Business management: Case Study
To: Joel Camos, Supervisor
From: My Name
Date: December 5, 2017
Subject: Cost vs. Quality Relationship
Our firm’s principal obligation is to appraise the quality of our products and services. Cost of quality is a strategy that allows the company to cut costs associated with shoddy products, and to ensure non-defective products reach our consumers. However, to quantify the savings that we can achieve from this initiative, the company has to assess the resources leveraged into the activities that ensure we do not launch defects into the market. Therefore, quality considerations incur costs includes the Prevention costs, Appraisal costs, and Failure costs.
Prevention costs are incurred when measures are put in place to avoid quality problems. Such charges involve the manufacturing process, staff training, machine maintenance, and quality control operations (P, 2017). These costs are proactive expenses that seek to guard against future outcome. Last year our company suffered a loss of 5.1 million dollars due to defective products. Now, the firm allocates 2.5 million dollars a year to minimize the defects. Trade-off situation is when the firm puts up preventive measures to avoid the errors, and which is cheaper compared to higher costs when repairing defective products.
Appraisal costs are expenditures incurred during inspection, to ensure non-defective commodities reach our customers. A highly qualified team of inspectors thoroughly evaluates new commodities to ensure they meet certain quality standards before they are sold out (Costs of quality or quality costs, 2017). The process is costly and involves activities like product verification, quality audits, and supplier rating. Currently, our company incurs up to 3 million dollars a year to inward returns, replacements and damage fee. The new team of audit experts shall make sure we recover up to 90% of these costs by the end of this financial year. Having defective product brings about a reduction in sales because of wrong publicity. In this case, trade-off occurrence is when the firm incurs this cost rather than lose its revenues because of bad publicity.
Failure costs entail internal and external costs. Internal failure costs are expenses incurred when there is need to rework or replace all products that are reportedly defective before being transported to the customers. External failure costs emerge when the faulty products reach the market (Chicago, 2016). In such a scenario, the company covers costs including replacements, a decline in sales due to a damaged reputation, warranties, and damage compensation. 15 million dollars have been allocated to purchase new equipment, employ new workers, and cater for training programs. Application of trade-off means, failure modes should be avoided at all costs, since defective products can reduce sales and profits and damage the goodwill of the company.
Please let me know if you have any queries.
AN AFFINITY DIAGRAM
XYZ shoe manufacturing company is faced with sporadic complaints from dissatisfied customers that have issues concerning their boot products. In order to address the problem, the senior executive held a brief meeting and came up with six cost centers that have troubled the company leading to financial losses.
IMPORTANCE OF INNOVATION IN ENTREPRENEURIAL ORGANIZATIONS
Stiff competition for the market is pushing entrepreneurial businesses to overhaul their strategies and exploit the opportunities that come with innovation. Businesses are now investing quality time to empower their employees, to come up with creative ideas nurture those ideas and allocate sufficient resources in innovative projects. The impact of innovation can be felt in the Smartphone industry whereby several companies are striving to outsmart each other with creative additives in their products. A clear example is the Samsung S8 products that have taken the market by storm through their sleek designs that are appealing to the customers. (Chicago, 2016).
Another reason why businesses seek innovation is to have a competitive edge. A competitive edge gives the firm a market advantage over other competitors producing the same product. For example, Honda, a car manufacturing company uses mass production strategy and a flexible car assembly process to remain a favorite car selling company of age and keep competitors at bay (Chicago, 2016). Companies now have to rely solely on innovation to adapt to the new age and adjust to the mutating market demands. Changing times mean organizations have to tune with market diversity, confine with the advanced technology and modern exploit the new marketing platforms. For instance, the music industry is evolving fast, and investors have to conform to the latest sound trends and music styles that define our age.
Furthermore, the primary reason why organization seeks innovation opportunities is to create a turning point of the existing product. Coming up with new products that are technologically advance than the existing ones, improves a firm’s revenue and in the end its profitability. Innovation entails the addition of user-friendly feature based on customers’ request, or difficulty when using the current product.
Moreover, it is an adaptation to the new technological age. Millennial generation workers who form the bigger percentage of the workforce value innovation. Organizations that are innovative enough will be the only ones that will benefit from expertise of this generation of employees. Innovation offers a better ground for the current workforce to offer solutions and add more improvement. Further still, things are changing very fast, it is only through innovation, and with the help of millennial workforce that the risks of product obsolesces may be eliminated.
The reasons why entrepreneurial businesses seek opportunities for innovation are galore. However, most importantly, changes prevent individual and business stagnation whereas companies give employees the opportunity to sharpen their innovative skills
THE FOUR BARRIERS TO COMMUNICATION
Four main barriers hinder communication: process barriers, semantic barriers, physical barriers and personal barriers (Kinicki, 2002, p. 136). As a manager, I must implement processes, guidelines, and procedures that can tackle these challenges in our institution.
Process barriers have proved to be a significant hindrance to effective communication. Communication is a process that entails conveying a message successfully from the sending end to the receiving end. At times, the transmission process is not that efficient, and information fails to reach the targeted recipient. As the manager, I intend to work on my communication skills and express myself with simple language in a transparent manner so that all listeners can comprehend easily. I can request the listener to repeat back my words to test my listening skills and assess if my thoughts are well understood. I will prefer a face-to-face meeting with colleagues instead of text messages or emails when communicating.
Semantic barriers are encoding and decoding errors that arise due to improper use of phrases and vocabulary. Cultural backgrounds significantly influence this barrier. As a manager, I will only allow standard language for office use and other jargon will not be accepted. Our interview panel will comprise of people with different cultural backgrounds to test the credibility of new applicants before hiring them. The move will also encourage us to employ diversity workforce and employ competent people.
Physical barriers are attributed to time, distance, and even office noise. Physical barriers force people to communicate via text or email, which lead to misunderstandings and distorted information that lacks detail. I prefer a face-to-face confrontation. Therefore, I will enact a policy to promote face-to-face talk and digital platforms like Skype will be used as formal communication channels in this company. All and sundry will have their offices to minimize background noises and flex time programs shall be implemented to adjust the time lag problems.
Personal barriers pose another threat to effective communication. Without trust, communication becomes a significant challenge. Being the manager, it is my obligation to earn trust from my colleagues the right way by promoting integrity and honesty. All employees will be treated fairly and a strict policy will be enacted to ensure justice, respect, and equity for all employees. I will not let my pride be the center of my actions and decisions in this business.
Chicago, U. o. (2016). Entrepreneurship and Innovation. Chicago: University of Chicago.
Costs of quality or quality costs. (2017, December 4). Retrieved from Accounting Formanagement.org: https://www.accountingformanagement.org/costs-of-quality-or-quality-costs/
Kinicki. (2002). Ri Irg Org Behaviour. McGraw-Hill Education.
P, A. (2017). Cost of Quality. Retrieved from ASQ: http://asq.org/learn-about-quality/cost-of-quality/overview/overview.html