The US Automotive Industry: Quality and Customers | Free Essay Example

The US Automotive Industry: Quality and Customers

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Topic: Business & Economics
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Abstract

The dynamic automotive business environment in the US requires industry players to strategize on ways of becoming competitive. In the 1960s, automotive companies in the US did not consider quality management as an important element of their strategies. However, competition has forced such companies to consider quality management as an integral part of success in the market. Ford Motors uses Total Quality Management (TQM) as a strategy for meeting and satisfying customer needs. Through the implementation of the TQM principles, Ford Motors has become one of the market leaders in the US automotive industry. The different aspects of TQM that Ford applies in its operations ensure quality products and customer satisfaction, which creates, brand loyalty, and improved overall company image. The TQM principles that Ford uses include focusing on the customer, improving continuously, empowering employees, managing supplier quality, and ensuring quality product design. The research carried out in this paper proves the thesis statement that quality management and customer focus play a critical role in the success of the companies in the automotive industry in the US by using Ford Motors as an example.

Introduction

Background

The automotive industry in the United States has evolved with time under the changing business environment. Competition has increased rapidly due to the existence of many players in the industry. Competition compels organizations to think creatively about ways of coming up with competitive advantage and claim maximum market share thus promoting growth. Customer focus and quality management are some of the key success elements for automotive companies in the US. Quality management benefits companies in two ways. First, ensuring quality controls along the value chain of production means that the cars released into the market are free from defects and failures. This aspect saves a company unnecessary recall or return costs thus improved profitability. On the other side, quality products meet customers’ expectations hence satisfaction (Topalovic, 2015). Such customers become loyal to the company, which leads to enhanced brand loyalty, improved sales, and a pool of returning clients. Similarly, customer focus allows companies to get and respond to the clients’ feedback (Kiran, 2016). This way, a car company can know the specific client needs and meet them or surpass expectations.

The success of any company depends largely on the way it interacts with customers to ensure satisfaction. As such, quality management and customer focus are the key determinants of whether a company will fail or succeed. Automotive customers value quality exceedingly because poorly made cars are compromised to safety which can ultimately lead to injury or death (Bandyopadhyay & Sprague, 2013). This paper explores the statement that quality management and customer focus are critical for automotive companies’ success in the US market. Ford Motors will be used as a case study to prove the thesis statement. The first section is a statement of the problem followed by highlighting the purpose of the study. The paper then builds on the theoretical bases of the study by exploring the available literature on the subject. The results and discussion section is a detailed presentation and discussion of the solution to the problem or proof of the thesis statement. Finally, the summary and conclusions section gives a recap of the study. There will be a recommendations section to highlight future research needs before restating the problem statement.

Statement of the Problem

In the current United States’ new vehicle automotive business environment, there is a growing need for quality management amongst the industry players. Increased competition leads to the demands for higher profitability and managing productivity, cost, and quality. Consumers can choose from a variety of similar automotive products, which are often exchangeable in the eyes of the users. If a consumer is not satisfied with the products of a given automotive company, he or she will switch to the competitors’ brands.

The focus on the customers’ needs and wants in line with quality is one method to differentiate from the vast number of competitors. Satisfied consumers will build brand loyalty by continually coming back for more purchases. With a sizeable pool of satisfied returning clients, a company lowers its real-time expenditure by cutting down customer acquisition costs and recall expenses. The most significant factor in determining the long-term success or failure of any organization is its ability to apply the principles of quality management systems and consumer focus.

Purpose of the Study

The purpose of this study is to prove the thesis that quality management and customer focus are critical to the success of automotive companies in the US market.

Literature Review

Stiff competition is one of the characteristics of the automobile industry in the US as different companies seek to claim a share of the market. According to Bandyopadhyay and Sprague (2013), after the Second World War, quality in the automobile industry was not a major concern. Companies would easily sell whatever they produced because completion was not a major issue. Also, the quality of imported vehicles could not match that of the American counterparts and thus this was a key differentiating factor in the success of automobile companies in the US at that time. The proponents of quality management at the time included Edwards Deming, but the American industry players like Ford Motors could not listen to him because the competition did not demand such changes (Ehigie & McAndrew, 2005). Deming insisted that quality management should start from the top but American companies relegated such tasks to the mid-level managers.

To highlight the level of quality negligence at the time, Lee Iacocca, who headed Ford Motors in the 1960s, came up with the Profit Improvement Program (PIP), which sought to cut costs by removing some items from an existing budget (Winnard, Adcroft, Lee, & Skipp, 2014). This financially based approach led to poor qualities with devastating results. For instance, the management of Ford Motors chose not to implement safety design changes in the car model Pinto in the name of cutting costs. However, this decision led to the Grimshaw v. Ford Motor Company court case (Dyrud, 2015). Mathew Grimshaw sued Ford after an accident involving Pinto and another car. The company was ordered to pay close to 125 million dollars as punitive damages among other charges, even though the amount was revised to $3.5 million (Dyrud, 2015). However, Japan and South Korea automotive companies improved their quality management which ultimately pushed the American counterparts to rethink their market strategies. Also, numerous local companies have entered the automotive space thus creating competition.

On the other side, customer satisfaction determines the success or failure of any business establishment (Kiran, 2016). Satisfied customers will come back for more purchases. Such consumers will even become brand ambassadors by spreading the word of mouth concerning a certain product. Automotive companies in the US understand this principle and thus they are continually trying to focus on customer requirements. Ford Motors uses the Total Quality Management (TQM) concept for quality and customer focus purposes. According to Topalovic (2015), TQM is a “description of the culture, attitude, and organization of a company that strives to provide customers with products and services to satisfy their needs” (p.1026). Such culture emphasizes quality in all aspects of company operations to avoid wastage and defects in the final product.

The concept of TQM requires continuous learning amongst employees for the production of quality goods and the provision of unrivaled customer service (Topalovic, 2015). As such, automotive companies increase profitability by reducing losses associated with defects and product recalls. On the other side, the provision of quality cars meets customers’ expectations hence satisfaction. Therefore, for Ford Motors to remain competitive in the industry, it considers customer focus and quality management as part of its strategies through TQM.

Limitations of the Study

This study is limited because only one company (Ford Motors) was used for analysis. Unfortunately, the other automotive companies in the US do not have comprehensive literature on their quality management and customer focus processes. However, Ford Motors is one of the most successful companies in the US. This study acknowledges that the company has succeeded in such a competitive environment due to its use of quality management practices like TQM. Consequently, it suffices to conclude this methodology would prove the thesis statement that quality management and customer focus play a critical role in the success of automotive companies like Ford Motors in the US.

Definition of Terms

  • Total Quality Management (TQM) – this term describes an approach that ensures product quality and customer satisfaction.
  • Plan, do study, act (PDSA) – a model that ensures continuity in the learning process for improvement purposes.
  • Quality function deployment (QFD) – a data collection and scoring method in determining the appropriate product design
  • Global 8D – a quality tool by Ford Motors to come up with the right decision when solving problems in the workplace

Results and Discussions

Different scholarly materials were used to assess the contribution of quality management and customer service to the success of Ford Motors. TQM was found to be one of the tools that the company uses to ensure quality and customer focus. TQM specializes in six major areas including “customer focus, continuous improvement, employee empowerment, use of quality tools, product design, and managing supplier quality” (Kiran, 2016, p. 73). Each of these areas functions at different levels of operations to ensure quality products as discussed below.

Customer Focus

The success or failure of any company depends largely on customer relationships. Satisfied customers will quickly become repeat clients thus boosting the company’s image. Also, such clients become part of the company’s marketing channels by spreading information through the word of mouth (Topalovic, 2015). At Ford Motors, customer expectations are exceeded to ensure satisfaction. Customer feedback is one of the ways to know what expectations to meet. Ford Motors uses mixed methods to get feedback from its customers. For instance, the company has an interactive website with an intelligent questions and answers (Q&A) section where customers can learn more about the company and leave their comments. The company also observes customers in their environments to come up with innovative products that meet market demands. Additionally, this automotive company is constantly gathering information through market studies, meetings with clients, and the use of research groups to keep abreast of the changing customer preferences. Ultimately, every decision taken at Ford Motors revolves around how to make customers happy as a way of increasing sales. In other words, clients determine the quality level of cars at Ford Motors.

Continuous Improvement

As quality levels improve, client expectations go up. When customers give feedback concerning a product, they are normally comparing it to counterparts from other competing entities. The commonly used approach to continuous improvement is the plan, do, study, act (PDSA) model (Bandyopadhyay & Sprague, 2013). This approach ensures continuity of the improvement process. Ford Motors believes that mistakes can be avoided through continuous learning. Consequently, the company keeps on improving its performance in all areas from customer focus to product designs among every other operational facet. For instance, before every car is released into the market, it goes through a multi-layered inspection process to ascertain quality. Continuous improvement as an element of TQM ensures customer satisfaction through quality product offerings and excellent customer service among others.

Employee Empowerment and Involvement

Under TQM, employees are empowered to make important decisions at different levels of production. Under this model, employees are seen as critical elements of ensuring product quality (Hakes, 2014). Therefore, workers undergo rigorous and continuous training in quality measurement and improvement tools. At Ford Motors, employees are given a chance to test-drive vehicles awaiting release to the market. Additionally, the company organizes annual events where employees are engaged in product insights. This way, employees can gauge customer satisfaction from a personal view and experience. Eventually, employees make decisions based on the information and they can improve on previous performances.

Use of Quality Tools

TQM focuses on the use of quality tools at all operational levels. For employees to understand how to improve quality, they need training and exposure to the different tools that aid in the process. Ford Motors developed the 8D problem-solving tool to address any underlying and emerging issues. The Global 8D process involves, “Plan, build the team, describe the problem, implement a temporary fix, identify and eliminate the cause, verify the solution, implement a permanent solution, prevent the problem from recurring, and celebrate team success” (Kaynak, 2013, p. 77). This way, employees can fix quality issues through this rigorous process.

Product Design

The changing customer tastes compel companies in the automotive industry to review their product designs frequently. The meaning of “attractive” to one customer can refer to something different from another client. Therefore, companies use quality function deployment (QFD) to incorporate different customer tastes and meanings into product design (Mehrjerdi, 2010). Ford Motors uses QFD to collect information based on market needs and competition to make decisions that improve customer experience and satisfaction. This process involves identifying customer needs through the marketing department. The information is then scored numerically based on significance to match each score with a certain product characteristic. Finally, evaluations are based on how a product compares to the competition before coming up with goals to address the emerging problems.

Managing Supplier Quality

According to Lixandru (2016), the quality of materials from suppliers to the automotive companies determines the overall customer satisfaction. Ford monitors the operations of its suppliers in different locations to ensure habitable working conditions and quality service delivery. The company seeks to build capability by offering training through the Automotive Industry Action Group (AIAG) that enables suppliers to maintain proper working conditions. This way, suppliers create value and quality internally and for Ford Motors. Ultimately, Ford benefits by getting quality materials in time thus streamlining the procurement process for improved productivity.

Summary and Conclusions

Quality management leads to improved customer satisfaction that ultimately improves a company’s profitability and market share. Ford Motors has succeeded in the competitive American automotive industry largely due to the application of TQM as one of its quality management practices. Under TQM, the company focuses on its customers, learns continuously, empowers employees, employs quality tools, improves product design, and manages supplier quality. The success of Ford Motors due to the use of TQM is evident as the company was performing dismally in the 1960s when quality management was not taken as a priority.

Quality management ensures that a company does not make unnecessary losses due to avoidable circumstances. For instance, in the 1960s, Lee Iacocca, the head of Ford Motors ignored the need for quality management, which led to numerous losses in cases like Grimshaw v. Ford Motor Company. However, with the adoption of TQM, the company has improved its customer relations and product quality thus remaining one of the largest automotive industry players in the US. The success of Ford Motors due to the adoption of TQM proves the thesis statement that quality management and customer focus are critical to the success of an automotive company in the US.

Moving forward, future research should:

  1. Focus on quantitative research on the value of quality management and customer focus in the US automotive industry. The available literature is mainly descriptive.
  2. Carry out studies focusing on mid-level companies because currently, such information is lacking.
  3. Determine how the different quality management practices like TQM and Six Sigma contradict or fit into each other.
  4. Focus on the macro-economic impacts of quality management in the industry.

References

Bandyopadhyay, K., & Sprague, D. (2013). Total quality management in an automotive supply chain in the United States. International Journal of Management, 20(1), 17-22.

Dyrud, M. (2015). Engineering ethics and corporate America: The case of Ford Motor Company. International Journal of Business Management, 46(8), 66-78.

Ehigie, B., & McAndrew, B. (2005). Innovation, diffusion and adoption of total quality management (TQM). Management Decision, 43(6), 925-940.

Hakes, C. (2014). Total quality management: The key to business improvement (3rd ed.). New York, NY: Springer.

Kaynak, H. (2013). The relationship between total quality management practices and their effects on firm performance. Journal of Operations Management. 21(10), 77-91.

Kiran, D. (2016). Total Quality Management. Waltham, MA: Butterworth-Heinemann.

Lixandru, C. (2016). Supplier quality management for component introduction in the automotive industry. Procedia, 221, 423-432.

Mehrjerdi, Y. (2010). Quality function deployment and its extensions. International Journal of Quality & Reliability Management, 27(6), 616-640.

Topalovic, S. (2015). The implementation of total quality management in order to improve production performance and enhancing the level of customer satisfaction. Procedia Technology, 19, 1016-1022.

Winnard, J., Adcroft, A., Lee, J., & Skipp, D. (2014). Surviving or flourishing? Integrating business resilience and sustainability. Journal of Strategy and Management, 7(3), 303-315.