Global Competitiveness and Strategic Alliances

The Global Competitiveness Report (GCR) is a yearly report published by the World Economic Forum. Since 2004, the Global Competitiveness Report ranks countries based on the Global Competitiveness Index. The Global Competitiveness Index integrates the macroeconomic and the micro/business aspects of competitiveness into a single index.

The report "assesses the ability of countries to provide high levels of prosperity to their citizens. This in turn depends on how productively a country uses available resources. Therefore, the Global Competitiveness Index measures the set of institutions, policies, and factors that set the sustainable current and medium-term levels of economic prosperity.

Since 2010, Switzerland has led the ranking as the most competitive economy in the world. The United States, which ranked first for several years, fell to fifth place due to the consequences of the financial crisis of 20072010 and its macroeconomic instability.

Description

Since 2004, the report ranks the world's nations according to the Global Competitiveness Index. The report states that it is based on the latest theoretical and empirical research. It is made up of over 110 variables, of which two thirds come from the Executive Opinion Survey, and one third comes from publicly available sources such as the United Nations. The variables are organized into twelve pillars, with each pillar representing an area considered as an important determinant of competitiveness.

One part of the report is the Executive Opinion Survey which is a survey of a representative sample of business leaders in their respective countries. Respondent numbers have increased every year and are currently just over 13,500 in 142 countries (2010).

The report notes that as a nation develops, wages tend to increase, and that in order to sustain this higher income, labor productivity must improve for the nation to be competitive. In addition, what creates productivity in Sweden is necessarily different from what drives it in Ghana. Thus, the GCI separates countries into three specific stages: factor-driven, efficiency-driven, and innovation-driven, each implying a growing degree of complexity in the operation of the economy.

In the factor-driven stage countries compete based on their factor endowments, primarily unskilled labor and natural resources. Companies compete on the basis of prices and sell basic products or commodities, with their low productivity reflected in low wages.There are twelve pillars of competitiveness.

These are:

1. Institutions2. Appropriate infrastructure3. A stable macroeconomic framework4. Good health and primary education 5. Higher education and training 6. Efficient goods markets 7. Efficient labor markets 8. Developed financial markets 9. The ability to harness the benefits of existing technologies 10. Its market size, both domestic and international 11. by producing new and different goods using the most sophisticated production processes 12. Innovation

To maintain competitiveness at this stage of development, competitiveness hinges mainly on well-functioning public and private institutions (pillar 1), appropriate infrastructure (pillar 2), a stable macroeconomic framework (pillar 3), and good health and primary education (pillar 4).

As wages rise with advancing development, countries move into the efficiency-driven stage of development, when they must begin to develop more efficient production processes and increase product quality. At this point, competitiveness becomes increasingly driven by higher education and training (pillar 5), efficient goods markets (pillar 6), efficient labor markets (pillar 7), developed financial markets (pillar 8), the ability to harness the benefits of existing technologies (pillar 9), and its market size, both domestic and international (pillar 10).

Finally, as countries move into the innovation-driven stage, they are only able to sustain higher wages and a higher standard of living if their businesses are able to compete by providing new or unique products. At this stage, companies must compete by producing new and different goods using the most sophisticated production processes (pillar 11) and through innovation (pillar 12).

Thus, the impact of each pillar on competitiveness varies across countries, in function of their stages of economic development. Therefore, in the calculation of the GCI, pillars are given different weights depending on the per capita income of the nation. The weights used are the values that best explain growth in recent years. For example, the sophistication and innovation factors contribute 10% to the final score in factor and efficiency-driven economies, but 30% in innovation-driven economies. Intermediate values are used for economies in transition between stages.

The 12 pillars of competitiveness

First pillar: Institutions (Public and private)It is determined by the legal and administrative framework within which individuals, firms and governments interact to generate income and wealth in the economy. The importance of a solid institutional environment has become even more apparent during the current crisis; given the increasingly direct role played by the state in the economy of many countries .The quality of institutions has a strong bearing on competitiveness and growth. It influences investment decisions and the organization of production and plays a central role in the ways in which societies distribute the benefits and bear the costs of development strategies and policies. It goes beyond the legal framework. Government attitudes toward markets and freedoms, and the efficiency of its operations, are also very important: excessive bureaucracy, overregulation, corruption, dishonesty in public contracts, lack of transparency and trustworthiness. Proper management of the public finances is also critical to ensuring trust in the national business environment .An economy is well served by businesses that are run honestly, where managers have strong ethical practices in their dealings with the government, other firms and the public. Private sector transparency is indispensable to business, and can be achieved through the use of standards as well as auditing and accounting practices that ensure access to information in a timely manner.

Second pillar: InfrastructureExtensive and efficient infrastructure is an essential driver of competitiveness. It is a key to ensuring effective functioning of the economy, as it determines the location of economic activity and the kinds of activities or sectors that can develop in a particular economy. Well-developed infrastructure reduces the effect of distance between regions, resulting on the integration of the national market and connecting it at low cost to markets in other countries and regions. The quality and extensiveness of infrastructure networks has an impact on economic growth and reduces income inequalities and poverty. In this regard, a well-developed transport and communications infrastructure network is a pre requisite for the connection of less-developed communities with core economic activities and basic services. Effective modes of transport for goods, people, and services (such as quality roads, railroads, ports, and air transport) enable entrepreneurs to get their goods and services to market in a secure and timely manner, and facilitate the movement of workers to the most suitable jobs. Finally, a solid and extensive telecommunications network allows a rapid and free flow of information, which increases overall economic efficiency by helping to ensure that businesses can communicate.

Third pillar: Macroeconomic stabilityThe stability of the macroeconomic environment is important for the overall competitiveness of a country. Macroeconomic stability alone cannot increase the productivity of a nation, but economy cannot grow in a sustainable manner unless the macro environment is stable. The government cannot provide services efficiently if it has to make high-interest payments on its past debts. Running fiscal deficits limits the governments future ability to react to business cycles. Firms cannot operate efficiently when inflation rates are out of hand.

Fourth pillar: Health and primary educationA healthy workforce is vital to a countrys competitiveness and productivity. Poor health leads to significant costs to business, as sick workers are often absent or operate at lower levels of efficiency. Investment in the provision of health services is thus critical for a clear economy. The quantity and quality of basic education given to the population: Basic education increases the efficiency of each individual worker. Moreover, workers with little formal education can perform only simple manual work and find it much more difficult to adapt to more advanced production processes and techniques. Lack of basic education can therefore become a constraint on business development, with firms finding it difficult to move up the value chain by producing more-sophisticated or value-intensive products. For the longer term, it will be essential to avoid significant reductions in resource allocation to these critical areas

Fifth pillar: Higher education and trainingQuality higher education and training is crucial for economies that want to move up the value chain beyond simple production processes and products. In particular, todays globalizing economy requires economies to nurture pools of well-educated workers who are able to adapt rapidly to their changing environment. This pillar measures secondary and tertiary enrolment rates as well as the quality of education as assessed by the business community. The extent of staff training is also taken into consideration because of the importance of vocational and continuous on-the-job training (neglected in many economies) for ensuring a constant upgrading of workers skills to the changing needs of the evolving economy.

Sixth pillar: Goods market efficiencyCountries with efficient goods markets are well positioned to produce the right mix of products and services given supply-and-demand conditions, as well as to ensure that these goods can be most effectively traded in the economy. Healthy market competition, both domestic and foreign, is important in driving market efficiency and thus business productivity, by ensuring that the most efficient firms, producing goods demanded by the market, are those that thrive. The best possible environment for the exchange of goods requires a minimum of impediments to business activity through government intervention. For example, competitiveness is hindered by extreme taxes and by restrictive and discriminatory rules on foreign direct investment (FDI). The economic slowdown, with the consequent drop in trade and rise in unemployment, has increased the pressure on governments to adopt measures to protect domestic firms and jobs. For cultural reasons, customers in some countries may be more demanding than in others. This can create an important competitive advantage, as it forces companies to be more innovative and customer oriented and thus imposes the discipline necessary for efficiency to be achieved in the market.

Seventh pillar: Labor market efficiencyThe efficiency and flexibility of the labor market are critical for ensuring that workers are allocated to their most efficient use in the economy and provided with incentives to give their best effort in their jobs. Labor markets must therefore have the flexibility to shift workers from one economic activity to another rapidly and at low cost, and to allow for wage fluctuations without much social disruption. Efficient labor markets must also ensure a clear relationship between worker incentives and their efforts, as well as the best use of available talentwhich includes equity in the business environment between women and men.

Eighth pillar: Financial market sophisticationAn efficient financial sector allocates the resources saved by nations citizens as well as those entering the economy from abroad to their most productive uses. It channels resources to those entrepreneurial or investment projects with the highest expected rates of return. Business investment is critical to productivity. Therefore economies require sophisticated financial markets that can make capital available for private-sector investment from such sources as loans from a sound banking sector, well-regulated securities exchanges, venture capital, and other financial products. The banking sector needs to be trustworthy and transparent, and financial markets need appropriate regulation to protect investors and other actors in the economy at large.

Ninth pillar: Technological readinessThis pillar measures the agility with which an economy adopts existing technologies to enhance the productivity of its industries, as it has increasingly become an important element for firms to compete and prosper. ICT access (including the presence of an ICT-friendly regulatory framework) and usage are essential components of economies overall level of technological readiness .Firms operating in the country have access to advanced products and blueprints and the ability to use them. Among the main sources of foreign technology, FDI often plays a key role. FDI has declined by an estimated 15% in2008 with further deterioration expected for 2009, especially for developing countries. The level of technology available to firms in a country needs to be distinguished from the countrys ability to innovate and expand the frontiers of knowledge. That is why we separate technological readiness from innovation.

Tenth pillar: Market sizeThe size of the market affects productivity because large markets allow firms to exploit economies of scale. International markets have become a substitute for domestic markets, especially for small countries. There is vast empirical evidence showing that trade openness is positively associated with growth. Trade has a positive effect on growth, especially for countries with small domestic markets. Thus, exports can be thought of as a substitute for domestic demand in determining the size of the market for the firms of a country.

Eleventh pillar: Business sophisticationBusiness sophistication provides higher efficiency in the production of goods and services, increasing productivity and enhancing a nations competitiveness. Business sophistication concerns the quality of a countrys overall business networks as well as the quality of individual firms operations and strategies. The quality of a countrys business networks and supporting industries is important. When companies and suppliers from a particular sector are interconnected in geographically proximate groups, efficiency is heightened, greater opportunities for innovation are created, and barriers to entry for new firms are reduced. Individual firms operations and strategies (branding, marketing, the presence of a value chain, and the production of unique and sophisticated products) all lead to sophisticated and modern business processes.

Twelfth pillar: InnovationIn the long run, standards of living can be expanded only with innovation. Innovation is particularly important for economies as they approach the frontier of knowledge. Although less-advanced countries can still improve their productivity by adopting existing technologies or making incremental improvements in other areas, for those that have reached the innovation-driven stage of development, this is no longer sufficient to increase productivity. Firms in these countries must design and develop cutting-edge products and processes to maintain a competitive edge. This requires an environment that is conducive to innovative activity, supported by both the public and the private sectors. In particular, this means sufficient investment in research and development (R&D) especially by the private sector, the presence of high-quality scientific research institutions, extensive collaboration in research between universities and industry, and the protection of intellectual property. It shows the importance of R&D.

The interrelation of the 12 pillars

Although the 12 pillars of competitiveness are described separately, this should not obscure the fact that they are not independent: not only are they related to each other, but they tend to reinforce each other. For example, innovation (12th pillar) is not possible in a world without institutions (1st pillar) that guarantee intellectual property rights, cannot be performed in countries with a poorly educated and poorly trained labor force (5Th pillar), and is more difficult in economies with inefficient markets (6th, 7th, and 8th pillars) or without extensive and efficient infrastructure (2nd pillar). Although the actual construction of the Index will involve the aggregation of the 12 pillars into a single index, measures are reported for the 12 pillars separately because offering a more disaggregated analysis can be more useful to countries and practitioners: such an analysis gets closer to the actual areas in which a particular country needs to improve.

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Factors that determine International Competitiveness

International competitiveness is a measure of the relative cost of goods / services from a country. Countries which can produce the same quality of goods at a lower cost are said to be more competitive.

1. Relative InflationIf the inflation rate is relatively lower than other countries, then over time you become more competitive because your goods will be increasing at a slower rate. For example, in the post war period Japan and Germany had relatively lower inflation rates than major competitors; this helped them to become more competitive.During that period, inflation in Greece fell from close to 5% to below 2%. Greece will became slightly more competitive in this period

2. ProductivityProductivity is a measure of output per input. The most common measure would be labour productivity. For example, with improved technology and education, a country can enjoy higher labour productivity and therefore produce goods at a lower cost. Higher labour productivity is the key to increasing competitiveness and living standards at the same time.

Example, German v/s Italian labour productivityDuring 1990-2005, Italian labour productivity growth tended to lag behind Germany, leading to lower competitiveness of Italian exports.

Between 1990 and 2005, Germany labour productivity increased by 25 base points. UK labour productivity increased by 35 base points showing that the UK had faster improvements in labour productivity during this period.

3. Exchange RateMovements in the exchange rate will determine competitiveness. For example, a sharp depreciation will make exports cheaper and more competitive. An increase (appreciation) in the exchange rate makes the foreign currency price more expensive.

Often movements in the exchange rate reflect relative costs. For example, if a country has lower inflation, this will lead to an appreciation in the exchange rate, making exports relatively more expensive. Thus a floating exchange rate helps to maintain relative competitiveness levels.

However, sometimes economies can artificially maintain a lower value of the exchange rate to maintain competitiveness. For example, China has been accused of exchange rate manipulation. China buys large quantities of US securities; this causes an increase in the value of the dollar and helps to keep the Yuan undervalued. Therefore, this helps Chinese exports to be more competitive and explains the large Chinese current account surplus

Competitiveness in the Euro - In the Euro, countries have a permanently fixed exchange rate - they cannot devalue to restore competitiveness. Therefore divergences in labour costs and productivity will have a bigger impact on competitiveness than in a floating exchange rate.

4. Tax RatesTax rates on labour and corporations will be a factor in determining competitiveness. For example, higher labour taxes will increase the unit cost of labour faced by firms, leading to lower competitiveness.

5. Cost of Doing BusinessIt is argued that countries with more labour market regulations and regulations about doing business will have higher costs and lower competitiveness. For example, the difficulty in gaining planning regulations to expand a factory

The World Bank produces a list of countries which are the 'easiest places to do business'. The criteria include factors such as flexibility of labour markets, degree of regulations, and protection of private property.

Top 10 Ease of doing business

SingaporeHong KongNew ZealandUnited StatesDenmarkNorwayUnited KingdomSouth KoreaIcelandIreland

6. InfrastructureA key factor in determining competitiveness is the cost of transport. For example, some argue the UK's competitiveness is undermined by bottlenecks in transport, such as limited airport capacity in London and traffic jams on major roads.

THE 10-P FRAMEWORK FOR GLOBAL COMPETITIVENESS

The 10-P framework for globalization symbolizes the aspirations and needs of employees and organizations in the new competitive settings. It comes a long way from the initial impetus provided to the subject by Michael Porter in his book Competitive Strategy (1980), and goes beyond his purely industrial organization perspective. The framework operationalizes the 4-Diamonds for a nations competitive advantage of Porter. The 10-P framework integrates theory of strategic management and practice of business policy and provides a structure for the practicing manager to evaluate competitiveness at regular intervals.

The 10-P framework explores a fine `fit between the soft and hard strategic choices. It seeks a self-motivated network of stakeholders who are able to self-actualize a high sense of satisfaction, self-worth, liberty and freedom in business organizational settings.

True to the vision of a world-class organization, the central fulcrum in the framework is a PEOPLE-ORIENTATION-both inside and outside the corporation. This approach presents a humane perspective to issues at hand and differentiates between a `satisfying approach and an `excellent approach. It realizes and reflects that modern economies and corporations thrive mainly on innovation in all respects of value-augmentation-creative thinking at the design stage, ensuring production at highest efficiency and minimum costs, and satisfying the customer in a most effective manner.

The rest of the 9-Ps are levered in a highly interactive mode with People and amongst themselves. A change in any of the Ps affects performance of the other levers and therefore the final outcome for the organization. The 9-Ps are: Purpose, Perspective, Positioning, Plans (and policies), Partnerships, Products, Productivity, Politics, and Performance (and profits). The 10-P framework is appropriate for auditing strategic competitiveness, a monitoring emerging opportunities and threats, devising a value-based action-plan and executing it in the context of globalizing organizations.

1. PEOPLEOrganization is people: An organization is created by the people, it exists for the people, and continuously draws sanction from the people. From this humane perspective, the primary objective of an organization can only be to add value to the society by serving it with value augmented products. The people-focus implies that the primary purpose of an organization can never be to provide employment at the expense of customers or society in general-a drill routinely exercised in Third World countries, and especially in India by many public sector and government organizations during the height of regulated economic regimentation. Similarly, retrenchment of people (hire and fire) cannot be accepted as a no-holds-barred practice for maximizing organizational profits! Retrenchment is a myopic and non-creative response to the problem of cutting costs and improving productivity. The corporate manager in the new paradigm has the unenviable role of maximizing `people orientation as well as `task orientation. In these emerging work values, each employee is empowered to take decisions under certain norms. For instance, under Just-in-Time culture, an ordinary shop-floor worker is empowered to stop the whole machine assembly line if he finds that the product quality has gone out of control.

2. PURPOSEOrganizational purpose as used in strategy-making sense is interchangeable with mission, vision, core competence, strategic intent, and basic values. It is important not merely to produce and sell products, but to produce and sell quality products, without fail. Not only from the production side, but also from the distribution side, we must constantly review whether our customers are satisfied with our products and whether customers are satisfied with our service. We must be perfect in satisfying. Organizational purpose must be explicitly stated. An organization must enjoy social sanction by serving socially useful purpose. Purposeless organizations are liable to drift and become marginal in the course of time. A sense of purpose is important for other organizational reasons, including facilitating interpersonal processes and formalization of relationships (the other characteristic of an organization). Globalization connotes dynamic human will for achieving larger social and human purposes.

3. PERSPECTIVEStrategic management begins with a statement of clear perspective. Top-management perspective is not a bunch of hunches. Organizational perspective must be well-researched. In facing global competitive challenges, it is important that the firm possesses a global perspective, even though it might be competing and managing locally. Failure to develop an in-depth perspective results in missed opportunities. Polemical debates arise from lack of appreciation of multiple perspectives.

Some of the techniques for improving the perspective horizon and thereby quality of decisions are: scenario-building, process consultation, in-house training programmes, job rotation, and cross-functional teams.

4. POSITIONINGAn important di0mension in achieving world-class competitiveness relates to the positioning of the firm. This dimension has high interface with organizational purpose, planning and perspective, resulting in definitional confusion. Positioning of the firm is distinct from positioning of products in marketing. The term has remained mostly confined to abstract strategic management literature despite its obvious criticality to practice. An important dimension in strategy is to understand `where am I, `why am I here, `where do I want to be, and `how do I reach there. In other words, the strategic manager has to ascertain the existing position and future positioning of the firm. Positioning means the place in the industry which the firm would like to occupy in relation to its competitors from the perspective of the consumers. Does the firm compete on lowest-cost, mass-production, high-technology basis? Does it differentiate itself from others on the basis of superior and value-augmented products, or on high-ethic practices, employee policies, etc., which are unique in the industry? Once `positioning choice is made, many process and product related decisions flow.

5. PARTNERSHIPSThe partnership approach suggests a sense of belief and trust in other persons capabilities and skills. It opens the doors for people to look beyond the usual routined responses, and create an environment where people voluntarily come up with innovative solutions for seemingly intractable problems. Partnership is a perspective as well as a position. Partnership has softer (intangible) and harder (tangible) dimensions. Going beyond the softer side of partnership-approach, development of long-term partners for weak competitors is essential for deriving sustainable advantages. Suppliers, bankers and other investors, employees, government, technology collaborators, transporters, and distributors do have a stake in the firms well-being (and vice versa) and therefore have to be treated as key resources. In this approach, the perspective is that there can be no profits at the expense of any resource.

6. PRODUCTIVITYGlobal competitiveness is largely an expression of firms relative productive efficiency. A countrys prosperity is indicated by the amount of value-added goods that are produced/made available for consumption. Labor productivity is generally the accepted measure of value addition with the assumption that the same individual would have different capacities in different technological environments and organizational contexts. A key managerial decision that vitally effects the firms overall productivity pertains to capital intensity of the project in terms of investments in land, building and machinery. This decision also affects leverage position of firms.

Leverages are of two types: the first, called the degree of operating leverage (DOL), is the firms commitment to fixed overhead expenses irrespective of business done. The second, degree of financial leverage (DFL), is the way the firms funds are distributed, for example, the debt-equity ratio. The degree of combined leverage (DCL) of the firm is the product of its DOL and DFL.

7. PRODUCTA product is a package of information which the customer interprets in his mind while going through the process of consumption. Therefore, the concept of any product must start with the customer in mind, and end with his total satisfaction. In this definition all products are ultimately services converted into information. Beyond quality, products must offer customers a satisfaction to a level where they become the best salesmen for the company forever.

8. PLANS (AND POLICIES)The thrust of the 10-P framework is to integrate peoples personal growth and development with organizational objectives through excellent all-round quality. The premise is that the tasks are executed with finesse by satisfied and motivated people. To ensure that people remain aligned with the common sense of purpose and do not drift, the organization must have a clear, documented statement of objectives and broad plans. A firms `plan must contain a clear mission statement on the way it proposes to serve the customer.

CII-EXIM Bank Model of Competitiveness for Business Excellence

CII and Export Import Bank of India have, in 1994, jointly established the CII-EXIM Bank Award for Business Excellence, with the aim of enhancing the Competitiveness of India Inc. The Award is based on the internationally recognized EFQM Excellence Model.

CII-EXIM Bank Award for Business Excellence Large OrganisationsSmall & Medium Businesses

The Excellence Model provides a holistic management framework to organizations to achieve Excellence. A large number of organizations have successfully used this model to

Define Excellence as a common language across the organization Develop an integrated approach for achieving sustainable competitiveness Review and improve Strategy, Processes and Performance Identify and share good practices Helps build functional managers into Business Leaders

Participating in the Award programme will benefit organizations in many ways, including,- Providing an external perspective on the current status on the organisations performance and practices- Giving insight into organizational performance, beyond financial performance- Measuring progress on the journey of excellence, and,- Helping compare with best-in-class organizations

The following types of organisations are eligible to participate in the Award programme:- Large Business Organisations- Operating Units of Large Business Organisations- Small and Medium Business Organisations

CII ensures that the model remains dynamic and contemporary to management thinking. Both CII and EFQM are committed to researching and updating the model with practical and academic inputs drawn from organizational experiences across the world.

CII believes that organizations which will use the Excellence Model for internal improvements, and the CII-EXIM Bank Award programme for external validation, will truly be enabled in refining and improving their practices and performance, for achieving higher levels of excellence

UNIT II

Role of Quality And Productivity In Achieving World Class Competitiveness

Quality as a Competitive Tool

A product is a quality product if it conforms to the design and customers' expectation. Design quality refers to how closely the characteristics of a product or service meet the needs and wants of customers. Conformance quality refers to the performance of a product or service relative to its design and product specications. Total quality management (TQM) is the unyielding and continuous effort by everyone in the rm to understand, meet, and exceed the expectations of customers.

Certain characteristics of most TQM are: Focusing on satisfying the customer Striving for continuous improvement Fully involving the entire work force Actively supporting and involving top management Using unambiguous and objective measures Recognizing quality achievements in a timely manner Continuously providing training on total quality management.

The definition of quality is often a hotly debated topic. While it may seem intuitive, when we get right down to it, "quality" is a difficult concept to define with any precision. The most fundamental definition of a quality product is one that meets the expectations of the customer. However, even this definition is too high level to be considered adequate. In order to develop a more complete definition of quality, we must consider some of the key dimensions of a quality product or service.

Dimensions of Product and Service quality

Dimension 1: Performance Does the product or service do what it is supposed to do, within its defined tolerances? Performance is often a source of contention between customers and suppliers, particularly when deliverables are not adequately defined within specifications. The performance of a product often influences profitability or reputation of the end-user. As such, many contracts or specifications include damages related to inadequate performance.

Dimension 2: FeaturesDoes the product or services possess all of the features specified, or required for its intended purpose? While this dimension may seem obvious, performance specifications rarely define the features required in a product. Thus, it's important that suppliers designing product or services from performance specifications are familiar with its intended uses, and maintain close relationships with the end-users.

Dimension 3: Reliability Will the product consistently perform within specifications? Reliability may be closely related to performance. For instance, a product specification may define parameters for up-time, or acceptable failure rates. Reliability is a major contributor to brand or company image, and is considered a fundamental dimension of quality by most end-users.

Dimension 4: ConformanceDoes the product or service conform to the specification? If it's developed based on a performance specification, does it perform as specified? If it's developed based on a design specification, does it possess all of the features defined?

Dimension 5: DurabilityHow long will the product perform or last, and under what conditions? Durability is closely related to warranty. Requirements for product durability are often included within procurement contracts and specifications. For instance, fighter aircraft procured to operate from aircraft carriers include design criteria intended to improve their durability in the demanding naval environment.

Dimension 6: ServiceabilityIs the product relatively easy to maintain and repair? As end users become more focused on Total Cost of Ownership than simple procurement costs, serviceability (as well as reliability) is becoming an increasingly important dimension of quality and criteria for product selection.

Dimension 7: AestheticsThe way a product looks is important to end-users. The aesthetic properties of a product contribute to a company's or brand's identity. Faults or defects in a product that diminish its aesthetic properties, even those that do not reduce or alter other dimensions of quality, are often causes for rejection.

Dimension 8: PerceptionPerception is reality. The product or service may possess adequate or even superior dimensions of quality, but still fall victim to negative customer or public perceptions. As an example, a high quality product may get the reputation for being low quality based on poor service by installation or field technicians. If the product is not installed or maintained properly, and fails as a result, the failure is often associated with the product's quality rather than the quality of the service it receives.

Difference between Product and Service Quality

One is quality of the service and the other is quality of the product. Product quality usually includes features, performance, defects etc. Service quality includes delivery time, knowledge of delivery personnel etc.

The Quality of the product is more important. If the quality of your product is in line with the standards of the region that your product is sold in then there would be no need to waste money on customers that complain because they think they can. I earn an income from companies who waste money on stroking customer egos.

Role of Information Systems in Building Competitiveness

OverviewCompetitive Advantage in any industry or business venture is achieved when one particular organization performs more effectively and/or efficiently than the others in the same category. This Competitive Advantage does not have to be all encompassing of the industry and may only cover small segments. A Competitive Advantage is achieved when an organization can do any one thing, process; function, etc. more effectively and or efficiently than others in that industry segment or in some cases across the entire industry. Whether the organization employs a low cost strategy, cost/price differentiation, or what have you there is a Information System supporting the function. A well planned and executed Information System is imperative in today's business world. Well planned and executed Information Systems are key tools for the task of obtaining a Competitive Advantage. Planning for and developing a successful Information System falls under the strategy step of the critical success factors (Newkirk, Lederer, & Johnson, 2009).In most industries there is often a company that is far ahead of the game. These companies are the leaders of their field and tend to set the bar for their competitors. These companies are said to have competitive advantages. It has been argued if the result of their success is due to access to resources that others do not have or if it is because of superior knowledge and information assets (Laudon & Laudon, 2006). Regardless, these companies seem to have a better grasp on the principles of gaining competitive advantages.The introduction of technology into the business community has dramatically changed business practices and how advantages are gained. Information Systems, which is comprised of hardware, software, data, people, and procedures, is used to produce information that may allow a company to gain competitive advantage by producing insights that lead to actions. These insights and actions, when used efficiently, is one possibility that allows companies like Wal-Mart and Google to stand above the rest and expand its business capabilities far above the heads of its competitors.

Strategic Planning for Information SystemsBusiness Systems Planning began back in the 70's and continues today with an eye toward the competition and, how the system will enable the organization to improve business functions. As stated earlier a good planning precedes all system development. In an article written by Lederer & Sethi, they outlined seven steps for the planning process with one of the steps being the SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis. A good Information System development & planning strategy should begin with a SWOT analysis of the organization. This SWOT analysis should take place rather swiftly as the market and therefore business itself is fluid and changes quickly so systems must be flexible and easily improved (1998).One major aspect of strategic planning is planning for information systems. Proper planning relies on the appropriate integration of a companys business objectives and its plan for information systems (Thompson & King, 1997). The information system is utilized to assist an organization in reaching elements stated in its strategic plan. Having good information systems and operating data is an important part of executing a strategy successfully (Thompson, Gamble, & Strickland, 2006).Although not spelled out in this order or context one must know the who, what, when, where, why, and how an information system will aid or benefit an organization in order for the system to work for the organization. Proper management of the information system development is critical for success. During the information system planning phase one needs to identify these critical elements to ensure system success. All business ventures begin with planning and all planning begins with a clear vision of where you want to go with the system or business process. The ultimate goal of any information system is to improve business processing or some other function which also improves profit (Phillips, 2005).A critical step in strategic planning for information systems is the proper definition of the problem being solved. Porters value chain model can assist with defining and analyzing areas that are likely to have a strategic impact on competitiveness (Porter, 1996). Once this definition is determined, a properly designed Information Systems can adequately execute a successful strategy that meets the planned business objectives. According to OBrien (2005), the strategic role of information systems is to use information technology to develop products, services, or capabilities that give an organization a significant advantage over its competitors.

Aligning Information Systems Planning with the Business PlanThe alignment of information systems planning with the business plan tends to be a critical issue for organizations. The degree of alignment can determine the successes and/or failures of the actual information system. Information systems planning, also known as ISP, is described as being the process of establishing objectives for an organizations computing needs and identifying applications the organization should potentially implement (Thompson & King, 1997). It is considered paramount that IS strategies are in align with business strategies in order for a business to not only be successful, but to survive (Cragg, & Tordova, 2011). Different views have been undertaken on how the business should reach IS/Business alignment. One perspective is to let the IS infrastructure and decisions be driven by business strategies and decisions. Another would be the enhancement of IS could provide the business with new ways to make a profit and optimize existing business strategies.Some companies, such as Proctor & Gamble, Progressive, and Vanguard Group, have taken the concept of Business/IS alignment even further with a newer approach, convergence. Convergence has employees rotate jobs between the IT and Business departments (even CFOs with CIOs) in order to facilitate an encompassing understanding of both sides of the operation. At Progressive, IT employees are required to understand how the insurance business works in order to provide better service on customer websites and implement changes quickly if needed. Neither side of the organization drives the goals of the other in a convergence alignment, yet there is one goal that both sides work to achieve in unison (King, 2010).

Information Systems as a Competitive AdvantageAccording to Thompson et al (2006), a competitive advantage in an organization is defined as having the majority of buyers preferring the organizations products or services over the competition when the bias is strong.Information systems are created to solve problems, provide information, make organizations more efficient or create a new business. It is contended that gaining competitive advantage via IS is not as simple as investing in the latest IS/IT available, but rather developing the IS/business capability o