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Strategic Quality Management at Amazon
Strategic Analysis and Strategic Management (BUSI1384)
University of Greenwich
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Strategic Quality Management at Amazon Table of Contents 1. Introduction 2 2. Strategic Quality Management 2 Leadership 2 Planning 2 Design quality 2 Participation and partnership 2 Customer satisfaction 2 Fact-based decision making 2 Continuous improvement 2 3 3 5 5 6 7 7 3. Conclusion 8 4. References 10 1. Introduction Out of the countless things that are vital to an organisation, quality products and services is the foundation of success in nearly all businesses. Quality products and services that meet customer expectations ensures customer satisfaction, loyalty and a good reputation for the business (Linton 2014). It is important to meet the quality standards set by the industry or even go beyond that creating higher quality standards which will, therefore, give the business a competitive advantage. Quality cannot be measured and it cannot be managed as other things in the business can. This is because of the fact that different people will interpret quality differently. Transcendental view of quality which means that quality is achieved through experience. Product-based view, that compares the differences in a product and the things that it contains. The user-based view which consists of the personal views of the consumer. Manufacturing-based view, that focuses on minimising costs and optimising the manufacturing process. The value-based view is the last approach that measures quality based on the cost and price (Syed 2009). These are the five approaches to defining quality. In this report, Amazon will be analysed using the seven core principles of quality management. Amazon is a well-known e-commerce company that sells a lot of different products and services to their customers. Amazon started out by selling books and since then has branched out into countless more product categories from fresh groceries and electronics to newest fashion trends and business, industrial & scientific supplies (Layton 2006). Amazon now is the leading player in the e-commerce industry and in order to gain the competitive edge and continuously improve the technology behind its services Amazon closely follows the quality standards that they have chosen to follow. The next section will explain what is Strategic Quality Management (SQM) and why it is so important. 2. Strategic Quality Management The primary objective of all Strategic Quality Management (SQM) is to carry out analysis of the business strategy taking in account customer focused goals and the path that the business will take to achieve those goals (World Finance 2016). As there is not a quality manual the organisations have to create standards that they follow. In order to define strategic quality management, it is important that we look at how it is described by different scholars, the most popular views comes from Deming, Feigenbaum, Juran and Crosby. They each had a different view but most of them agreed on the fact that quality management should cover error free commercial goods, the involvement of cooperation within business operations and customer satisfactory economic status (Gold 2015). Amazon has put in a lot of effort to satisfy the expectations of the customers by setting smart objectives to maximise the quality of operational output. Their operations management is focused on continuous improvements to raise the quality standards of their e-commerce business. They do this by encouraging the employees to create new, better ways to tackle problems by being bold and inventive (Ferguson 2016). The company will be examined using the seven core aspects of strategic quality management. 1 Figure 1: Basic design school model (Mintzberg, 1990) Referring to Figure 1. Amazon is known to follow the Mintzberg’s business planning model to be able to access and evaluate the opportunities that are essential for expenditure (Amazon 2010). Strategic planning within Amazon ensures successful operations and allows the company to grow exponentially. The Mintzberg’s business planning model gives the company a possession of competitive strategically developed steps that guide the company to success. The basic design school model is all about transformation and continuation and in order to implement it into an organisation Amazon had to make the upper management conduct the internal appraisal to understand the business strengths and weaknesses and external appraisal to understand threats and opportunities. Once a strategy has been developed they are evaluated and the best one is chosen and implemented. In order to evaluate the strategy to see if it matches the quality standards, Amazon follows four tests that ensure precise evaluation. The first test is to check if the strategy has consistent goals and policies, second test looks at how adaptive the strategy is and how it will respond to various external factors, the third test makes sure that the strategy provides a competitive advantage to the organisation and finally the fourth test tests if the strategy is feasible meaning that it shouldn’t create additional issues and it shouldn't take up too much resources. The biggest flaws with this design are that it is quite hard for an organisation to evaluate their strengths and weaknesses as it requires judgemental behaviour and that this design promotes inflexibility (Sarbah, Otu-Nyarko 2014). 3 2 Design quality It is important to look at the design quality of the e-commerce website, packaging & delivery and the design of the operation management within Amazon in order see the big picture. Implementation of high-quality design systems in an organisation assures to eliminate preventable errors from happening. First of all, as the first thing that Amazon’s customers see is their website and the design quality of it is no less than excellent as in 2015 it allowed the customers to browse a library of 261 million products in the United Kingdom website alone (Grey 2015). The customers can browse products, read their descriptions, post & read reviews, follow their orders and much more as Amazon has introduced on demand service where customers can browse through massive media libraries. The e-commerce website is well thought through and therefore it is very efficient. As the customer orders an item it is dispatched without wasting time or resources, the Amazon warehouses are well organised and the employees working there are well trained to perform up to a quality standard that is set by the top management. If the parcel is dispatched via Amazon’s own delivery service it’s shipped extremely fast ensuring high customer satisfaction. The fast shipping and precise order distribution is the result of well-managed layout design strategy. Amazon’s operations managers are constantly creating new objectives in the layout design strategy area to improve and optimise the information channels, material transport and HR movement. The company aligns computer-assisted processes with efficient layout designs to achieve the desired objectives (Ferguson 2016). The design of this system requires to be very organised and tested to prevent any problems from happening that could result in unhappy customers. The design that Amazon has developed focusses on removing the processes that are not necessary and that don’t add any value for the customer. This way there are no processes that would delay the packages from dispatching and customers receive high-quality products much faster than with most other competitors and for a lower price. 2 Participation and partnership Referring to Tummula and Tang (1994) participation and partnership core aspect plays a very important role in creation and implementation of the strategies used to increase the quality standards as it raises awareness of quality issues by using competition. It is important for customers to know that the products and services that are available to them can consistently fulfil the specified requirements. There are many benefits to employee involvement and cooperation one of the main ones is that working together and getting the employees to give their best raises the quality standard that they can achieve, therefore, the customer will be satisfied, costs reduced, the development will be stimulated and the overall quality standards will raise that demonstrates excellence. Because of the fact that Amazon is a very large organisation, there is a high demand for employees that are able to work well with others as teamwork is essential for a large organisation to work as a single organism. 4 concerns the organisation in order to be able to make the right decisions accurately and without hesitation. The data collection and analyzation is a way for the management to actually see what is happening internally and externally and also this allows the organisation monitor how well they are performing. The collection of facts and statistical data from the past it is possible to improve the accuracy of forecasting the future and therefore increasing the chance of making the correct decision (Asq 2016). Amazon encourages their employees to use their judgement and good instincts to make decisions but also reminds them to seek diverse perspective and consult widely in order to assure that the decision will benefit the company. One of the 14 leadership principles also states that the management should always “stay connected to the details, audit frequently, and are sceptical when metrics and anecdote differ” (Amazon 2010). This confirms that when the employees within Amazon makes decisions they will increase value for the customer and organisation and are supported by facts and data. Fact-based management uses statistical techniques to evaluate the strategies before they are implemented as it ensures quality (Tummula, Tang 1994). When Amazon was expanding into the China market it was vital for the company to make the right decisions in order to successfully capture market share. The Chinese market turned out to be very challenging but by researching the market and making fact-based decisions Amazon made the decision to “adapt to the international diversity encountered” and “to overcome the constraints imposed by distinct national systems, structures or behaviours” (Amazon 2010). Amazon entered the China market by purchasing Jojo in 2004 and slowly increasing their presence by carefully launching new products and announcing new moves to capture larger market share which was 2% in 2013 (Swanson 2015). 2 Continuous improvement Continuous improvement is an essential to keeping the organisation at the top of an aggressively competitive environment that consists of challenging competitors. Every organisation that wants to stay successful must maintain high-quality standards by adding value to their products and services. This can be done through ongoing objectives that aim to improve the organisation's overall performance by making the processes within more effective and more efficient (Rundle 2015). Amazon has shown incredible growth over the years and where there is growth there is space for improvement. Over the years Amazon has been continuously improving by finding innovative ways to gain the competitive edge and meeting the shareholder expectations of performance. The continuous improvement made by Amazon have been influenced by the quality trilogy developed by Dr Joseph M Juran. 6 Figure 2. Quality trilogy by Joseph Juran Referring to Figure 2 Amazon used the quality trilogy system to ensure quality planning, quality control and quality improvement. Juran created this system because he believed that the level of customer satisfaction directly correlates to the quality, therefore, to increase the customer satisfaction the business must be aware of the quality and there is need to continuously improve the standards by setting targets and planning how they will be achieved, providing the necessary training and creating report progress, communicating results and carrying out projects to resolve problems (Juran 1998). Great examples of what the company did when they enchanted the quality are assuring delivered product quality, offering reliable return service and constantly upgrading their e-commerce website so that the customers would have more pleasant experience when shopping there. One of Amazon’s 14 leadership principles also encourages the employees to learn and be curious meaning that the workers should always seek to improve themselves, explore new opportunities and explore them (Amazon 2010). These suggestions implement the correct mindset in order to ensure that all of the employees that make up the company will try to continuously develop and improve themselves. If all the employees have this mindset all the parts of the company will continuously improve as well. Especially as growth creates various important issues this aspect can help manage growth while keeping the products and services high quality. 3. Conclusion The long journey that Amazon has made from the date when it was established to the current day can only be described as an astonishing success and a lot of credit has to be given to the strategic decisions that were made throughout the company’s lifetime. The company followed the core aspects of quality management in order to assure product quality, high performance and transparency. This report has analysed how the seven core aspects have had an impact on Amazon after being implemented in the company. It shows how Amazon has used their own version of Deming’s 14 points for total quality management to manage the company and give their employees the correct mindset to continuously improve themselves and the company overall, adapt to ever-changing environment that is highly competitive, make the correct decisions that are supported by facts and focus on the customers as they are the key to success. Furthermore, 7 4. References Figure 1. Amazon, (2016). Amazon Strategic Plan, Available at: scribd/doc/24854038/Amazon-Strategic-Plan (Accessed 13 Dec. 2016). Figure 2. Businessballs, (2016). Quality management gurus theories, Available at: businessballs/dtiresources/quality_management_gurus_theories.pdf (Accessed 15 Dec. 2016). Amazon, (2016). Amazon Strategic Plan, Available at: scribd/doc/24854038/Amazon-Strategic-Plan (Accessed 8 Dec. 2016). Aaq.auburn., (2016). Strategic Quality Management, Available at: aaq.auburn/node/96 (Accessed 3 Dec. 2016). Alfred Sarbah, Doris Otu-Nyarko., 2014. An Overview of the Design School of Strategic Management (Strategy Formulation as a Process of Conception) pp. 232-246 Asq., (2016). Total Quality Management (TQM): What is TQM? | ASQ. Available at: asq/learn-about-quality/total-quality-management/overview/overview.html (Accessed 3 Dec. 2016). David Willden, (2013). Example of strategic plan model - Amazon. Available at: strategy-keys/example-of-strategic-plan-model---amazon.html (Accessed 8 Dec. 2016). Davison, R., (2006). Concepts of entrepreneurship. Russell-davison.blogspot.co. Available at: russell-davison.blogspot.co/2006/09/concepts-of-entrepreneurship.html (Accessed 7 Dec. 2016). Ferguson, E., (2016). Amazon Inc. Operations Management: 10 Decisions, Productivity Panmore Institute. Panmore Institute. Available at: panmore/amazon-com-incoperations-management-10-decisions-areas-productivity (Accessed 8 Dec. 2016). Ferhan Syed, (2009). Definition of Quality. Available at: totalqualitymanagement.wordpress/2009/08/27/definition-of-quality/ (Accessed 3 Dec. 2016). Gold, E., 2015. Notice of 2015 Annual Meeting of Shareholders. Management Proxy Circular, pp. 0-35. 9 Grey, P., (2015). (2015) How Many Products Does Amazon Sell?, Available at: exportx/2015/12/11/how-many-products-does-amazon-sell-2015/ (Accessed 8 Dec. 2016). HowStuffWorks, (2006). How Amazon Works, Available at: money.howstuffworks/amazon.htm (Accessed 3 Dec. 2016). Ian Linton, (2014). Why Is Quality Important for a Business?, Available at: smallbusiness.chron/quality-important-business-57470.html (Accessed 3 Dec. 2016). Jeremy Rundle, (2015). Seven Principles of Quality Management as per ISO 9001:2015 Committee, Available at: linkedin/pulse/seven-principles-quality-managementper-iso-90012015-committee/ (Accessed 30 Nov. 2016). Joseph M. Juran, (1998), Juran's Quality Handbook, McGraw-Hill Professional pp. 25-28 Mintzberg, H. 1990, 'Strategy Formation - Schools of Thought', in J. Frederickson (ed) Perspectives on Strategic Management, Harper Business, New York. Quinn, J., (2015). Amazon timeline: from internet bookshop to the world's biggest online retailer, Available at: telegraph.co/technology/amazon/11801515/Amazon-timeline-frominternet-bookshop-to-the-worlds-biggest-online-retailer.html (Accessed 4 Dec. 2016). Swanson, A., (2015). Amazon China: A Lightweight Amazon China: A Lightweight, Available at: knowledge.ckgsb.edu/2015/01/14/china-business-strategy/amazon-china-a-lightweight/ (Accessed 5 Dec. 2016). Tummala, V. & Tang, C., 1996. Strategic Quality Management, Malcolm Baldrige and European quality awards and ISO 9000 certification. Core concepts and comparative analysis, 4(13), pp. 8-36. World Finance, (2016). Strategic Quality Management, Available at: finance.mapsofworld/strategic-management/quality.html (Accessed 3 Dec. 2016). 10
Strategic Quality Management at Amazon
Module: Strategic Analysis and Strategic Management (BUSI1384)
University: University of Greenwich
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