. However, it cannot do so with an inferior product. The product must be perceived as comparable with competitors or the firm will be forced to discount prices well below competitors’ prices to gain sales – otherwise, this could cancel any benefits that result from cost advantage.
• Differentiation: To achieve differentiation, a firm must be unique in its industry along some dimensions that are widely valued by customers. It selects one or more attributes that customers perceive as important and positions it uniquely to meet those needs. Often, a firm with a...