15. Competition

Competition between companies can be tough, aggressive, even ferocious or cut-throat. Firms may accuse each other of using unfair methods such as dumping, where a competitor (usually foreign) sells products for less than what they cost to produce, or at less than the price charged in the home market. Firms dump in order to build market share and recoup their losses later when, having established themselves to benefit from economies of scale (producing in larger quantities so that the cost of each unit goes down), they are able to charge market prices with a healthy profit margin on each unit sold.

Competition can also be gentlemanly or even cosy, so cosy that companies may be accused of forming a cartel to agree on prices in a price fixing arrangement. They may then be investigated by a government department that looks into unfair trading practices.

Competitors may also enter into other perfectly legitimate forms of cooperation, such as joint ventures for specific projects. They may even talk about strategic alliances. But like mergers, these can go awry and lead to recrimination between the erstwhile partners.

The Course Book unit looks at market leaders, market challengers, market followers, and market nichers. (Nichers can also be referred to as nichists.) It also looks at Michael Porter's model containing:

• cost-leaders, who are low-cost producers with a broad scope and cost advantage, appealing to many industry segments (many groups of buyers with different needs)

• differentiators, who appeal to buyers who are looking for particular product attributes (characteristics) and position themselves as the most able to meet those needs

• focussers, who concentrate on one particular segment and try to find competitive advantage by satisfying the needs of buyers in that segment better than anyone else. Focussers are, in effect, nichers.

These are the available choices, according to Porter, that a commercial organisation has if it wants to compete effectively, and not get 'stuck in the middle'.

Read on

Michael Porter is the key reference here.

Michael E. Porter: Competitive Advantage of Nations, Free Press, 1998, on what makes countries successful in specific industries.

Michael E. Porter: On Competition, Harvard Business School Press, 1998. A collection of his articles. Gary Hamel, C. K. Prahalad: Competing for the Future, Harvard Business School Press, 1996 John Kay: Foundations of Corporate Success, Oxford Paperbacks, 1995

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16. Quality

Quality is the elimination of variation, or, to put it another way, conformity to specification. Things should turn out as they were designed and intended to be.

Total quality management or TQM was a watchword of the 1980s. This often involved employee , with quality circles of workers encouraged to suggest ways of making things in better ways. It was associated with an influx of other Japanese ideas, such as the kanban system of just-in-time manufacturing or lean manufacturing, where parts are only made and supplied when they are needed : inventories (stocks) of parts and the need to finance and store them are eliminated. A related objective is that of zero defects, where things are made right first time, eliminating the need for inspection and reworking. All this is part of kaizen: striving for continuous improvement.

TQM gave a.way in the 1990s to business process re-engineering or BPR, when companies were told by their consultants not just to tinker in a piecemeal way with how goods or services are produced but to abolish everything and to start again from scratch. The concept of leanness was now also applied to reducing the number of management layers, and a lot of middle managers lost their jobs. (See the Business Briefs on Employment; Organisation; and Change)

It was also in the nineties that benchmarking emerged: the idea that a firm should see which company performed a particular task best, and model their performance on this best practice.

It is undeniable that things are better made today than 20 years ago, and even small manufacturing companies apply for the certification of the International Organization for Standardization with ISO 9000 to reassure their customers. The equivalent standards in the accreditation of services are ISO 9001 and ISO 9002. Here, the ultimate goal of elimination of variation is even harder to attain, as the variations to be eliminated are largely those of human behaviour. The organisations that manage it are even more admirable than their manufacturing colleagues.

Read on

Rafael Aguayo: Dr. Deming: The American Who Taught the Japanese About Quality, Simon & Schuster;Books. 1991

Mary Walton, W. Edwards Deming: The Deming Management Method, Mercury Business Books, 1992 Andrea Gabon: The Man Who Discovered Quality: How W. Edwards Deming Brought the Quality Revolution to America - The Stories of Ford, Xerox, and GM, Penguin, 1992

Joel E. Ross: Total Quality Management, Kogan Page, 1994

Crosby: Quality Is Still Free: Making Quality Certain in Uncertain Times, McGraw-Hill, 1996

Tom Peters, Robert H. Waterman: In Search of Excellence, HarperCollins, 1995. Still interesting, even though many of the companies held up as paragons of excellence have had their travails since it was first published in the early 1980s

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