Business Strategies: Market Advantages Provided by Information Systems

TQM and Competitive Advantage

When all processes are combined, we can look at a term called Total Quality Management (TQM), or just Quality Management. This is a concept aimed at securing customer satisfaction by the entire company working toward the goal of continuous improvement. If we go back to the cookie re-engineering scenario, TQM would be part of this. We would be constantly looking for a way to make this a more efficient process. Another important part of TQM is that each employee who participates in a given task, such as processing a check or doing the same manufacturing job, must do it in exactly the same way as another employee. This contributes to improved quality.

Why does a company use TQM? It's one way to give them a competitive advantage, or something about a company that sets it apart from its competitors. The 'something' can be cost. Do you choose a pair of jeans over another because they cost less? Or maybe because they are different and unique enough that they stood out to you? A third area of competitive advantage can be technological. How does that relate to picking a pair of jeans? Let's say the store you wish to buy jeans from doesn't exist anywhere near where you live. The company may have created a competitive advantage by setting up a website so you can purchase those jeans.

An example of a corporate acquisition simply to gain a technological competitive advantage happened just at the turn of the 21st century. A prominent snack producer had an excellent distribution system. A certain cereal manufacturer knew this would give them a competitive advantage for efficient delivery of products. The benefit to the snack company that was acquired came from the order and payment system of the cereal company. This cereal manufacturer was one of the first to utilize electronic data interchange (EDI), which is the use of networks and the Internet to place orders, invoice customers and receive payments. Since the acquisition was complete, the snack company's computer system was rolled over to the same one the cereal company used, something that many businesses do now on a daily basis.

Lesson Summary

Companies use business process modeling, the analysis of a business' systems and processes, in order to re-engineer, or redesign, those systems. This is always a work in progress in an effort to practice Total Quality Management, or utilizing consistency and continuous improvement in an effort for customer satisfaction. Excellence in this endeavor may result in a competitive advantage, giving the company that practices TQM a leg up on others in its industry.

Learning Outcomes

After watching this lesson, you should be able to:

• Define processes, process re-engineering and competitive advantage
• Describe business process modeling and the three types of processes analyzed
• Summarize the process of TQM