The company 2TW manufactures and sells products overall Europe and is organised into dozens of strategic business units (SBUs). SBU managers, who report to regional directors, have for more years been paid bonuses on total SBU sales generated. This has led to a fast growth in overall turnover but 2TW has experienced declining profitability over the past few years, and the Chief Executive fears a loss of control over SBU operations. As a result, six months ago 2TW's Chief Executive used management consultants to conduct a whole organisational review. The management consultants have now reported that:
- inadequate quality control systems exist within the company, which has led to differing operating efficiencies between SBUs;
- there are significant numbers of returned goods which needs replacement or reworking;
- current incentives for SBU managers are inappropriate given 2TW's declining profitability.
Describe the potential benefits of quality standard ISO 9000 certification to 2TW.
The International Standards Organisation (ISO) issues standards that are globally recognised, and include the ISO 9000 series. ISO 9000 gives a systematic approach to managing business processes to manufacture products that conform to customer expectations. The Chief Executive believes that significant advantages to 2TW might arise by gaining the quality standard ISO 9000 certification.
Overcoming internal weaknesses
Currently 2TW has inadequate quality control systems which have led to differing operating efficiencies among SBUs and there are significant numbers of returned goods which needs replacement or reworking.
Customer satisfaction
The significant numbers of returned goods mean that customers are not at present receiving products of the quality they expect.
Enhanced company reputation
If 2TW customers are not at present receiving products of the quality they expect then this can be very damaging to the company's reputation.
Improved sales
Organisational growth could arise as sales improve by:
- Repeat purchases by satisfied customers.
- New customers attracted by the recommendation of existing customers.
- New customers attracted by a growing reputation and a guarantee of quality by ISO accreditation.